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Posts Tagged ‘Thomas Piketty’

The nation is on the cusp of the largest inter-generational transfer of wealth in history. A study from the Boston College Center on Wealth and Philanthropy projects a total of $59 trillion passed down to heirs between 2007 and 2061.

As the French economist Thomas Piketty reminds us, this is the kind of dynastic wealth that’s kept Europe’s aristocracy going for centuries. It’s about to become the major source of income for a new American aristocracy.

The tax code encourages all this by favoring unearned income over earned income.

The top tax rate paid by America’s wealthy on their capital gains — the major source of income for the non-working rich – has dropped from 33 percent in the late 1980s to 20 percent today, putting it substantially below the top tax rate on ordinary income (36.9 percent).

If the owners of capital assets whose worth increases over their lifetime hold them until death, their heirs pay zero capital gains taxes on them. Such “unrealized” gains now account for more than half the value of assets held by estates worth more than $100 million.

At the same time, the estate tax has been slashed. Before George W. Bush was president, it applied to assets in excess of $2 million per couple at a rate of 55 percent. Now it kicks in at $10,680,000 per couple, at a 40 percent rate.

Last year only 1.4 out of every 1,000 estates owed any estate tax, and the effective rate they paid was only 17 percent.

Republicans now in control of Congress want to go even further. Last Friday the Senate voted 54-46 in favor of a non-binding resolution to repeal the estate tax altogether. Earlier in the week, the House Ways and Means Committee also voted for a repeal. The House is expected to vote in coming weeks.

Yet the specter of an entire generation doing nothing for their money other than speed-dialing their wealth management advisers is not particularly attractive.

It puts more and more responsibility for investing a substantial portion of the nation’s assets into the hands of people who have never worked.

It also endangers our democracy, as dynastic wealth inevitably and invariably accumulates political influence and power.

Consider the rise of both the working poor and the non-working rich, and the meritocratic ideal on which America’s growing inequality is often justified doesn’t hold up.

That widening inequality — combined with the increasing numbers of people who work full time but are still impoverished and of others who have never worked and are fabulously wealthy — is undermining the moral foundations of American capitalism.

The Rise of the Working Poor–Robert Reich

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The war on the middle class began in 1981 with a well orchestrated anti-labor union message spread throughout all aspects of the national news media. It was a full frontal assault. It still is.

According to the Economic Policy Institute, “As a broad attack on unions continues, with Republican politicians leading efforts to eliminate unions or weaken them in Illinois and Wisconsin, Missouri and West Virginia, and county-by-county in Kentucky, it’s wise to think about what’s at stake. We now know what happens when employers hold most of the cards and employee power is diminished: profits and CEO pay skyrocket, and worker pay flat lines.

It is no coincidence that, as the Figure (above) shows, the share of income going to the broad middle class began to fall as union membership and power were reduced. The middle 60 percent of families depend primarily on wages for their income, so as the unions’ ability to raise wages diminished, so did the ability of middle class families to earn a fair share of the nation’s growing income. Research has shown that as unions were less able to establish wage standards the wages of nonunion workers in the same occupations and sectors were also reduced. Politicians who care about the middle class should be looking for ways to help workers gain access to collective bargaining and restore union strength. They certainly ought not weaken them further and limit or forbid collective bargaining.”

International income redistribution agreements, falsely marketed as free trade agreements, have been the primary tool used by corporate CEOs in their war against labor unions. These agreements allowed US corporations to export nearly 30 million jobs between 1990 and 2010, and millions more since then. See Exporting Jobs–Global Intersection. Millions of these were labor union jobs.

When a job is exported the difference between the old higher wages and the new lower wages is redistributed from the 99 to the 1 percent via higher corporate profits, rising dividends and surging share prices. The citizens who lose their jobs might wind up with unemployment insurance, if they’re lucky.

This is one of the reasons why Thomas Piketty is able to write in his international best seller Capitalism in the Twenty-First Century that the US has the greatest mal-distribution of labor income of any nation in the history of the world. CEO pay has skyrocketed in large measure because they are able to ship millions of jobs overseas and redistribute part of the proceeds into their own pockets.

This is also why the 1 percent have gotten wealthier over the last thirty years. Currently, the 1 percent steal a little over 36 percent of all the income produced in the United States, up from 8 percent in 1978. At the current rate of growth, the 1 percent will steal about 40 percent of the total income produced in the USA by next year.

The economic and political strategy of the 1 percent has been quite sound; destroy the middle class by shipping jobs overseas, while simultaneously attacking labor unions at home. That’s why there is such a vicious assault on public employee labor unions, and such a large push to give Fast Track Authority to President Obama, so that he can sign the Trans Pacific Partnership into law when it is introduced into congressional debate. This is the largest income and political power redistribution scam in US history, and it is falsely being labeled a free trade agreement.

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The Trans-Pacific Partnership is an international income and political power redistribution scam falsely marketed as a free trade agreement, which is exactly why President Obama, Wall Street Senator Ron Wyden, as well as most of the Republican Party support this scam. It will redistribute massive amounts of income from the 99 to the 1 percent.

According to economist Thomas Piketty, in his seminal work, Capitalism in the Twenty-First Century, the United States has a record “level of inequality of income from labor (probably higher than in any other society at any time in the past, anywhere in the world, including societies in which skill disparities were extremely large)….”

Don’t let Wall Street Senator Ron Wyden lie to you. If we are going to defeat the job killing, environmentally devastating, Trans-Pacific Partnership from being railroaded through Congress using Fast Track Authority, then we need to get Senator Wyden to oppose it once again. He was against it before he was for it, so he can change his mind on this, but your voice matters, so call now. This time his vote in the senate matters most to all Americans.
Please make the call to 1-866-502-6055 and tell the senator you are against Fast Track Authority and the international income redistribution scam known as the Trans-Pacific Partnership (TPP).
What is Fast Track Authority? What is the Trans-Pacific Partnership (TPP)? Why does Senator Wyden support them? I’m happy you asked.
The fast track negotiating authority for trade agreements is the authority of the President of the United States to negotiate international agreements that Congress can approve or disapprove but cannot amend or filibuster. Debate is also limited. Fast track negotiating authority is a temporary and controversial power granted to the President by Congress. The authority was in effect from 1975 to 1994, pursuant to the Trade Act of 1974, and from 2002 to 2007 by the Trade Act of 2002. Although it expired for new agreements on July 1, 2007, it continued to apply to agreements already under negotiation until they were eventually passed into law in 2011. In 2012, the Obama administration began seeking renewal of the authority.

Former Federal Reserve vice chairman Alan Blinder has calculated that 22 percent to 29 percent of all U.S. jobs could potentially be offshored if the TPP is approved by congress. 25 percent would translate to 36 million workers whose wages are in competition with those in largely lower-income nations. Of the 11 nations with which the United States is negotiating the TPP, nine have wage levels significantly lower than ours.

The difference between the old higher US wages of the jobs exported, and the soon to be lower wages overseas, would go straight into the pockets of the super rich via higher dividends, share prices, and soaring corporate profits. In addition, for a job well done in offshoring jobs, CEOs will receive raises and bonuses. Currently, on average, US CEOs receive a record 475 times more in pay than the lowest paid workers in their companies. See The Ratio of CEO to Average Worker Pay

According to Harold Meyerson writing in the Washington Post, “By avoiding discussion of the consequences that trade deals with developing nations have on U.S. workers, not to mention our trade balance, defenders of free trade are indulging in the worst kind of imperviousness to facts. But when the case for free trade is coupled with the case for raising U.S. workers’ incomes, it enters a zone where real numbers, and real Americans’ lives, matter. In that zone, the argument for the kind of free-trade deal embodied by NAFTA, permanent normal trade relations with China and the Trans-Pacific Partnership completely blows up. Such deals increase the incomes of Americans investing abroad even as they diminish the incomes of Americans working at home. They worsen the very inequality against which the president rightly campaigns.

There are ways that a developed nation can trade with the developing world without gutting its own economy. Germany has been able to protect its workers not only through the advantage of having the euro as its currency, but also by requiring its corporations to give their employees a major say in their companies’ investment decisions and by embracing a form of capitalism in which shareholders don’t play a major role. Were the United States to adopt this form of stakeholder capitalism, then its trade accords wouldn’t necessarily come at the expense of its workers. Absent such reforms, however, trade deals will only negate our attempts to diminish inequality.”

If the TPP is approved by congress and signed by the president, only the rich will benefit, and at the expense of our jobs. But there’s more. Those lost jobs pay our taxes, and so the TPP will lower the amount of tax dollars going to schools, fire, police, parks, recreation, road maintenance, and DMV services, among other things.

So we know President Obama, Wall Street Senator Ron Wyden, and the Republican leadership in congress (think Mitch McConnell and Orrin Hatch) are intending to rob from the middle class and give to the super rich, and those are the people they serve.

For more on what Harold Meyerson has to say about the TPP, click on the link below.

Free Trade and the Loss Of US Jobs–Washington Post

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In the early development of Western European governments, say around 1100 AD, kings loosely ruled over kingdoms, and the members of the aristocracy liked that because having a king meant political and economic stability, more or less. If a king died without a successor, then anarchy reigned during the process to replace the monarch. If a king ruled who was weak, and or cruel to the nobility, such as Edward II of England, they were replaced via revolution, poison, or some other form of aristocratic treachery. The nobility preferred a king who taxed them little (unless high taxation was necessary to maintain their status) and kept the peasant class under their thumb, and working for the nobility for the most minimum of subsistence.

Western governments slowly changed in form, but not necessarily in substance, always favoring the rich and powerful, until the Great Depression. That’s when the little people got government working for them, as well as for the rich and powerful. President Franklin Delano Roosevelt raised the marginal top tax rate to 91 percent, which for him, acted as a maximum wage and suppressed the political power of the corporate class, whose policies of redistributing income from the 99 percent to themselves via government had led the USA into the worst economic crisis in its history. That doesn’t mean any of the rich actually paid 91 percent at even the highest portion of their income because they had many deductions.

The Reagan tax cuts and subsequent tax cuts unleashed the power of the modern rich to manipulate government at all levels, and especially the federal level, to redistribute income and wealth from the 99 to the 1 percent via legislation, such as free trade treaties, more tax cuts for the rich, privatization scams, etc….

In the video above, economist Thomas Piketty discusses his new book about how the economic power the 1 percent has robbed the 99 percent of their livelihoods and their democracy.

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Here’s what the press tells you.

The New York Times
Tuesday, September 10, 2013

“The top 10 percent of earners took more than half of the country’s total income in 2012, the highest level recorded since the government began collecting the relevant data a century ago, according to an updated study by the prominent economists Emmanuel Saez and Thomas Piketty.

The top 1 percent took more than one-fifth of the income earned by Americans, one of the highest levels on record since 1913, when the government instituted an income tax.

The figures underscore that even after the recession the country remains in a new Gilded Age, with income as concentrated as it was in the years that preceded the Depression of the 1930s, if not more so.

High stock prices, rising home values and surging corporate profits have buoyed the recovery-era incomes of the most affluent Americans, with the incomes of the rest still weighed down by high unemployment and stagnant wages for many blue- and white-collar workers.”

Continue reading the rest of the story–the-rich-get-richer-through-the-recovery

Here’s what you should know the press isn’t telling you.

“Surging corporate profits” and “high stock prices” are cited as a reason for the uneven distribution of income during this recovery. However, what isn’t cited is that the surging corporate profits are due in large part to shipping jobs over seas, which redistributes income from the 99 to the 1 percent. Free trade treaties have also paved the way for US corporations to create lesser paying jobs overseas, rather than higher paying jobs here, and this does the exact same income redistribution thing.

The difference between the old, higher US wages and the new, lower wages goes into the pockets of the 1 percent via higher corporate profits, rising dividends and surging share prices. Now you can understand what’s going on.

According to the Federal Reserve Bank, one to three million jobs are shipped overseas every year, thanks to free trade treaties. Millions more per year are created overseas, but these would have been created here in the absence of free trade treaties, which are really income redistribution treaties.

The Obama administration is negotiating to redistribute more income from the 99 to the 1 percent via the largest free income redistribution trade treaty of them all; the Trans Pacific Partnership. Studies are showing this treaty will push middle class income down and redistribute the difference between the old wages and the new lower wages into the pockets of the uber rich. See study-mega-trade-deal-the-trans-pacific-partnership-would-make-most-americans-poorer.

In addition, the study that shows the 1 percent are stealing 95 percent of all income growth doesn’t count all the cash stashed away by the 1 percent in offshore accounts to avoid taxes. The study is counting only cash declared as taxable income. This means the 1 percent have a greater share of the national total income than the study reports. The share of national income the 1 percent have stolen via legislation is much closer to 34  percent than what the study cites.

And finally, the rich have received massive bailouts to the trillions of dollars while the middle class has struggled under the vicious financial assaults in the political markets of the 1 percent. See breakdown-of-the-26-trillion-the-federal-reserve-handed-out-to-save-rich-incompetent-investors-but-who-purchase-political-power. These bailouts have enabled the rich to continue to purchase legislators and legislation, such as the South Korea free trade treaty of 2012. So we’re really talking about massive government corruption, all the way from the white house through the congress and into the US Supreme Court. It’s one giant rigged game against the  middle class.

These are the reasons the rich are stealing 95 percent of all income growth over the last four years.

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