Growing Inequality, Deliberately Engineered Through a Whole Range of Policies Intended to Redistribute Income Upward

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There’s a long list of ways in which our well paid(-off) gov’t officials have obediently acted to redistribute income upwards over the last 30+ yrs. Inequality didn’t just happen; it is the result of government policies. For the sake of what might be called “trickle-up,’ Congress and the prez have deliberately decided to craft budgets that lead to millions of unemployed, which puts downward pressure on wages. Hence trickle up.Economist Dean Baker explains this phenomenon like this:

Trade is probably the best place to start just because it is so obvious.   Trade deals like NAFTA were quite explicitly designed to place our manufacturing workers in direct competition with the lowest paid workers in the world.   The text was written after consulting with top executives at major companies like General Electric.   Our negotiators asked these executives what changes in Mexico’s law would make it easier for them to set up factories in Mexico.   The text was written accordingly.

When we saw factory workers losing their jobs to imports from Mexico and other developing countries, this was not an accident.   In economic theory, the gains from these trade deals are the result of getting lower priced products due to lower cost labor.   The loss of jobs in the United States and the downward pressure on the jobs that remain is a predicted outcome of the deal.

There is nothing inherent in the globalization process that necessitated this result.  

For example:   Fully qualified doctors work for much less money in Mexico, India and elsewhere in the developing world than in the United States.   In fact, they work for much less money in Europe and Canada than in the United States.   So, if we had structured the trade deals to facilitate the entry of qualified foreign doctors into the country, it would have placed downward pressure on the wages of American doctors (many of whom are in the top one percent of the income distribution), while saving consumers tens of billions a year in health care costs.

In other words, the government quite deliberately structured our trade to put downward pressure on the wages of much of the labor force, whileprotecting doctors and other highly paid professionals from similar competition.   But trade is just one of many ways in which the government has redistributed income upward over the last three decades.

The subsidy for too-big-to-fail banks, which makes the Wall Street crew incredibly rich, is another way that the government redistributes money to the top.   Bloomberg estimated the size of this annual subsidy for Wall Street at $80 billion a year, which is more than the government spends on food stamps.

The longer and stronger patent protection the government has given pharmaceutical companies is another way that money goes from the rest of us to the very rich.   The annual size of patent “rents’ in the drug industry (i.e. their unfair taking of excessive profits that does not occur in other industrialized countries) is currently in the neighborhood of $270 billion, more than three times as much as the government spends on food stamps.   This $270 billion is, of course, extra money that the public must ultimately shell out for the unnecessarily high-priced drugs they purchase.

The macroeconomic policies implemented by our government have systematically increased inequality.

Budgets are crafted by politicians, not by the gods or by nature.   The decision not to run a more stimulatory policy (which would reduce unemployment), is every bit as much a conscious act as would be the decision to try to bring the economy to full employment with further stimulus.

In other words, for the sake of what might be called “trickle-up,’ Congress and the president have quietly but deliberately decided to craft budgets that lead to tens of millions of people being unemployed or underemployed.   As Jared Bernstein and Dean Baker point out in their new book, high levels of unemployment put downward pressure on workers’ wages, especially those in the bottom third of the labor force.   This means we have a federal budget that limits growth and employment in a way that redistributes income upwards.

Full employment used to be an explicit goal of economic policy in most of the industrialized world.   Some countries even achieved it.   In his new book, Back to Full Employment, yet another economist, Robert Pollin, argues, along with Baker and Bernstein, that the United States — today faced with its highest level of unemployment and underemployment since the Great Depression — should put full employment back on the agenda.

Full employment will help individuals, families, and the economy as a whole, while promoting equality and social stability, Pollin says.   Equally important, creating a full-employment economy can be joined effectively with two other fundamental policy aims:   ending our dependence on fossil fuels and creating an economy powered by clean energy.

Pollin argues that the policy was abandoned in the United States in the 1970s for idiotic reasons, and he shows how it can be achieved today despite the serious challenges of inflation and globalization.   He says the biggest obstacle to creating a full-employment economy is politics.   For that reason, putting an end to the prevailing neoliberal opposition to full employment will require nothing less than an epoch-defining reallocation of political power away from the interests of big business and Wall Street, and toward the middle class, working people, and the poor, while simultaneously mounting a strong defense of the environment.   In the end, achieving full employment will be a matter of political will:   But in the face of withering opposition and very fat political campaign contributions from the financial top 1%, can the United States make having a decent job a fundamental right?

There is a very long list of ways in which our well paid(-off) government officials have obediently acted to redistribute income upwards over the last three decades.   Find that discussion in Baker’s book, The End of Loser Liberalism: Making Markets Progressive.   The key point is that inequality didn’t just happen;   it was the result of government policies.   That’s why those of us who actually want to see inequality reduced, so that the poor and middle class can once again share in the benefits from economic growth, are not likely to be very happy about President Obama’s recent speech on the topic.   His ridiculous comment about the government being a mere “bystander’ disingenuously ignores the real source of the problem!   Therefore it is not likely he will come up with much in the way of real solutions.   Real solutions are obviously not what Obama is about;   “hopeful’ talk, and pretty talk, talk, talk is what he is about.

As Bill Moyers informs us, the distance between the first and the least in America is indeed vast and growing — proven by shocking statistics and personal stories of challenge and hardship, made even harder by policies and political collusion that reward the wealthy at the cost of everyone else.   Learn more here about the class gap, how it happened, what’s making it worse, and what you can do about it.

So, in the face of this ongoing and systematic theft from the poor, why is a Senate Democrat agreeing to another $8 billion in food stamp cuts?

On the same day that President Obama beautifully described his happytalk-talk vision of “an economy defined by economic mobility and opportunity for all,” his minion, Senate Agriculture Committee Chairwoman Debbie Stabenow was busy cutting a deal with House Agriculture Committee Chairman Frank Lucas to slice another $8 to $9 billion from food stamps, now called SNAP (Supplemental Nutrition Assistance Program).

“One study shows that more than half of Americans will experience poverty at some point during their adult lives,” said President Obama.   “Think about that.   This is not an isolated situation.” That’s why we have nutrition assistance or the program known as SNAP, because it makes a difference for a mother who’s working, but is just having a hard time putting food on the table for her kids.”

The United States has the second-highest rate of childhood poverty in the developed world, according to a new report  from the United Nations Children’s Fund (UNICEF), which concluded that nations with comprehensive government programs designed to protect vulnerable children had the lowest rates of child poverty and deprivation.   Out of the 35 wealthiest countries analyzed by UNICEF, only one, Romania, had a child poverty rate above the 23% rate recorded in the U.S.

There are currently 47 million Americans who turn to food stamps to help make ends meet.  

According to the Center on Budget and Policy Priorities, nearly 72% are in families with children and one-quarter of SNAP participants are in households with seniors or people with disabilities.   Further, 91% of SNAP benefits go to households with incomes below the poverty line and 55% to households receiving less than half of the income at the poverty line (i.e. about $9,500 annually for a family of three).

Despite the fact that the Institute of Medicine demonstrated the inadequacy of the SNAP benefit allotment and that a child’s access to food stamps has a positive impact on adult outcomes, the program was just cut by $5 billion on November 1.   The average benefit then dropped from $1.50 to $1.40 per meal.   (The Senate Agriculture Committee’s previous proposal to cut yet another $4 billion from SNAP would have led to 500,000 losing $90 per month in benefits, the equivalent of one week’s worth of meals.)

“That was the first time in history that a Democratic-controlled Senate had even proposed cutting the SNAP (food stamp) program,” said Joel Berg, executive director of the New York City Coalition Against Hunger.   “The willingness of some Senate Democrats to double new cuts to the program”is unthinkable.”

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How Wall Street always gets its way, always at our expense

After almost 30 years in Washington, Bart Chilton is quitting in disgust.   For more than 6 years, he has been an outspoken member of the Commodity Futures Trading Commission (CFTC), one of the financial industry’s most important regulators.

Chilton leaves behind a sobering message:   As we long suspected, Wall Street continues to use every trick in its playbook to do whatever it can to eviscerate numerous post-financial-crisis rules.   The arsenal includes:   High-powered lobbyists who outnumber lawmakers 10-to-1;   $1,000-an-hour letter-writing lawyers who gain strength (and fat paychecks) from endlessly negotiating over arcana;   and the occasional hoodwinking of a president whose knowledge of the ways of finance are close to nil.

In a recent interview, Chilton says that, despite years of hard work by financial regulators to put the Dodd-Frank law into force   — witness the 882 pages required to explain a 71-page Volcker Rule — their efforts will be futile in the face of Wall Street’s money and power.

“The financial sector is so powerful that they will inevitably roll things back over time,” Chilton says.   “Wall Street firms have tremendous influence, and they can impact policy to a greater degree than any one regulator or a small group of regulators can.”

Over the years, Chilton has come to understand Wall Street’s four-pronged strategy, or what he has dubbed the “D.C. Quadra-Kill,” used to get its way.   He says the first thing Wall Street’s army tries to do is kill outright any legislation that it finds onerous or distasteful.   If that fails, Wall Street pushes to defund the legislation or the agency enforcing the rules, and that includes the CFTC and SEC.

In fiscal 2013, for example, the CFTC (Commodity Futures Trading Commission) requested funding of $308 million and got only $195 million ($10 million less than the previous year) despite many new responsibilities.   “There are crooks getting away with crimes because we don’t have the resources to go after them,” Chilton says.   The SEC has a similar discrepancy between its appropriations and what it needs to fulfill its legal mandates.

With its regulators overwhelmed and underfunded, Wall Street firms then move to the Relentless Negotiation stage

“As you try to deal with the regulatory agency,” he says of Wall Street, “the first thing firms do is ask, “Well, would you exempt us?’   And when that doesn’t work, they try to ameliorate the regulation.”   And if that strategy fails too, the industry defaults to litigation.

The Commodity Futures Trading Commission’s recent approval of rules to establish position limits on certain types of trades got the “full-on-Monty Quadra-Kill” from Wall Street, Chilton says, although the outcome was far less favorable to the banks than they had hoped.   Of course, they already are contemplating taking legal action against the parts of the just-completed Volcker Rule that they find “distasteful.’

Chilton says he has noticed one additional underhanded tactic that Wall Street has been employing lately:   stalling or thwarting nominees to regulatory agencies.   The nomination of Timothy Massad, the U.S. Treasury Department official who managed the Troubled Asset Relief Program, to replace Gary Gensler as CFTC chairman came late in the year and a confirmation vote has now been delayed, probably to February 2014.   That means further Dodd-Frank rule-writing and enforcement could be delayed, too, because only two of five commissioners will be seated and they would both have to agree to get anything done.   “It’s a gift to Wall Street,” he says.   In short, they’ve been trying to trip, stall, or even cripple Dodd-Frank any way they can.

Though we are the vast majority, the main reason why Wall Street can always beat us

Bottom line:   Financial-industry executives contribute more money “in every election, than any other sector, and they have made more profits (from which to get this money) in every single quarter since the fall of 2008 (when many of them helped crash the economy),” Chilton explains.   “So while the rest of the nation is suffering still, and trying to get a leg up to get out of the ditch, the financial sector (who put them in the ditch) didn’t miss a beat.”

Unless and until Wall Street’s disproportionate ability to bully Washington is somehow curtailed, the rest of us will be held as permanent hostages to its agenda.

For those interested in the fuller version of all this, Chilton has been writing a book.   Its working title: “Theft.”

ABOUT THE AUTHOR

Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I’ve always been more interested in political economics and what’s going on behind the scenes in politics, than in mechanical engineering, and because of that I’ve rarely worked more than 8 months a year, devoting much of the rest of the year to reading and writing about that which interests me most.

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