Occupy Wall Street’s Why: What You Need To Know

For its participants, the rationales for the occupation movement springing up from the Occupy Wall Street protest in New York may incorporate an amorphous or multifaceted collection of political and economic grievances. But there are a few basic economic and political realities to which the movement’s symbolism and activism are a response, and to which they seek to awaken Americans and rouse them to repudiate.

Without question the sense of urgency and palpable outrage is related to the realization that such is the entrenched power, and so prevailing is the dominance of the American right’s political and media apparatus, that even with the election of a promising and charismatic President Obama, coming into office in the wake of one of the most conspicuous wreckages of the country by a political party, the Republican Party, in American history, the right’s skewed, essentially falsified vision of the country not only has revived but gained steam in recent years.

Despite Obama, and the Democratic Party’s best efforts (which have been woefully inadequate) and given that most of the major media have lost all effectiveness, and all but abandoned any obligation to, or prioritization of providing Americans objective truths and fact-based reality, many Americans feel correctly there is no alternative but a massive human dissent to this false prevailing reality in order to first get the attention of as many fellow Americans as possible, and to eventually effectuate a change in the nation’s course.

In a nutshell, American-based international corporations, America’s large businesses, and the wealthiest segment of the population have in cooperation and through the efforts of the Republican Party and the American right initiated and kept in place a thirty year span of dominance by radical ideology and radical economics, and of policies benefitting exclusively a small number of citizens, and directly at the expense of the majority of Americans. It’s very difficult if not impossible to overstate how dominant this reign has been, though the devastation of the American economy that culminated in 2008 was the visible face of its consequences for ordinary Americans.  This isn’t about overheated rhetoric, or political opinion: it is about a very real, very deep and very pervasive set of economic realities with empirical evidence behind them that are well beyond the point of being indisputable. To get an idea, here are some of them.

WEALTH AND INCOME DISPARITY

According to the Census Bureau, the top-earning 20 percent of Americans — those making more than $100,000 each year — received 49.4 percent of all income generated in the U.S. last year, compared with 3.4 percent earned by those below the poverty line. That is a ratio of 14.5-to-1, and an increase from 13.6 in 2008 and nearly double a low of 7.69 in 1968.

The international Gini index, found U.S. income inequality at its highest level since the Census Bureau began tracking household income in 1967. The U.S. also has the greatest disparity among Western industrialized nations. Only twice before in American history has so much been held by so few, and the gap between them and the great majority been a chasm — the late 1920s, and the era of the robber barons in the 1880s.

During the last economic expansion between 2002 and 2007, the top 1 Percent of Americans received two-thirds of the income gains…I repeat two-thirds of income gains between 2002 and the beginning of the recession in 2007 went to the top one percent. According to an analysis of IRS data by economists Thomas Piketty and Emmanuel Saez, this is the largest share retained by the top one percent of income since 1928 at the end of the Gilded Age. In the 1970s the top one percent reaped 9 percent of total income. Today they gather 26 percent.  The (pre-tax) average household income of the top 1% has skyrocketed from $386,900 in 1980 to $1,203,600 in 2008 (using the 2008 price index in both cases). The (pre-tax) average income of the bottom 50% of households, by contrast, has declined slightly from $16,100 in 1980 to $15,400 in 2008, and that decline occurred despite the rise of two-earner households struggling to make ends meet.

In the United States now, the bottom 40 percent of the population (140 million people) owns a mere 0.3 percent of the nation’s wealth. In the 1970’s , the ratio of CEO pay to the pay of the average worker was 30 to 1. Prior to the recession that ratio had risen as high as 500 to 1, went down during the recession and now is back to 366 to 1.

THE ECONOMIC AND POLITICAL POWER OF CORPORATIONS

According to Fortune magazine, the Fortune 500 generated 10.8 trillion in total revenues last year, up 10.5% from the previous year. Profits for those companies rose 81 percent.

The Northeastern University Center for Labor Market Studies found that since the economic “recovery” officially began two years ago “corporate profits captured 88 percent of the growth in real national income while aggregate wages and salaries accounted for only slightly more than one percent. According to the authors of the report: “The absence of any positive share of national income growth due to wages and salaries received by American workers during the current economic recovery is historically unprecedented. The lack of any net job growth in the current recovery combined with stagnant real hourly and weekly wages is responsible for this unique, devastating outcome.”

On the political front, corporate lobbying accounts for two-thirds of all lobbying expenditures. From 2008 through 2010 total lobbying expenditures were approximately 10 billion dollars. This would mean corporations spent more than seven and a half billion dollars directly lobbying government. The financial sector alone, in other words Wall Street, spent 5 billion on lobbyists and on direct contributions to political campaigns between 1998 and 2008. During the 2010 congressional elections which resulted in a gain of more than 60 Republican seats in the House of Representatives and substantial gains in the Senate, campaign contributions totaled approximately 4 billion. Three-quarters of that money came from corporations.  In January of 2010, a conservative majority of the Supreme Court ruled that corporations retain the same rights as individuals and may make unlimited political contributions.

As profits have accumulated for corporations, corporations have turned their backs on American workers, increasingly shipping jobs overseas. According to the Commerce Department companies cut their work forces in the United States in the 2000’s by 2.9 million while increasing employment overseas by 2.4 million. The Commerce Department also has reported that during the recession year of 2009 multinational corporations reduced the overseas workforce by 100,000, or 1.5 percent. However, domestically companies cut 1.2 million workers, a reduction of 5.3%. In 2000, 30 percent of GE’s business was overseas; today 60 percent is. In 2000 46% of GE’s employees were overseas; today 54 percent are. Between 2005 and 2010 Caterpillar increased its workforce by 3,400 workers, or 7.8%, in the U.S. and 15,900, or nearly 39%, overseas. According to the McKinsey Global Institute, multinationals account for 23% of the nation’s private-sector output and 48% of its exports of goods. According to the Economic Policy Institute in 2010 American companies created less than one million jobs  in the United States and more than 1.4 million overseas.

SHIFTING OF THE TAX BURDEN FROM THE WEALTHY TO THE MIDDLE CLASS AND THE POOR

During the economic boom of the post WWII period, marginal tax rates for America’s wealthy were at 91%. Those taxes were reduced to around 70% during the Kennedy years. During Ronald Reagan’s tenure, two tax reduction initiatives cut taxes on the wealthy further, first reducing them to 50% and finally all the way to 28%. Taxes for the top two percent of Americans were raised by several percentage points during the Clinton years; but in 2001 and 2003 the Bush administration reduced them to rates even lower than prior to Clinton. America’s wealthy enjoy their lowest taxes in modern history. and now pay less than nearly any place else in the world.

Republicans continue to make the false assertion that Americans are highly taxed, and in particular that corporations are overly taxed. Among the largest 26 national economies in the world, America is 24th in overall taxes paid. When it comes to taxes paid by corporations America ranks 25th out of 26.  In 1965 taxes paid by corporations were 4 percent of GDP. As of last year corporate taxes had fallen to a measly 1.3 percent of GDP. The General Accounting Office found that between 1998 and 2005, 55 percent of corporations paid no taxes whatsoever. Only 2.7 percent of those corporations had zero net tax liability. In the Thirties and Forties taxes paid by corporations were half of all taxes paid, while individuals paid the other half. As of the 1980’s the ratio was 4 to 1, individuals paying the larger amount.

While Ronald Reagan lowered taxes for the wealthiest while he was president, he also doubled payroll taxes which are predominantly paid by the middle class. Payroll taxes are applied only to the first $106,000 of income, meaning middle-class and working poor Americans pay a much higher percentage of their incomes. The average American pays around 30% in income tax, while America’s wealthiest, hedge fund managers for instance, make their income from investments which are taxed at the capital gains rate of 15%.

Contrary to Republican claims that higher taxes lead to lower job creation it should be remembered that while the wealthy enjoyed historically low tax rates during the Bush administration, the least number of jobs were created during any presidency since Herbert Hoover. When the wealthiest Americans paid tax rates of 91% in the late Forties and Fifties America experienced its greatest economic boom. In fact, in the past 60 years job growth has been greater in years when the top tax rate was considerably higher than now. When the top rate was more than 90 percent the average annual growth in total payroll employment was 2 percent. In years when the top rate was 35 percent or lower, as it is now, employment grew by an average of just 0.4 percent.

ATTACK ON WAGES, UNIONS AND THE MIDDLE CLASS

As the economic pie has grown over the last thirty years less and less has gone to the middle and working classes, while more and more, in fact nearly all increase has gone to the top few percent. Average and median family income has been virtually stagnant since the late 1970’s. Between 1953 and 1973 median family income doubled.

Michael Cembalest, the chief investment officer of J.P. Morgan Chase (probably not a communist) said this year in the bank’s regular report to its private banking clients that “US labor compensation is now at a 50-year low relative to both company sales and US GDP.” He showed that companies’ revenue going to profits among Standard and Poor’s 500 companies were at their highest levels since the mid 1960’s.  From 2000 until their highest point in 2007 corporate profit margins for the 500 companies rose from just under 11 percent  to over 12 percent (they are now at 13 percent). Explaining the rise, Cembalest says, “reductions in wages and benefits explain the majority of the net improvement in margins.”  He calculated that reductions in wages and benefits accounted for 75 percent of the increase in corporations’ profit margins.

Average hourly wages for production workers fell 6.2 percent during the Reagan era (from 1979 to 1989) after having risen steadily for three decades. Since then they have remained essentially stagnant. The overall stagnation in wages coincides with the dismantling of regulations pertaining to workers’ ability to organize and join unions, and businesses’ ability to thwart those efforts. Union membership in the United States has been declining steadily since 1983, shortly after Ronald Reagan fired striking members of the Air Traffic Controllers union and essentially busted the union. In 1945 36% of Americans were represented by a union. The percentage is now 7%. Again, while the economy was expanding between 2002 and 2007, median family income was declining.

In addition to the shifting of the tax burden downward, and the flow of wealth from economic productivity upward, there has been a steady and ferocious assault on the security and safety net of ordinary Americans. The right has consistently sought to disparage and indicated a wish to dismantle both Social Security and Medicare upon which a majority of Americans depend to live after they retire. Rather than the guaranteed pensions of the past, workers now must rely on 401K’s, which of course are vulnerable, as we saw in the financial meltdown, to the risky behavior and vicissitudes of the financial sector, whose employees and CEO’s tend to be in the top few percent . In fact Social Security provides more than half the income for two-third of all American retirees.

Furthermore, increasingly conservative courts have slowly but steadily diminished workers’ rights. The Employee Retirement Income Security Act of 1974 was intended to guarantee that workers receive benefits they were promised by employers. Currently the law has been rendered all but abolished, employees denied health or retirement benefits no longer retaining a reliable legal recourse for obtaining them. The cost of health insurance has risen year after year at a rate far exceeding inflation, and though millions of Americans are uninsured, private health insurance companies abetted by the Republican Party have violently opposed any and all health reform, even when in the political minority managing to profoundly water down the final health reform bill eventually passed by congress.

GROWTH OF THE FINANCIAL SECTOR (WALL STREET)

In the 1960’s the financial sector, including insurance comprised less than 4% of the American economy. Since then it has more than doubled to more than 8%.  Of the nation’s richest 400 companies 109 are in finance or investment. Financial sector profits as a share of overall corporate profits soared from 12% in the mid-Sixties to 41% by 2002. In 2010 America’s top 25 hedge fund managers took in an average of $1 billion each (paying only 17% in taxes because most of their income is capital gains taxed at 15%).

From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it rapidly increased, reaching 181 percent in 2007.

One of the reasons for this growth of the financial sector is that since the early 1980’s there has been a continuous reduction in the regulation of banks and finance. By the 2000’s almost all of the major financial regulation that was enacted after the Great Depression had been repealed or neutralized. The Securities and Exchange Commission had been rendered toothless. Lack of regulation and oversight of Wall Street (Wall Street’s influence on government policy and the electoral process being commensurate with its lobbying and campaign expenditures) allowed the creation of risky financial instruments and set the stage for the unsound investments that collapsed the banking and financial system in 2008 and subsequently the entire world economy.

Attempts at new regulation, including the Dodd-Frank Act have been stifled at every turn by Republican elected officials acting on behalf of the financial giants. Though Wall Street essentially squandered trillions of dollars of the nation’s wealth with its greed-fueled risky behavior, and that it currently is operating at profitable levels equal to its earlier profitability…in fact the only part of the economy doing so well…it resists all further regulation or accountability.

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