Pulse of the Peninsula: How inequality is baked into system

Karen Rubin

Inequality – the great and growing gap between The Haves and The Have Nots – is at the heart of the protests triggered by police and justice system’s actions/nonactions in Ferguson and New York City, prompting 50,000 taking to the streets in Manhattan on Sunday and tens of thousands more across the country. 

There is the sense that justice is not meted out fairly, law enforcement is not fair, the prison system is disproportionately punitive to poor people of color which is demonstrated by the weekly incidents of police shooting unarmed black men, while a rich kid, driving illegally and drunk, murdered four people, actually got off using “Affluenza” as his defense (he was too spoiled to understand the consequences of his actions).

Far from being a society where anyone can rise based on merit and expect to be treated equally under the law, inequality is becoming institutionalized, cooked into the “rules of the road. “The system rigged,” as Sen. Elizabeth Warren has stated.

Rich/poor is at the heart of immigration reform, tax policy, energy policy, climate justice because of the nexus between wealth and political power – who has it, and who does not.

A clear demonstration unfolded during the budget fight, when, taking advantage of the latest “make-or-break” moment, House Republicans literally in the dead of night, inserted provisions to accomplish what they could not do in the sunlight, or with actual legislation (yes, there was complicity with outgoing and good-riddance Majority Leader Harry Reid and Senate Democrats, only contributing to the cynicism among voters). 

The $1.1 trillion budget (which authorizes spending through the end of the fiscal year, in September, except for Homeland Security, so the Republican Congress can overturn Obama’s executive actions on immigration reform) includes provisions written by Citibank’s lobbyists, which overturns Dodd-Frank protections against banksters putting taxpayers on the hook again for their risky, but hugely profitable bets. 

How? Dodd-Frank prohibits entities insured by the Federal Deposit Insurance Corporation from trading complicated financial devices known as custom swaps, a type of derivative. 

That’s how the banks managed to crash the economy, taking with it ordinary Americans homes, jobs, retirement savings, and that’s what they have put back into place, and yet, those who caused the crash and profited from everyone else’s misery were bailed out by taxpayers. (See Paul Krugman’s column, “Dodd Frank Damaged By the Budget Bill,” New York Times, Dec. 15, 2014.)

As Warren stated, “We put this rule in place after the collapse of the financial system because we wanted to reduce the risk that reckless gambling on Wall Street could ever again threaten jobs and livelihoods on Main Street. We put this rule in place because people of all political persuasions were disgusted at the prospects of future bailouts.

“And now, no debate, no discussion, Republicans in the House of Representatives are threatening to shut down the government if they don’t get a chance to repeal it.  

“That raises a simple question – why? If this rule brings more stability to our financial system, if this rule prevents future government bailouts, why in the world would anyone want to repeal it, let alone hold the entire government hostage in order to ram through the repeal?

“The reason, unfortunately, is simple. It’s about money, and it’s about power. Because while this legal change could pose serious risks to our entire economy, it’ll also make a lot of money for Wall Street banks.”

Just four banks, Bank of America, Citigroup, Goldman Sachs and JPMorgan Chase, control more than 90 percent  of the banking industry’s swaps market. The four spent $30.7 million lobbying Congress and federal agencies, according to Maplight.

Meanwhile (and this is really rich), another provision inserted into the budget bill relating to financially failing multiemployer pension plans would allow controversial cuts for current retirees. 

Hear that retirees? The CEOs who crashed the economy were able to protect their golden parachutes, but your pensions are assailable, reinforcing Warren’s question, “Who do you work for? Wall Street or the people?”

Krugman (and Sen. Warren) make the connection to the influence of money (and who has it) on politicians, so it is really, really rich that at the same time they did Wall Street’s bidding to weaken Dodd-Frank (and I’m sure this is only the opening salvo for when the Republicans take full control of Congress), at the same time, they increased eight-fold, the amount of money an individual can contribute to the political parties. 

“One rider would allow a huge increase in the size of checks that deep-pocketed donors can write to win inner-sanctum clout with the major political parties. A donor now held to a mere $97,200 under party limits would be able to give a staggering $777,600. In a further invitation to luxury shopping, a couple yearning for the inside track could triple-down and give $3.1 million to party committees. This is pretty much the coup de grâce for the McCain-Feingold law’s ban on large party donations enacted to end the “soft money” corruption of Watergate,” the New York Times stated in a Dec. 12 editorial.

Institutionalized inequality – and remember that financial inequality is now tantamount to political inequality – is also at the heart of tax so-called “reform,” with the push to lower the corporate tax rates and pay for it by cutting Social Security and Medicare and eliminating “loopholes” that enable people to enter the middle class by owning their own home. (They are also against a proposal to reduce the down payment requirement to 3% so that more people can own a home  (See “A Home of One’s Own,” NYT Dec. 14)

Take for example the tax reform proposals being offered by Republicans who will take over Congress and have demonstrated their intention to force their will or shut down government: they seek to reduce corporate taxes, “flatten” out the progressive aspects of the tax code (the goal is actually to have a flat tax) while eliminating the only tax breaks afforded middle class people: the mortgage tax deduction, which is the singular thing that makes it possible for home ownership. (The budget also cuts $345.6 million from the Internal Revenue Service, weakening auditing and taxation, and another side blow to Obamacare.)

Home ownership is also connected to stability, to economic progress (you are basically paying the money into your own savings account, rather than handing over rent to a landlord when you own your own home), to participation in community and by extension, the voting process. Since wealth and politics are now so intertwined, The Owner Class does not want a stable, rooted middle class – because they vote. 

They would rather have a highly mobile renter class because they don’t, and because their financial security is in the hands of a landlord.

Or take for example the campaign the Kochs have financed to get states to end their incentives for renewable energy, so that we remain dependent upon fossil fuels (they are really being hurt by the drop in gas prices below $3/gallon for the first time in years. 

Consider that every penny saved at the pump, means $1 billion available for families to spend as they like (and $1 billion less to the Kochs). (Aside: Instead of low gas prices incentivizing people to go back to gas guzzling cars, now is the time to raise the gas tax – consumers won’t feel it, and it will provide billions for critical infrastructure, which in turn will fuel jobs creation, income tax revenue to the federal government, and overall economic growth.)

Consider the policies – advocated by Obama and blocked by Republicans – that would make college more affordable, so that new graduates are not saddled with lifelong debt, for example – would also propel families their upward mobility. Not to mention the fact that college is becoming unaffordable, and without a college degree, it is infinitely harder to progress up the ladder.

Consider the policies – advocated by Obama and blocked by Republicans – that would make child care and early childhood education available and affordable, as well as policies that would insure pay equity.

Republicans would like to do away entirely with progressive taxation – the right-wing Heritage Foundation likes to say that the top 10 percent of Americans pays 68 percent of tax revenue but neglects to mention that the top 10 percent owns 75 percent of America’s wealth. In fact, just 400 families have more wealth than half the population – 150 million people.

A single family, the Waltons (heir to Sam Walton), has a net worth of $144.7 billion – that’s more than 42 percent of American families.

“Take Walmart employees (now striking around the country) who make $8/ hour while the Walton family, who never worked a day in their life for the company, bring in $1.5 million/hour in dividends,” according to Nation of Change (a not-for-profit publication which bills itself as the anti-Murdoch because it depends on contributions).

A big piece of the $144.7 billion that the Walton’s have is the result of tax breaks afforded by friends in Congress – just as we’ve seen in this latest go-around . Now Walmart is pressing to cut its tax bill by another $720 million by getting Congress to lower the corporate income tax rate.

Taxpayers have a double whammy: the rest of us working stiffs have to make up the tax revenues that Walmart gets to shelter, while Walmart’s low wages and shoddy benefits mean its workers need $6.2 billion a year in public assistance – paid out of our tax money – just to make ends meet.

Republicans not only want to reduce taxes on corporations (and raise taxes on low-income earners) but they refuse to raise the minimum wage to a living wage (which would benefit 28 million workers and stimulate the economy); in fact, Republicans want to eliminate the minimum wage altogether.  

Consider what that means: McDonald’s pays many of its employees less than $11,000 a year — that’s not enough to keep one individual out of poverty, let alone a family. 

Yet the CEO of McDonald’s, Donald Thompson, made $9.5 million in 2013. It would take a minimum-wage full-time worker more than 864 years to earn that much, or put another way, in one year, McDonald makes the equivalent of what four families earn in their entire lifetime.

“It’s no wonder dystopian tales like the “Hunger Games” feel scarily resonant right now. Too many of us have our own stories about the pain of rising economic inequality. Choosing between food and rent. Walking in the cold to work because we can’t afford gas. Getting sicker and sicker because we can’t afford the medical care we actually need. 

All while the 1 percent keep getting richer and richer at our expense,” says Democracy for America’s Electoral Director Annie Weinberg, 

As the economy was crashed by banksters, employers manipulated workers to give back wages and benefits during the downturn in order to “protect their jobs”, but even after the economy (and their profits) rebounded to record heights, have yet to restore wages or let workers share in their productivity. 

“In 2013, after-tax corporate profits as a share of the economy tied with their highest level on record (in 1965), while labor compensation as a share of the economy hit its lowest point since 1948. Wage growth since 1979 has not kept pace with productivity growth, resulting in falling or flat wages for most workers and big gains for corporate coffers, shareholders, executives and others at the top of the income ladder,” the New York Times editorialized (“Wages and Salaries Still Lag as Corporate Profits Surge,” Aug. 31, 2014).

But it is not just refusing to pay a living wage (and battling against raising the minimum  wage or pay equity legislation) or having workers share in their own productivity and success, employers engage in out-and-out wage theft

Data compiled by the Economic Policy Institute show that in 2012, the Department of Labor helped 308,000 workers recover $280 million in back pay for wage-theft violations — nearly double the amount stolen that year in robberies on the street, at banks, gas stations and convenience stores.

In an article, “More Workers Are Claiming ‘Wage Theft,” (Sept. 1) Steven Greenhouse writes, “New York’s attorney general, Eric T. Schneiderman, has recovered $17 million in wage claims over the past three years. ‘I’m amazed at how petty and abusive some of these practices are,’ he said. ‘Cutting corners is increasingly seen as a sign of libertarianism rather than the theft that it really is’.”

Then in Dec. 3, article, “Study Finds Violations of Wage Law in New York and California”, Greenhouse reports, “The United States Labor Department says that a new study shows that between 3.5 and 6.5 percent of all the wage and salary workers in California and New York are paid less than the minimum wage.

“The study, which examined work force data for the two states, found that more than 300,000 workers in each state suffered minimum-wage violations each month. Labor Department officials said that even if one assumed a violation rate half that nationwide, that would mean more than two million workers across the nation were paid less than the federal or state minimum wage.

“The minimum-wage violations in those two states translate into $20 million to $29 million in lost income per week, the study concluded. Those amounts represent 38 percent of the income of the victimized workers in New York and 49 percent of the income of victimized workers in California.

“Violations were most common in the restaurant and hotel industries, the study found, followed by educational and health services and retail and wholesale.”

At Saturday’s protest against racial injustice, I met one such restaurant worker who lives upstate. She impressed me with the way she articulated the issues, but when I asked whether she had voted (testing my theory that a lot of people complain but don’t vote), she said she is an undocumented immigrant who was brought here at the age of 4, 30 years ago. She did not qualify for DACA so is forced to be part of an underground economy where she can be taken advantage of without protection of the justice system. She is a smart young woman who said she could not afford college (she would not have qualified for any assistance or in-state tuition rate). 

She makes less than minimum wage and has few options. The shadow economy – the lack of immigration reform that underpins it – is part of the institutionalized inequity.

What else is buried in that omnibus budget (now adopted)? “Further budget cuts at the Environmental Protection Agency, always a favorite target of the Republican right wing. Most notoriously, the bill would enshrine a Bush-era rule that allows the mountaintop mining industry to continue dumping toxic coal waste in the streams of Appalachia,” the New York Times reported. 

“The budget bill cut EPA funding to its lowest level since 1989, forcing the agency to reduce staff as they are due to take action on climate change, water pollution and more; blocks Clean Water Act protections for millions of streams, ponds and wetlands, allowing Big Ag and others to pollute them as much as they want; repeals new standards to make light bulbs more efficient, costing all of us money and increasing pollution; prevents the Department of the Interior from placing Sage Grouse (who are on the brink of extinction) on the Endangered Species List so that drilling and ranching interests can run roughshod over public lands where they live and breed, said Anthony Rogers-Wright, Environmental Action.org.

This is a matter of environmental justice, as well as social justice. Who winds up paying the bill for polluted air and water and all the attendant health problems? Certainly not Rex Tillerson, the CEO of oil and gas leviathan ExxonMobil, who sued to block fracking near his home outside of Dallas.  

And it is a contributor to the socio-economic-political inequity that is roiling society.

When anyone raises the issue of the growing inequality – the gap between rich and poor is the greatest since the Robber Barons and the Gilded Age, and is the greatest among all industrialized nations, while the US has the poorest “upward mobility rate” – no one is suggesting that everyone make the same income and have the same wealth. In fact, the mythology of the American Dream is so strong, that those who would most benefit from more progressive policies oppose them because they harbor the fantasy of becoming that Billionaire, just as they harbor the fantasy of winning the Superball lottery.

What people do want is a system that isn’t rigged to deny worthy individuals of their opportunity to succeed, as Elizabeth Warren has so eloquently described.

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