Good for the economy or good for the rich?
Published 10:23 am Tuesday, May 6, 2014
My Point of View by Jennifer Vogt-Erickson
I was born during our nation’s bicentennial celebrations, and friends from school are sending reminders about our class reunion this summer. I cringe before doing the math. Twenty years have passed since my high school graduation. I’ve got my share of wrinkles to show for it. What else?
I can’t complain about my other accumulations — a husband, two kids, a house and a bit socked away for retirement. Standard American dream stuff. Armed with college degrees, my husband and I have weathered two major national economic downturns in fairly good shape.
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A lot of people haven’t been so fortunate. In fact, a huge swath of the American public has not done as well in my lifetime as they did during the earlier postwar era. The middle class has been squeezed, and the working class has fared even worse.
Republicans repeat ad infinitum that the best way to spread prosperity is to get government out of the way of business. Since gaining steam in the 1980s, they’ve led years of deregulation and tax cuts for the top, with many Democrats abetting them. Where has that gotten us?
The math isn’t pretty. Wealth inequality is now the worst it’s been since the late 1920s. The richest 1 percent control 40 percent of the wealth and take home 24 percent of annual income. It’s a crummy deal, unless one is part of that gilded sliver which can insulate itself from societal problems grounded in the majority’s struggle to get by.
This imbalance is an affront to our sense of fairness as Americans. Even most Republican voters think our economic inequality is too great. Many people older than me yearn for a return to better times, like what we had during the mid-20th century.
The 1950s were a great time in America, especially if one was white and male. It was the heyday of the middle class. Men could get good-paying jobs right out of high school; many got married young and supported a family on one income. Union membership was at its height.
The G.I. Bill was helping thousands of men who served in World War II and Korea finance their college educations, and the Veterans Administration subsidized their home loans. Taxation was much more progressive, and the top marginal income tax bracket was over 90 percent.
In other words, the strong middle class we once had was engineered by government policy. Roll government back, and capitalism does what it does best — it siphons more and more resources to a shrinking percent of very wealthy individuals.
Republicans present capitalism as a magic wand that both rewards those with creativity and ambition and also distributes wealth to more people. It does the former to some extent. It should be clear by now, though, that the latter idea is a pipe dream.
Here’s an example of how capitalism favors those with wealth: A quick way to get rich is to carefully select one’s parents. Congress has sharply reduced estate taxes since 2001, when the first $675,000 of an estate was excluded from taxation, and the top rate on the rest was 55 percent.
If one’s widowed mother passes away this year, the first $5.34 million of her estate is exempt, and the maximum tax rate for the remainder is down to 40 percent. If one’s mother bequeaths him or her that kind of treasure, they should thank Republicans for preventing the greedy public from getting their hands on it and wasting it on fripperies like transportation, education, health and defense.
With, say, $1.5 million of unearned income inherited from one’s mother, may she rest in peace, a person could now purchase some blue chip stock. The long-term capital gains from the investment is taxed at much lower rates than earned income and is not subject to the 6.2 percent payroll tax.
This is just one way the current system favors unearned income over earned income. Who are the “makers” and “takers” in this arrangement?
Appeals to keep government “out of our back pockets” have distracted us from the real pickpockets. The overall wealth of our country has increased, but instead of the gains being widespread like they used to be, they are accruing mainly to a tiny segment of the population. If we want to bring back the good old days, we have to bring back good government.
When I was in high school, the main targets of anger over fading middle class dreams were Japanese cars and the spotted owl. Now, more than ever, it’s anything related to government.
We have to overcome both public distrust and plutocracy. Government is the only entity powerful enough to stand in the corner of most Americans. It is neither the bogeyman nor the goon squad, it is We The People, at least the part not captured by the 1 percent. We each still have just one vote.
Do the math over the last 20 or 30 years. Can you afford to vote for candidates who favor policies that expand economic inequality?
Albert Lea resident Jennifer Vogt-Erickson is a member of the Freeborn County DFL Party.