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1873 - Santa Barbara lawyers Charles Fernald and J.T. Richards purchase Rancho San Francisco for $33,000 (75 cents an acre) in a sheriff's sale [story]


Out of Left Field | Commentary by Charlie Vignola
| Tuesday, May 7, 2013

charlievignolaIf you have money in the stock market, you must be a very happy camper right now.  I can tell you that compared to what my 401K looked like in October of 2008, my retirement savings have roughly quadrupled since then thanks to the stock market climbing to 15,000 for the first time in history.

And while I’m pleased as punch about my current good fortune, it is also emblematic of how American capitalism is broken and no longer working for the common good.

Whatever you may think about John Edwards, he was absolutely right about there being “Two Americas”: there’s the tiny sliver of Americans at the very top of the food chain, the “one percenters” that inspired the “Occupy” rallies and were hotly discussed during the last election  who’ve vacuumed up the majority of the economic gains since we’ve started recovering from the Great Recession, and then there’s the 99 percent of Americans who are either running in place or who’ve fallen behind.

Just how bad has income inequality gotten in America?  Well, according to Emmanuel Saez, a renowned economics professor at U.C. Berkeley, the top one percent of households captured 121 percent of all income gains between 2009 and 2011, during the first two years of the economic recovery.  How is that even possible?  Because they became 11.2 percent richer while the bottom 99 percent got 0.4 percent poorer, adjusting for inflation.

And this is going on against a backdrop where even corporations that are doing well, like the Walt Disney Company, are still shedding hundreds of jobs.  If even companies that are reaping a fortune are responding by slashing jobs so they can become even more profitable, then what hope do we have to improve job growth?

The proffered Republican solutions never change: cut taxes on the rich, cut taxes on capital gains and dividends, cut taxes on corporations, cut taxes on estates, cut regulations, make it more difficult for people to sue companies for wrongdoing, and the magic of the free market will make everything all right.

But that unshakeable faith in the free market to self-correct for changing times and technologies is terribly misplaced, as the economic data has starkly shown for the past 33 years.

In fact, if you look at America’s post-war economy from 1945 through 2013, you can pinpoint the moment when income inequality and national debt both started exploding – and conservatives won’t like it: it neatly coincides with the election of Ronald Reagan in 1980 and his embracing of Supply Side Economics.

Supply Side or “Trickle Down” Economics is the conservative economic theory that rich people are the job creators in America, so as long as you make them richer through tax cuts, tort reform and the paring back of regulations, then all of society will benefit as the wealth inevitably “trickles down.”

The analogy they always use is “a rising tide lifts all boats,” but as we’ve seen over the past thirty years this analogy only works if your boat happens to be a yacht; otherwise, your boat has been stuck on a sandbar somewhere, and no one is coming to tow you to safety.

Basically, for the past three and a half decades we’ve followed the conservative game plan, doing exactly what they insisted would lead to a booming economy, dynamic job growth and broadly shared prosperity.  Well, one out of three ain’t bad: yes, the economy has boomed since 1980, but job growth has been inconsistent and only really exploded under a Democratic president – Bill Clinton – while prosperity has been the exact opposite of broadly shared.

Here’s a little statistic for you: the wealthiest 400 Americans have the same combined wealth as the poorest 150 million Americans.  Here’s another one: since 1980, average after-tax incomes for the top one percent rose by 281 percent, compared to increases of 25 percent for the middle fifth of households and 16 percent for the bottom fifth.

If all those numbers are making your head hurt, here’s the only thing you really need to know: the rich have been capturing all of the gains in the economy since the 1980s, leaving mere scraps for the rest of us.  And the trend lines are only getting worse for anyone who makes their living from wages rather than investment, speculation or upper management.

It’s evident to anyone who can do math and read data that the rising tide hasn’t been lifting all boats since the Reagan Revolution of the 1980s, and there are myriad reasons for this.  Some of those reasons include globalization, which has caused formerly American jobs to be outsourced to countries with lower labor costs and fewer environmental regulations, and  technology shifts resulting in fewer jobs – as internet businesses have caused brick-and-mortar businesses like book stores, record stores, video stores and travel agencies to close.

Even worse, while workers have clocked major productivity gains over the past thirty years, the economic fruit of those gains hasn’t been shared with the workers, but rather have stayed pooled at the top of the income chain, with executives giving themselves fatter salaries and bonuses while cutting wages and benefits for their workers.

And at the same time that the executive and corporate elite have been seizing more and more of the economic gains, their share of the tax burden has been shrinking and shrinking due to the Supply Side tax cutting of Reagan and the two Bushes.  But that loss of revenue didn’t result in less government spending – after all as the population grows, so does spending – and so the national debt has exploded from $900 billion when Reagan took office, to $11 trillion when Bush the Younger left office.

True, Obama has added $5 trillion to that debt, but let’s be intellectually honest and put it into context: he did it in the form of short-term stimulus spending to contend with a once-in-a-lifetime economic downturn, and he was on the hook for all of the spending baked into the budget by the Bush Administration thanks to the two unfunded wars, the new unfunded Medicare Part D prescription drug benefit, and the unfunded tax cuts that we clearly couldn’t afford.

When capitalism is no longer working for the majority of Americans, then it’s time to reexamine the system and try to figure out how to restore some sense of balance so that it works for more than just the people who can afford lobbyists and lawyers to game the system in their favor.

There are no easy answers, that much is certain, but based on more than three decades of evidence it’s pretty clear that the answer isn’t to continue down the path we’ve been on, which is transforming America from a land of opportunity into a country that more closely resembles the yawning income inequality of a third world nation.

Look, if you believe that things are more or less just fine the way they are, and that there’s nothing wrong with the U.S. economy that more slashing of upper-end tax cuts and gutting of business/environmental/gun regulations won’t fix, then you’re either willfully blind or have a vested interest in the rigged status quo.  Either answer is flat out depressing – but worse, it’s simply unpatriotic.

The fact is that macroeconomics is incredibly complicated, which makes it susceptible to manipulation by people much smarter than you for their own financial gain – which is what’s been happening for decades now.  But it’s your job to pay attention and educate yourself, then vote your conscience.

People may hate politicians and loathe politics in general, but the truth is it’s the most effective way to change things on a national level – and if we want a better future for ourselves and our children, that change is up to us.

 

Charlie Vignola describes himself as a former College Republican turned liberal Democrat.  A resident of the Santa Clarita Valley since 1999, he works in the motion picture industry and loves his wife and kids.

 

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2 Comments

  1. You can’t repair the monster that is capitalism. One word: Sweden.

  2. Reason says:

    This “trickle up” experiment under Obama has worked wonders for our economy hasn’t it? The zero interest rate policy has destroyed savers and senior citizens, forcing them to chase riskier investments in order to maintain their income. Asset prices are distorted beyond reality with the flood of cheap and easy money. Meanwhile, after $7 trillion and counting of newly printed money we have record unemployment, record food stamp usage, record numbers of people on disability and record numbers of people who have just given up trying to find work. Meanwhile, the banks and unionize car companies who mismanaged themselves didn’t suffer, they got bailed out. That isn’t capitalism. Obama has turned us into a more socialistic country but Mr. Vignola still isn’t happy with a president he has ardently supported. Maybe he would be happy with a Communist system where everybody is equal-they all have nothing – that is except for the very few politically connected. There is no doubt that capitalism works better than any other system, we just need to let it work. And that includes letting those that fail, fail – making room to give others an opportunity to succeed.

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