The fuss over President Trump’s taxes is largely an artificially-whipped-up political chimera, designed to stir up discontent among his supporters and buttress the opinion of voters already opposed to him. However, it does remind us of a basic reality in America today, which is that there’s been a $50 trillion transfer of wealth from the general population to the very wealthy since the 1970’s – and it’s been done deliberately, planned for and executed almost without people noticing. Almost all of us are poorer as a result – and resentment is building.
Charles Hugh Smith puts it succinctly.
Do you hear the pathetic bleating of America’s billionaires and their army of toadies? If not, you soon will, for a remarkable report has been released that documents the $50 trillion in earnings that’s been transferred to the Financial Aristocracy from the bottom 90% of American households in the past 45 years.
The report was prepared by the RAND Corporation, and has a suitably neutral title: Trends in Income From 1975 to 2018. (The full report can be downloaded for free.)
. . .
The rallying cry to claw back a significant percentage of the $50 trillion is just beginning. The billionaires have the money and power, of course, and the best government that money can buy plus the loyalty of a vast army of well-paid toadies, lackeys, factotums and apparatchiks.
But once the citizens no longer accept their servitude, the pendulum will gather momentum. America’s Financial Aristocracy has reached extremes not just of wealth-income-power inequality, but extremes of hubris. Their faith in luxury bug-out estates / private islands is evidence that even if the way of the Tao is reversal, they’ll have their private bodyguards and stashes of fuel and other essentials.
The clawback might not be as easy to rebuff as they anticipate, nor will the pendulum swing that’s just starting necessarily arrive at the opposite extreme in the orderly, predictable fashion they’re accustomed to controlling.
There’s more at the link.
The Washington Post provides two illustrations of what this means. First, from an article titled “Wealth concentration returning to ‘levels last seen during the Roaring Twenties,’ according to new research“:
Then, from an editorial titled “The massive triumph of the rich, illustrated by stunning new data“:
Those two illustrations should send shivers down the spine of anyone who studies history and economics. If you do, you know that in every single society where such income and wealth inequality has taken root, there’s been a strong, often revolutionary reaction against it from the broad mass of the people. For example, that was one of the main reasons behind the French Revolution. It’s also behind much of what we’ve seen in American society over the past decade or more. “Occupy Wall Street”, Black Lives Matter, Antifa, and a host of other movements – they’re all fundamentally Marxist at heart, when one analyzes them and studies the background of their leaders. They’re all fundamentally anti-capitalist, because they see this transfer of wealth as one of the biggest (if not the biggest) problems of US society today, and they want to undo it, by force if necessary.
It’s hard to criticize that understanding of the problem, because it’s all too accurate. When you take away the prospect of a decent income from the broad mass of society, they’re left discontented, angry and ready to fight for better prospects. I think we’re seeing more and more of that in the reaction against COVID-19 restrictions. It’s not just a reaction against unreasonable regulations – it’s defiance of the authorities that people believe are responsible for the current mess (economic as well as health) in which we find ourselves. Economic discontent is fueling all sorts of other discontents.
Commenting on the RAND Corporation report, Time magazine provides some extraordinary, even mind-boggling facts. Bold, underlined text is my emphasis.
A staggering $50 trillion. That is how much the upward redistribution of income has cost American workers over the past several decades … had the more equitable income distributions of the three decades following World War II (1945 through 1974) merely held steady, the aggregate annual income of Americans earning below the 90th percentile would have been $2.5 trillion higher in the year 2018 alone. That is an amount equal to nearly 12 percent of GDP—enough to more than double median income—enough to pay every single working American in the bottom nine deciles an additional $1,144 a month. Every month. Every single year.
Price and Edwards calculate that the cumulative tab for our four-decade-long experiment in radical inequality had grown to over $47 trillion from 1975 through 2018. At a recent pace of about $2.5 trillion a year, that number we estimate crossed the $50 trillion mark by early 2020. That’s $50 trillion that would have gone into the paychecks of working Americans had inequality held constant—$50 trillion that would have built a far larger and more prosperous economy—$50 trillion that would have enabled the vast majority of Americans to enter this pandemic far more healthy, resilient, and financially secure.
As the RAND report … demonstrates, a rising tide most definitely did not lift all boats. It didn’t even lift most of them, as nearly all of the benefits of growth these past 45 years were captured by those at the very top. And as the American economy grows radically unequal it is holding back economic growth itself.
. . .
It is easy to see how [COVID-19], and the draconian measures required to contain it, might spark an economic depression. But look straight into the eyes of the elephant in the room, and it is impossible to deny the many ways in which our extreme inequality—an exceptionally American affliction—has made the virus more deadly and its economic consequences more dire than in any other advanced nation. Why is our death toll so high and our unemployment rate so staggeringly off the charts? Why was our nation so unprepared, and our economy so fragile? Why have we lacked the stamina and the will to contain the virus like most other advanced nations? The reason is staring us in the face: a stampede of rising inequality that has been trampling the lives and livelihoods of the vast majority of Americans, year after year after year.
. . .
On average, extreme inequality is costing the median income full-time worker about $42,000 a year. Adjusted for inflation using the CPI, the numbers are even worse: half of all full-time workers (those at or below the median income of $50,000 a year) now earn less than half what they would have had incomes across the distribution continued to keep pace with economic growth. And that’s per worker, not per household. At both the 25th and 50th percentiles, households comprised of a married couple with one full-time worker earned thousands of dollars less in 2018 dollars than a comparable household in 1975—and $50,000 and $66,000 less respectively than if inequality had held constant—a predicament compounded by the rising costs of maintaining a dignified middle-class life. According to Oren Cass, executive director of the conservative think tank American Compass, the median male worker needed 30 weeks of income in 1985 to pay for housing, healthcare, transportation, and education for his family. By 2018, that “Cost of Thriving Index” had increased to 53 weeks (more weeks than in an actual year). But the counterfactual reveals an even starker picture: In 2018, the combined income of married households with two full-time workers was barely more than what the income of a single-earner household would have earned had inequality held constant. Two-income families are now working twice the hours to maintain a shrinking share of the pie, while struggling to pay housing, healthcare, education, childcare, and transportations costs that have grown at two to three times the rate of inflation.
Again, more at the link. It’s well worth your time to read that article in full.
So, when you read the fuss and bother about President Trump’s taxes, think of them in the context of the numbers provided above. I don’t blame the President for being a successful businessman, and hiring good accountants to minimize his tax liabilities. As I said yesterday, anyone with enough sense and the means to do so is doing the same thing. However, when one looks at the resentment of the average American when faced with our current economic reality, that fuss and bother takes on a new dimension. Here’s an illustration from that Time magazine article.
Economic discontent is real, and it’s growing. It doesn’t matter whether you’re conservative or liberal, left-wing or right-wing in your politics. The disparity is a fact of life, and it’s going to have to be dealt with, sooner rather than later – or it’s going to become fuel for yet another revolution. That’s the lesson of history, and it’s at the root of what we’re seeing on our streets today. Economic discontent fuels all other discontents.
Peter
the claim that $50 Trillion has been transferred to the rich is absolutly false
there was not $50T in the economy at the start of the cycle to be transferred.
Logic like this assumes that there is a fixed amount of wealth and if one person has it they stole it from someone else.
The reality is that many of the richest people are rich because they have created a company that produces products that people want. In many cases, these are new industries.
pre Microsoft, what was the total value of the computer industry? (never mind all the stuff made possible by it)
what was the value of the pre-Tesla electric car industry?
what was the value of the pre SpaceX space industry?
what was the value of the pre Amazon mail-order industry?
This has been wealth creation, not 'transfer of wealth'
Also, This trats the 1% as if it is a fixed group of people, how many of the 1% have remained in this group over the last century vs ones who have joined or dropped out of it?
Now, if you look back at the prior situations of extreme wealth inequality, were the wealthy creating new industries? or was the wealth primarily based on land ownership (and land ownership is close to a zero-sum game, while they old adage about them not making more land isn't quite true any longer, it was for most of history)
But I would argue that the biggest problem wasn't the distribution of the wealth, but rather the unequal laws that applied to the two groups. Unfortunantly by this metric, we do seem to be slipping.
@Unknown: I'm sorry, but you're wrong. That $50 trillion is, indeed, the value of what was transferred – the present value, rather than the value at the time. Inflation has had its impact there, too. Read the articles I cited to get the facts – they're very detailed, particularly the RAND Corp. study.
Long time reader, first time commenter. After reading biased opinions on last night's debate, this post was a breath of fresh air, although it took my breath away. 50 trillion – unbelievable, but numbers don't lie.
" it's going to have to be dealt with, sooner rather than later – or it's going to become fuel for yet another revolution. "
I kept reading, looking for the "how to deal with it". That's the missing piece to the million dollar question, or should it be trillion dollar question. I can only surmise that it will result in an unrecognizable USA in the not to distant future. Liberty or tyranny seem to be the 2 choices.
As Jefferson resonated – The Tree of Liberty must be refreshed with the blood of patriots and tyrants. To put his comment in context, he also said the remedy to these uprisings was to "set them right as to facts, pardon and pacify them". This is not possible with the mega media controlling the dissemination of the 'truth'.
I look forward to any follow up posts to this one. Keep up the great writing.
Jim in Monroe
Would not that graph (distribution of taxable income) reflect how there is a significant percentage of society who are not paying income taxes at all? If you're getting a net refund thanks to things like the EIC, you aren't on that chart at all. You had no taxable income. That segment of society has been growing.
While I agree there is significant income inequality (the profits aren't trickling down as they should- the higher ups aren't ensuring wages keep pace) and that will lead to some kind of populist movement (as it has), some of the discontent is the result of people cherry picking stats to inflame opinion. No, it's not good that wages haven't kept pace. Still, the bottom strata of society are FAR better off in our capitalistic system than they are in any socialist system there has ever been.
This is what happens when we shift from earning a living by making things to becoming wealthy by making money. Financialism is the death of economies and societies.
5% reserve banking no longer means they can lend out 95% of deposits. It now means they can lend out 19 times what they have on deposit.
The financial shift is worrisome, but I'm far more concerned with the attempt by the ruler-elite class to impose their societal values downward, restructure our lives and homes, meddle with and influence our ways of thinking ("nudges"), devalue and destroy our history, dumbing down education and turn our young into mindless bots, disrespect our culture and religion.
Not that these aren't all related and intertwined with the financial sucking sound created by globalization and the destruction of US jobs.
The idea that a big corp can make tons of money selling a popular product thus bettering everyone fails to account for the fact that if MegaGlobalCorp is manufacturing overseas to reduce their costs, the consumers in the "home country" are, in fact, worse off than before even if the resulting goods are slightly cheaper. If the "creative destruction" of the marketplace removes jobs but then ships the replacement jobs overseas, it doesn't matter if you can get cheap goods because the cost of widespread unemployment and lower paying remaining jobs affects everyone, even those who still do have work. Then add in all the sweetheart deals and regulatory capture that operates to extinguish competition and it's obvious that the usual capitalist taking points are just as utopian as communist or libertarian ideology.
The framing is wrong.
Wealth isn't measured in a percentage of the total; on the living level, wealth is measured by what you have.
If I have four cows, and a guy with 40 takes two of mine– yeah, I'm going to get pissed.
But if I have four cows, and there's a guy with 40, and in twenty years I now have eight cows, but he has 400– I have not been hurt.
1/10th of the cow-wealth was mine, and now it's 2/100ths; but I am better off, because I have twice as many cows as I had.
If someone came in and decided to make it more "fair" by taking half of his cows– I will have doubled my relative wealth, but I am no better.
If someone came in and took, oh, half of everything over ten cows, and then a quarter of everything over five cows, and used those to make sure everyone had at least two cows, then I may be harmed or may be the same, but the guy who worked to build up that 400 cow herd has just been destroyed.
People aren't stupid. They notice when hard work, sacrificing and saving isn't rewarded, but instead makes them a target.
**********
I went to look for what the incomes involved were; here it is, in raw buying power (adjusted for modern dollars), rather than in fixed-pie form:
https://www.taxpolicycenter.org/statistics/household-income-quintiles
Here's the income for the lowest quintile:
Lowest quintile:
2016, $24k.
2011, $20.2k.
2006, $20k.
2001, $17.9k.
1996, $14.7k.
1991, $12.6k.
1986, $10.2k.
1981, $8k.
1976, $5.4k.
1971, $3.8k.
Envy is a sin because it destroys work, and hope, and frames things as others having something good means you cannot.
Teacher is it lawful to pay taxes to Washington?
Show me a coin that the tax is paid with
They aren't paid with coins.
Then show me a note that the tax is paid with
They aren't paid with notes they are paid with electronic transfers thru the Air.
Then give onto the ruler of the kingdom of the air that which is his and give unto God what is God's.
Shooting from the hip, so to speak, since I have not read the actual Rand report but what has been posted here.
The Raving Prophet is correct in pointing out that the charts are using percentages of taxable income. There is a huge population that has no taxable income and, then, a large portion of them get tax credits — we the people through our elected honest politicians have decided that those people whose tax liability is zero get some of "we the people's money" in addition to the different levels of government help.
Does Rand give the number of filers with taxable income?
Foxfier, the problem is how did the guy acquire those additional 360 cows? Are you better off, and more importantly, will your children be better off when it takes 10 cows to buy a plot of land?
JaimeInTexas –
I am better off with twice the cows I had before, even if someone else now has four times what they previously had. Someone else's profit does not negate my profit.
If what the other guy did to acquire those extra cows matters– then so does what I did, or did not, do. More importantly, how he did it wasn't part of the original question; the original framing was the idea that relative amount matters, not if one is actually any better off. Fixed pie thinking, vs the idea of making more pies.
I'm familiar with it because it is the argument that holds each new child born is taking away from others, by living– defining away any hope that the child can improve things, because simply by existing they lower the percent of the total that could be fair.
Foxfier
"the argument that holds each new child born is taking away from others, by living"
No, I am not saying anything of the sort. What I am saying that the business conditions, laws, you and others create will dictate your progeny's ability to live their life.
So, your child having to work to gain 10 cows to buy a plot of land under laws that limit how much new land can be put to use for raising cows do not matter? You know, laws that are barriers to entry in a business?
Nothing to do with the other guy gaining 360 cows, per se, but how the cows were gained. Through honest hard work or luck, everyone gains. But, if the increase in cow ownership was through some shenanigan at the expense of others then there is a loss to the others.
Which is what we have today. The folks with 1000 cows influencing the tax laws to their benefit and to the benefit of another group – guys with no cows. Benefits that have negative effects to guys with 4 cows.
JaimeInTexas-
You are still going on the assumption that ten cows is less than two cows, and haven't made an argument for why, but merrily go forward feeling free to assume bad actions on the part of those who happen to have more.
Meanwhile, I remember that cutting down the tallest poppies is unlikely to to be harmless to my offspring, and their children.
If person 1 and person 2 each have 1 female meat critter
person 1 gets 1 calf peer year and sells it
person 2 keeps them and breeds them trading the males for females
10 years later, person 1 will have 1 meat critter
10 years later, person 2 will have ~1000 meat critters
this isn't person 2 stealing from person 1
All this cow talk is making me hungry. So here's what's been going on in cow metaphors.
Person A has a ranch with 50 cows. Person B has a ranch with 100 cows. Person C from New York buys out person B. He has every last cow slaughtered and generates an enormous quarterly profit, then declares bankruptcy on Ranch B, selling the land to a Chinese company to become a strip mall. Person A loses money, because the price of beef plummeted due to the temporary glut, and the slaughterhouse was overbooked with an exclusive contract for ranch B. Person C then tips off the ASPCA that ranch A abuses their cows. The resulting scandal and court case destroys person A, who is forced to sell out to person C, who proceeds to have every single cow slaughtered that quarter. Wash, rinse, repeat.
How is everybody at the end? Person A commits suicide. Person B makes a meager living working at the strip mall, having sold his posterity. Person C is fabulously wealthy, never having left his upper east side neighborhood.
Thank you all for your thoughts about this. Now we have proof once again that:
Why was astrology invented? So economics would seem like an accurate science.
On the first day, God created the sun. In response, the Devil created sunburn. On the second day, God created sex. In response, the Devil created marriage. On the third day, God created an economist. This was a tough one for the Devil, but, in the end, and after a lot of thought, he created a second economist.
🙂
Why is our death toll so high and our unemployment rate so staggeringly off the charts?
First part: it isn’t. Second part: government.
Why was our nation so unprepared, and our economy so fragile?
First part: it wasn’t. Second part: government.
Why have we lacked the stamina and the will to contain the virus like most other advanced nations?
They haven’t. And if they have, by the earlier questions, it must have been done with no economic damage or it wouldn’t count.
a stampede of rising inequality that has been trampling the lives and livelihoods of the vast majority of Americans, year after year after year.
Citation needed.
McChuck, thanks for that.
How to use cows as analogy of what is happening today's economy, that the guy printed 360 cows and anyone else that tries the printing of cows gets shot?