The Congressional Budget Office provides a comprehensive report on wealth every three years. The percent of total wealth owned by the top 10 percent of all families is shown below.

The unavoidable and indisputable conclusion: The top 10 percent is getting wealthier at the expense of everyone else.

Why did wealth grow faster for the top 10 percent over the last quarter century? Most of the answer involves income. The math is simple:

more income more investing more wealth.

In other words, wealth for the top 10 percent grew faster because their income grew faster.

Analyses from the Federal Reserve clearly indicate that the income share for the top 10 percent grew at the expense of everyone else. The Fed goes even further. They show that the top 3 percent is the only group that took a greater share of income over the last quarter century. The next 7 percent was level, and the bottom 90 percent declined.

Another way to track income inequality is the Gini statistic. Gini rises with the level of inequality. Starting with a baseline of 100 in 1993, income inequality rose in the US despite a series of severe business cycles. It could be argued that the wealthy few played a major role in creating the dotcom craze and the great recession. But rather than suffer defeats, they ultimately came out ahead.

It is important to examine Gini levels across various political administrations. The inescapable conclusion is that Gini has grown regardless of who is President or whether we have a Republican or Democratic administration. Both parties have catered to the wealthy few. Their power permeates both political parties.

No Level Playing Field

What does it mean when one group benefits at the expense of others? Classic economic theory would hold that the top 10 percent gained because they added more value relative to everyone else. The wealthy few sometimes rationalize their outsized gains by arguing that they are smarter than the rest of us. During the recent presidential campaign, Donald Trump personified these claims. He made it clear he views himself as smarter than everyone else, that he knows more about taxes, that he knows more than the generals, and so on.

But there is at least one major problem with the assertion that the top 10 percent deserved their outsized gains: there is no level playing field. The rules favor the wealthy few. They have far more advantages in our economy over everyone else, especially in the political and legal realms. They fund PACs, lobbyist and lawyers to push their interests at the expense of everyone else.

Proof that there is a biased playing field is provided in a study by Martin Gilens and Benjamin Page. They conclude that the wealthy few and special interest groups for business have substantial impacts on U.S. government policy, while average citizens and groups supporting them have little to no influence.[i] In short, we have an oligarchy in the USA.

Capitalism has no argument with top producers earning more. Capitalism becomes something else when the wealthy few benefit at the expense of everyone else, and for no reason other than they have the power and the means to take more than their fair share. That’s not capitalism; that’s oligarchy.

While American productivity rose, income for American workers stagnated. For decades, as Americans worked harder and smarter, the fruits of American productivity gains were claimed exclusively by the top 10 percent. Again, this is not capitalism, it is a systematic pattern of “reverse robin hood.”

Blowing Smoke

Our government is charged with the responsibility of maintaining a healthy economy. Just as societies do not self-regulate, neither do economies. Civil society requires laws and a system of justice. The same is true of economies: laws provide the foundation for an economy. Then those laws need to be enforced by government and our legal system. This creates trust. Economies flourish with trust, and eventually decline without it.

Political conservatives claim we have too many laws, which hampers economic growth. This is propaganda; a simple-minded bastardization of classic economic theory. In fact, classic economic theory has always called for regulations that maintain a level playing field.[ii]

America’s government has failed to provide a level playing field. The interest of the wealthy few have driven political and legal decision making to favor them at the expense of everyone else. The facts prove it, and this has been going on for decades in the USA.

Progressive Taxes

The short-term solution is to raise taxes on the wealthy few. The current conservative proposal is to cut income taxes at the top. They claim the benefits will trickle down to everyone else. The absolute fraud of the trickledown claim is laid bare by the facts. We’ve had trickledown economics for decades, and it only benefits the wealthy few.

Tax cuts for middle America are immediately spent in the economy or used to pay off debt. Tax cuts for the wealthy few, on the other hand, mostly go toward investments, which does not feed the economy.[iii] It is far more credible to expect that diverting money from middle America to investments by the wealthy few reduces consumption and depresses rather than fuels the economy.

How Much Money Are We Talking About?

The top 10 percent of wealthy Americans owned 76 percent of total US wealth in 2013. That year, aggregate family wealth was $67 trillion.[iv] So, the top 10 percent held about $51 trillion in 2013.

How much is $51 trillion?

• The number 51 followed by 12 (yes, twelve!) zeros.
• More than 3 times the USA’s gross domestic product in 2013.[v]
• 32% of total world wealth.[vi]
• More than the combined wealth of China, Japan, United Kingdom and Germany.[vii]

There is no ethical way to justify such an egregious concentration of wealth among so few. It is a gross distortion of capitalism, and it impacts the entire world. Progressive taxes would help fix the imbalance created by an uneven playing field for the last quarter century. For example:

• A 1% wealth tax on the upper half of the top 10 percent’s wealth would generate $255 billion a year.[viii]
• A 100% tax on all annual income over $10 million would generate another $255 billion a year. [ix]

How much is $255 billion?

• It equals all of Trump’s proposed budget cuts ($58.6 billion) and increases ($60.4 billion), plus and additional $136 million for Affordable Healthcare rate discounts, college tuition relief, and so on.
• It equals the taxes paid by everyone in 2016 who earned less than $75,000 plus $66 billion for further tax relief.

Pushback

The above two tax programs together would generate over half a trillion dollars a year. As we can imagine, the pushback will be immense. The wealthy few have trillions at stake, and they will spend many billions if not trillions to keep what they have. They will wage all-out war. They will deploy their massive power to fight. They have unfair advantages across our economic, political, and legal systems, and they will leverage them aggressively to quash any redistributive taxation.

The simple fact, however, is that the wealthy few only have as much power as we give them.

Americans tend to be easily intimidated by wealth. We have let ourselves be bullied by the wealthy few for centuries. But from time to time we also stand up and say: That’s Enough! You’ve gone too far!

After the Great Depression Americans assumed a bold persona embodied in Franklin Delano Roosevelt. With a supermajority of Americans behind him, he reversed income and wealth inequality. He implemented progressive taxes and stood up to powerful corporate interests. He restored a level playing field, and the bulk of Americans won. They took back what was rightfully theirs. They restored their fair share of the American dream.

Restore True Capitalism

There is no way to be polite about egregious misappropriation of income and wealth. On the one hand, it is perpetrated by ugly, rampant greed. On the other, it is enabled by widespread cowardice.

Progressive taxes are the most immediate and effective tool for moving toward economic balance. It does not fix the problem at its core, but it takes a big step forward.

Fair distribution of income and wealth must become an integral part of the American political lexicon. We need to talk about how much money is taken from Americans every year by the wealthy few. We need to quantify the benefits of progressive taxation We need to become more facile with detecting economic propaganda. We need to hold conservative economists accountable for their economic lies and deceit.

The wealthy few are not going to help us rebalance the economy. It is up to us – the remaining 90 percent. We must restore capitalism, put an end to oligarchy, and create a level playing field on which capitalism can flourish for everyone once again.

* * *

Mark Blessington has an insider’s view of Corporate America. After receiving an MBA from Northwestern University in marketing, he pursued a 30-year career as a consultant to some of the world’s largest corporations. For the last 15 years and with Howard Zinn as his inspiration, he has published numerous articles that reexamine various political economics topics from the perspective of common citizens.

* * *

[i] Martin Gilens and Benjamin I. Page, Testing Theories of American Politics: Elites, Interest Groups, and Average Citizens, American Political Science Association, September, 2014.

[ii] For example, Adam Smith called for strict government regulation of the banking industry. Wealth of Nations, 1776, Book 5, Chapter 1, Part 3, Article 1. Later, F. A. Hayek called for better laws to ensure fair competition in The Road to Serfdom, 1944, Chapter 3.

[iii] The major source of corporate funding over the last quarter century has been through debt, not equity financing.

[iv] Congressional Budget Office, Trends in Family Wealth, 1989 to 2013, August 2016, page 1.

[v] World Bank: http://data.worldbank.org/country/united-states

[vi] Alianz, Global Wealth Report, 2016. Top 10% wealth share of 76% x USA share of world wealth of 42% in 2016 = 32%.

[vii] Alianz, Global Wealth Report, 2016. After the USA, the next four countries’ share of world wealth (Japan, China, United Kingdom, and Germany) is 31%.

[viii] $51 trillion held by the top 10% x 50% of the top half’s wealth x 1% wealth tax = $255 billion

[ix] The IRS provides income and tax details in its annual reports. In 2016, the group with adjusted gross incomes (AGIs) over $10 million had an average income of $30.4 million and an effective tax rate of 25.4% for 16,733 tax returns. The new total tax for this group would be $384 billion versus the old $129 billion, yielding a gain of $255 billion.

The answer is absurdly simple: Because US health insurance companies jacked-up their ACA rates!

Let’s be clear. The ACA does not set insurance rates. Companies voluntarily join the ACA “marketplace” and they set their premiums independently.

In 2016, health insurance companies raised their insurance rates by 140% for policies purchased by individuals for their families. In contrast, company-sponsored premiums for family coverage only increased by 3% in 2016. This is beyond reasonable.

The biggest problem with the ACA is that it has no teeth in dealing with insurance companies.

While the rest of the industrialized world has single-payer healthcare, the US uses private insurers. Our free market system was failing before the ACA, and it still is. The only viable options are to greatly increase health insurance company regulation, or go to a single-payer system.

The Republican proposal went in the wrong direction.

It reduced restrictions on health insurance companies, which would have pushed us back toward what we had before the ACA.

Trump’s strongest concentration of support was in rural areas. And guess what? Many of these voters do not have company-sponsored or “group” health insurance. Many of them do not work for big corporations which typically pay 70% to 80% of an employee’s health insurance bill. They tend to be self-employed, independent contractors, part-time workers, or retired. They desperately need health insurance relief, and Trump-care was not going to provide it. This is the real reason why Trump-care failed.

An essential restriction that would greatly improve the ACA is:

If an insurance company offers group health insurance in a state, then:

(1) It must also offer ACA coverage in that state, and
(2) ACA and group rates must be the same in that state.

This regulation has very serious consequences. It means that:

• Major insurance carriers will not be able to opt-out of the ACA unless they choose to exit the health insurance business entirely.
• It puts individuals on the same footing as corporations when it comes to buying health insurance. If an insurance company wants to raise their rates, they must do it across-the-board in that state.
• Health insurers will be forced to focus on the cost side of healthcare. For example, what can be done about egregious prices for some pharmaceuticals and some medical equipment and devices? What can we do about the small minority of patients who drive healthcare costs through the roof? How can illness prevention help drive down costs?

The bottom line here is that if the health insurance industry can’t play a central role in fixing our healthcare cost crisis, then they have no right to be in the business. They must solve the problem, not profit from it.

What about a discount?

Adding one new regulation to the ACA does not fix it. For example, what about workers who receive no health insurance discount from an employer? This problem impacts about one-third of working America. The obvious solution is for the federal government to ensure that large discounts (e.g., 70 to 80%) are provided to individuals. Why so obvious? Because two-thirds of US workers receive it, and insurance is not affordable for those who do not receive it.

There are two avenues: increase the number of companies that offer their employees a health insurance discount, or offer it through the ACA. The ACA strives to do both. While it may need strengthening in these areas, the more immediate issue is pulling premiums back down to reality.

Who wins and who loses?

Now we have a clear picture of who wins and loses when we fix the ACA. Individuals who buy insurance through the ACA win. Insurance companies lose if they can’t reduce healthcare costs. Small companies lose because of higher expenses from offering health insurance. Taxpayers lose unless money from other areas of the Federal budget is diverted to pay for the ACA discounts.

Some argue that these losses are too high and that we can’t afford to fix the ACA. There are numerous counter arguments, such as we place too high a priority on military spending relative to the value of improving American’s health, and so on.

Rhetoric aside, Americans can see through the smoke and decipher the reality surrounding healthcare. They will hold politicians accountable for fixing this large, pressing problem. Too many people are suffering under our failing health insurance system.

See also:
It’s Time for a Single Payer Healthcare System in the US by Philip Kotler.

Mark Blessington is a sales and marketing consultant and has worked with many of the world’s largest corporations. He has written four books, ranging from Deep Economics to Sales Forecasting.

BY MARK BLESSINGTON

I long for a reemergence of an FDR-like era.

I call this the Era of Compromise Democrats. From an economic perspective, the last Democrat to really fight for the people was Franklin D. Roosevelt. He was even brave enough to stand up to the Supreme Court. While President Obama immediately spoke out against Citizens United in 2010, he did nothing to directly oppose it. While many think the Court far exceeded its purview, Obama merely threw a few small stones. That was not what FDR would have done.

Perhaps the best example of judicial obstruction is provided by a rapid succession of Supreme Court decisions against the New Deal in 1935 and 1936 (Schechter Poultry, Butler, Carter Coal, Morehead). They destroyed the very foundation of the New Deal, leaving FDR and the U.S. recovery effort dead in the water. Most of the New Deal involved federal and state intervention in the economy, and the Court declared that tack illegal.

With a landslide victory behind him and supermajorities in both houses, FDR crafted a judicial reorganization bill in early January 1937, popularly referred to as the court-packing plan. Roosevelt’s efforts to win Congressional support were tactically flawed. To recover, he held a Fireside Chat on March 9. Going for the jugular, he critiqued the Court’s interference in legislative matters. He accused the Court of destroying the balance of power intended by the Framers, and referred to a half-century of decisions (later called the Lochner era) that struck down numerous state and federal laws protecting workers and consumers. Public opinion, though cautious about the notion of court packing, staunchly supported FDR and the New Deal.

The Court read the writing on the wall: Roosevelt would alter the very structure of the Court in order to reinstate the New Deal. A mere 20 days after FDR’s Fireside Chat, the Court reversed itself in West Coast Hotel. No only did they strike down Morehead and make minimum wage laws legal. They also nullified the freedom of contract doctrine, thus ending the Lochner era. Roosevelt and the New Deal were back in business thanks to what was dubbed “the switch in time that saved nine.”

To me the FDR v. SCOTUS (Supreme Court of the U.S.) drama is one of the most exciting and revealing junctures in 20th century U.S. history, but it is seldom told in its fullness. Perhaps doing so is too unsettling. When told from a common citizen’s perspective, the story portrays the Court as a usurper. The Court empowered the wealthy few to subjugate U.S. citizens. And most disturbing of all, nothing short of a dramatic, unprecedented threat was required to restore balance and bring the Court back in line.

Any plan for economic reform must consider the judicial branch. The progression of Occupy Wall Street camp closures across the U.S. can be tied to a single New York Supreme Court decision granting permission to Mayor Michael Bloomberg and the New York Police department to close down the Zuccotti Park occupation. The failure of the Arab Spring in Egypt to elect a popular reform leader can be tied to how their Supreme Court devised election rules to pit reform candidates against each other and position Mohamad Morsi for victory, a conservative Muslim Brotherhood candidate.

Moving backward in time from West Coast Hotel, the first major economic case decided by the Court was Fletcher v. Peck in 1810. Thirty-five million acres of Georgia land were sold in the Yazoo Act of 1795. Nearly every state legislator who voted for the act, however, took bribes from Yazoo land corporations. Georgia’s citizens soon discovered the graft and elected new legislators who immediately declared the Act null and void. Yazoo stockholders were also alarmed; they had paid good money for their shares. A few Northern stockholders sued each other, hoping to eventually force Georgia to honor the Yazoo Act of 1795.

Despite the 11^th Amendment which prohibited citizens from one state suing another state, the Supreme Court took the case. Worse, Chief Justice John Marshall had direct personal ties to an original Yazoo conspirator but did not recused himself. The Court ruled 4-1 that Georgia had no right to repeal the fraudulent land sale. Property rights had to be protected “from those sudden and strong passions to which men are exposed.” Rather than penalize stockholders for their due diligence failures, the Court penalized Georgia’s citizens for rejecting fraud.

Moving forward in time from West Coast Hotel, there was a sustained period of rulings favoring common citizens. But the honeymoon was short-lived. Five Supreme Court appointments by President Eisenhower starting in 1953 and four by President Nixon starting in 1969 revived the Lochner era. The result was a string of decisions culminating in Citizens United in 2010. This decision was opposed by 80 percent of the voting public at the time, remains highly unpopular, and is credited with a doubling of political spending, mostly by the super-rich.

Today we face a pro-business legal precedent that is every bit as daunting as what FDR confronted in 1937. He was emboldened by a landslide election, supermajorities in Congress, and Fireside Chats. What will it take to swing the pendulum back once again? If we study the history of capitalism with a careful eye to the judicial branch, we can not only craft but also implement a comprehensive economic strategy that is even more successful than what we now enjoy.

As Phil Kotler so wisely says: “I believe capitalism is better than any other system. But I also believe that it has fourteen major shortcomings.” I ask him to consider what may be a fifteenth: judicial obstruction.

The Monsanto case is a perfect illustration of at least three shortcomings identified in Philip Kotler’s book Confronting Capitalism: too much money in politics (Chapter 10), weak consumer protections (Chapter 12), and environmental harm (Chapter 6). Most people think Monsanto’s monopolies are harmful to the economy, society and the environment. According to Harris Interactive, Monsanto has a horrible reputation with the general public. For a farmer’s perspective on Monsanto’s intimidation tactics, watch Seeding Fear (a video supported by Neil Young). For research on the harmful effects of GMO seeds, read this study from Agricultural Sciences.

Who is charged with preventing U.S. monopolies or breaking them up? The Federal Trade Commission and the Antitrust Division of the U.S. Department of Justice. Let’s first look at the FTC. How is it that the FTC can go after Google or Microsoft but not Monsanto? Isn’t farmer intimidation anticompetitive? Of course it is. The FTC is an independent agency of the U.S. government. Most citizens do not know what this means. In my view, “independent federal agency” is an oxymoron: how can a federal agency be independent? The FTC is not directly accountable to any federal branch of government. This is no way to run a ship. Can you name even one business with a quality control department that does not ultimately report to the CEO? Of course not. As every CEO knows, a poorly designed organization doesn’t perform well. The FTC’s reporting structure is highly ambiguous. So it is not held accountable for fulfilling one of its most important missions: protect the general welfare from monopolies.

Then there is the Antitrust Division of the USDOJ. Why hasn’t Monsanto’s high market share triggered an investigation? Because the Supreme Court has embraced a pro-business orientation for decades. Citizens United is a perfect example, which is the Court’s 2010 decision allowing unfettered political spending by non-profits. This decision was then extended to corporations despite 80% of the voting public in opposition. Rarely are voters so unified. For example, only four presidents have won more than 60% of the popular vote. Currently the judicial branch favors corporations over common citizens. We must fix this problem. At its core, the judicial branch has far too much latitude to set its own course, rather than passionately and consistently serve the public interest.

As for food safety regulation, who is charged with that? The Food and Drug Administration. But there is a revolving door between the FDA and Monsanto. This severely dampens the FDA’s independence, objectivity and effectiveness in serving the general welfare. Even though the FDA clearly reports within the Executive branch, its mission is subverted by prior or future big salaries at Monsanto. Simply put, revolving doors between corporations and public offices are unethical.

To fix the Monsanto monopoly problem, the FTC, FDA and the DOJ must do their jobs well. We need to end the oxymoronic concept of “independent federal agency.” Put the FTC inside the Department of Commerce and charge its director with opening an immediate investigation into Monsanto and restraint of trade. Second, make the revolving door illegal between the federal government and corporations. Pass clear legislation and hold the FBI accountable for enforcement, not only within the FTC and the FDA, but across all federal departments. Third, charge the director of the FDA with opening a science-based investigation into the health risks associated with GMO seeds, and fire the director if the agency’s findings are not consistent with global scientific research findings.

Fourth, and with far more difficulty, we must make the judicial branch more accountable to the people. Due to a long string of highly conservative appointments, the Supreme Court has favored corporations and the wealthy few. Perhaps a few pages from the Franklin Delano Roosevelt playbook would help. Remember, the Supreme Court nullified the highly popular New Deal with a rapid string of decisions in 1935 and 1936. It was reinstated in 1937 only after FDR threatened to unleash his devious court-packing plan. This dramatic and wholly unique chapter in U.S. history tells me two things. First, we need a viable impeachment process for justices who consistently fail to serve the general welfare. Second, we need a credible threat of unpopular decision reversal through a modernized, streamlined Amendment process.

Kotler’s inaugural post for this site invites enhancements to or additions beyond his list. I congratulate him on such openness and submit this post as support for Chapter 5 (Companies Not Covering Their Social Costs). Kotler explains that if air and water pollution results from steel production, then someone bears the cost. If steel companies evade the cost, then it is born by society either through poor health or from the clean up. Chapter 5 does not cover corporate taxes, though, which is a classic way for individuals and companies to cover social costs. If corporations avoid their fair share of the tax burden, then they are not covering their social costs.

What do we know about corporate taxes relative to social cost?

The bottom line in taxes is: “Who paid what?” Top marginal tax rates don’t really answer this question because they are easily dodged by large corporations and wealthy individuals. We need to measure actual taxes, not marginal rates. As the chart shows, corporations carried 44% of the tax load between 1929 and 1955. The remaining 56% was paid by individuals. Then from 1956 to 1980 the corporate share of taxes dropped precipitously. Since 1981 it leveled out at 20%, and the remaining 80% of the total tax burden has been paid by individuals ever since.

Some might argue that the lower corporate tax burden is appropriate. Perhaps corporations became more socially responsible starting around 1955 and made important non-tax contributions such as enhanced employee programs (e.g., higher employment, compensation, benefits and training)? Maybe they enthusiastically embraced more responsible manufacturing practices (e.g., lower carbon footprint, less natural resource extraction) or better products (e.g., fewer cancer- or obesity-causing products)? Perhaps companies significantly decreased their use of “social goods” (e.g., lower road, bridge and airport use, less need for military intervention or protection)? Or, perhaps their tax burden should have declined due to the rise in social welfare programs?

As Kotler argues throughout his book, it is more reasonable to conclude that companies have radically increased their social costs, not decreased them. They have cut employee programs. They have outsourced work to other countries. They have encouraged consumption of questionable products and aggressively sought legal protections to continue doing so. (Shocking examples of protectionist legislation are found in the meat and dairy industries.) It certainly seems like companies have accelerated their use of public roads, bridges and airports since 1955. U.S. military involvement around the world seems to greatly benefit many powerful U.S. companies. And individual welfare, education and arts programs have suffered extensive defunding and privatization.

Concurrently, corporations dodged their fair share of social costs by investing heavily in lobbying, political spending, tax lawyers and consultants. Indeed, companies now spend more on lobbying than the U.S. spends to fund the House and Senate combined.

Strictly from a shareholder perspective, company efforts to avoid social costs have yielded fabulous returns. Given the pre-1955 proportion of 44%, the decline to 20% yielded a gain of $9 trillion for companies, before considering the time value of money or what they spent on lobbying, political spending, lawyers and consultants. If we add a conservative return to capital of five percent net of costs, then the gain to corporations has been almost $22 trillion. As a point of reference, the market capitalization of the U.S. total stock market is currently about $25 trillion. David Parsley of the Vanderbilt Owen Graduate School of Management and his coauthors studied the return on investment for lobbying expenditures and concluded it was nothing short of dramatic.

From a common citizen’s perspective, the time since 1955 could be described as “The Great Corporate Tax Dodge.” Its cost to society is nearly the value of every publicly traded company in the U.S.

While some deride government ineptitude and insist on further downsizing, the interests of common citizens are better served by empowering government to crack down on corporate tax avoidance and force them to pair their fair share.