Can America’s Wealth Redistribution Steam Roller Be Stopped?

Where I differ on the subject of redistribution is not in whether redistribution is necessary but in how redistribution should occur. The current drive toward wealth redistribution will be a nail in the coffin of an already sick nation. My hope is that it is not too late to change America’s dreadful redistributive course.

For two centuries, Americans have intuitively accepted the notion that the western world has benefited from our acceptance of wealth inequalities between social classes. Most of our citizens have received far greater benefits than would have occurred in other economic systems. Throughout the economic tumult of the 20th century, while conflicts over fair distribution of wealth led to various levels of socialism within western nations, the masses have nonetheless accepted wealth being concentrated in the hands of a very few stewards as a precursor for successful national growth.

For those lucky enough to be perched on the pinnacle of wealth distribution, I offer both God’s blessing and mercy. I am not envious of their stature nor would any misplaced envy change the inevitability of the few destined to sit atop. Capitalism works because mass envy is not a common trait in a healthy economy. It is however a fickle trait that can be politically manipulated when capitalism is stricken ill.

Yet, capitalism is simply a wealth sharing system, nothing more or less, and those that inherit concentration of fortune do so by virtue of grace, luck, a bit of ambition, and the will of a contented public. When contentment sours beyond the realm of sustainability, wealth is always redistributed by the envious, whether for the good or bad of society.

An envious society must overcome the desire to divert wealth concentration purely for mass consumption. We must accept that concentrated wealth is required if a people are to rise above a level of sustenance that existed for all the earth before the turn of the 20th century. The benefits to modern society were born in a condensing stew of science and industry on the heels of modern banking and capital.

China has now centrally emulated this formula for the benefit of her people. History will ultimately determine her success, but posterity is now penning the chapter on the West’s experiment in capital diversion. We are now demonstrating that a concentration of wealth deployed across political boundaries can cause capitalism to fail within political boundaries. This is not a judgment on the virtues of globalization, only an observation of its limits.

America’s deployment of concentrated capital eastward has seen too little benefit for those that subjugated themselves to our capital stewards. Now after three decades of trickle out versus trickle down, an uprising is afoot. Redistribution will likely result in a short-sided American consumption of our precious future. How will redistributive consumption better our people? Will we allow expedient appeasement politics to devour our birthright?

The alternative of enforcing a redistribution of capital into American infrastructure will be just as futile if we are unwilling to correct underlying economic, structural impediments through shared sacrifice. Yet, rather than help America mature, our politicians have opted to feed America’s discontent with the divisive, poisoned scapegoat of wealth inequities as our problem.

If redistribution is inevitable, then a proactive geographic redistribution of wealth back within America’s political boundaries is what is required, not class redistribution but compromise toward a concentration of wealth that benefits all; that invests in a restructured educational system, a drive toward American state of the art productivity and efficiency in industry, and a restructured culture of long lived natural resources. Is there yet time to steer redistribution toward this thriving compromise? More at thrivingpath.com

2 Comments

Filed under American Governance, American Politics

2 responses to “Can America’s Wealth Redistribution Steam Roller Be Stopped?

  1. Not Paul Ryan

    You raise two crucial points, one of which is getting plenty of national attention while the other isn’t.

    The point that isn’t getting enough attention is that trickle out economics are obliterating America’s job market. Trickle out tactics highlight a major pitfall to unbridled capitalism. Capitalism benefits from a strong middle class, which keeps spending money on American businesses, while the businesses keep producing and hiring. By shipping jobs overseas, of course, business don’t hire Americans (or they underpay Americans, instead), thus the middle class can’t spend, and businesses can’t produce.

    I think the solution involves (a) punishing companies that ship jobs out of America, (b) punishing companies that keep money in foreign accounts, and (c) punishing companies for underpaying workers, whether American or foreign. If cheap labor and foreign banking accounts reward corporations without rewarding the labor and banking accounts of the American people, then that is a failure of the free market.

    The second point you pose — a point that pervades the media at the moment — involves wealth redistribution. Many Republicans believe that the problem is our spending. I agree that our spending has been out of control for decades, but where has our money gone? Social Security? Medicare? Medicaid? Unemployment benefits? If we are to decide, as a nation, that people are not entitled to Medicare or Social Security benefits, then yes, we are spending way too much money. With a growing population and an aging population, this spending will only need to increase if we maintain our commitment to these programs.

    I find it fascinating that the Republican Party — or at least some of those running for office — are championing thinly veiled social Darwinism. I’m not surprised by their ideology, since America is one of the most individualistic countries on the planet. If one person can live a successful, wealthy life without any handouts, then why can’t everyone else do the same?

    Here’s where that ideology contradicts another core principle of today’s Republican Party. Neoconservative foreign policy believes in spending money on the spread of freedom and democracy throughout the world. The Republican Party’s social Darwinism (with respect to domestic programs) does NOT mesh with neoconservative foreign policy for two reasons.

    First, the primary reason for cutting domestic programs is to cut the deficit. Neoconservative foreign policy, however, is no friend to the budget either. We spend almost as much on our military as the cost of every other military combined. In America’s history, when we have suffered financially, we were hesitant to spend even more money on foreign involvement. Why has that changed? Why did the percent of GDP spent on our military balloon from 2% in the post-WWII years to 5% in the Reagan Administration when we were at peace during the Reagan Administration? Some people answer those questions with precisely the second reason why neoconservatism competes with domestic social Darwinism.

    Second, neoconservative foreign policy is purported to keep Americans safe and to spread freedom around the world. Keep Americans safe from what? Death on our own soil? How does cutting spending on Medicare keep Americans safe from death? How does cutting unemployment benefits keep Americans — and our children — safe from death? And what about cutting spending on education? Without proper education and job training, how can Americans expect to live long, healthy lives? Neoconservatives believe in spreading freedom around the world, but freedom from what? They believe in freedom from communism, the perils of which involve destroying the free market — the same free market that is destroyed by itself when it favors monopolies over competition. They believe in freedom from oppression, which occurs on our own soil in the form of assaulting the right to unionize. They believe in freedom from death, while we kill civilians in the process. One one hand, they champion spreading safety and freedom, while on the other they merely hope that each person can provide one’s own safety without government aid.

    So far, I don’t think that I have disagreed with you on the points of (1) stopping the trickle out, and (2) cutting some military spending. We’d be in the majority, as well. It’s not surprising that most Americans want jobs to stay in America, and recent polls suggest that only 30% of Americans oppose cutting military spending. Some Republican politicians, therefore, are moving far to the right of most Americans on these two issues. To be fair, on the point of trickle out economics, Democrats aren’t doing much to fix the problem, either.

    On your point of entitlement spending becoming the nail in the coffin, though, I fiercely disagree. A more realistic nail in the coffin is the combination of high entitlement spending, high military spending, and a regressive tax system. Right now, those on the left are vocal about low taxes on the rich being a problem, while those on the right say it’s entitlement spending that’s problematic. Though the two parties in Washington appear to be split on whether or not to cut military spending, most Americans don’t divide along party lines on the issue of our military budget. Some on the left believe in a strong military, while some on the right believe in cutting some military spending.

    Taxes on the rich are alarmingly low, relative to historical numbers. Capital gains taxes are even lower now than during the Reagan Administration, and the wealthiest 0.1% of America earn 50% of all money earned from capital gains. Moreover, most of the super-rich make most of their money from capital gains and dividends, not earned income, which is taxed at a much higher rate. In one of the Republican debates, Mitt Romney attacked Newt Gingrich because Gingrich believes in eliminating the capital gains tax. Romney’s beef with that plan? He said that if there were no capital gains tax then he wouldn’t have paid any taxes in the last two years.

    But it’s more than the type of income; it’s the sheer amount of income. From 1979 to 2007, the top 1% of Americans saw income (after taxes and benefits) skyrocket by an average of 275%. The lower 99% only saw an increase of 40-60% of income. The difference between incomes for the rich and the middle class are disconcerting, but the more frightening aspect of the disparity is that it has grown for decades. The rhetoric of the American dream where hard work pays off and we can all live free, wealthy lives is not only less true than decades ago, but it’s also less true than it is for much of the rest of the world; among developed nations (in the OECD), America ranks 31st with regard to income equality, after taxes, as measured by the Gini index. America ranks 27th in the same list before taxes, however, which suggests regressive taxation. Our rank of 31st, by the way, is directly between Israel (30th) and Turkey (32nd).

    Of course, your point of geographic redistribution is part of the solution. Without redistribution of wealth, though, I don’t see income inequality improving. According to a recent National Employment Law Project report, 60% of the job losses from 2008 to early 2010 paid median hourly wages of $13.84 to $21.13. Lower-wage occupations (median wages of $7.69 to $13.83) accounted for 21% of the job losses. Since hiring has resumed, however, the middle group ($13.84 to $21.13) only accounts for 22% of job growth! The lower-wage occupations accounted for 58% of the new jobs. If these numbers are any indication of the future, I don’t think forcing companies to hire Americans is enough on its own. If we expect to strengthen our middle class, then we need to do more than create jobs; we need to create jobs that pay more money and we need to strengthen the work force by standing up for unions. As these are long-term benefits for the middle-class, redistribution of wealth (by way of a truly progressive tax system that does NOT hike taxes on the poor or cut taxes for the rich), is something we need to seriously consider in the short-term.

    I think it is crucial to feed “the divisive, poisoned scapegoat of wealth inequities” as a problem of ours. Voters should know that wealth inequality is not the only problem, but it certainly is a problem. As I stated above, the true nail in the coffin would combine high entitlement spending, high military spending, and low taxes. A vote for Romney-Ryan would be a vote for a special type of disaster, because if they honor their promises of low taxes on the wealthy and high military spending, then how do they balance the budget, much less reduce the deficit? The reason for such rhetoric about wealth inequities is that the only options for the government to accommodate high military spending and low taxes on the rich are disastrous for low- and middle-class families. Either we slash spending on Medicare, Medicaid, Social Security, transportation, and education, or we increase taxes on the lower- and middle-class. Some states with Republican majorities and Republican governors are already increasing taxes for the poor in Wisconsin, Kansas, and South Carolina, while they cut taxes for the rich. Some conservatives might not have moral problems with this, but to contribute to even more inequality than we are already seeing is tantamount to the murder of the American dream. No longer will we hear about rags-to-riches stories or the working class parents working four jobs to send their children to college. No longer would postgraduate education even make financial sense for many Americans who couldn’t expect to earn enough money to pay off their loans. No longer could children expect their parents to be safe after retirement, and no longer could parents expect their children to be safe after birth. Worst of all, no longer could lower- and middle-class families expect political representation within the self-aggrandizing plutocracy disguised as a democratic republic.

    • Very thoughtful and erudite response…My first concern is for all able Americans to have jobs. For this to occur, capital must be invested here in the United States, we both agree. I am in favor of incentivizing an inflow by making the US market accessible only to US-value-added products. History shows that many other forms of penalties become disincentives that chase capital underground but our goals are the same.
      Secondly, I agree that income disparity needs correction but this issue is complex and the solution of taxation has major drawbacks. Capital and its gains are politically mobile and higher taxation has the opposite effect of drawing investment away from the United States. Higher wages come from higher demand for workers which comes from a greater need for them.
      Artificially raising wages through minimum wage increases does not increase demand for workers, it only provides higher income for some while increasing unemployment for others. Letting wages float and requiring production in America will help to correct our jobs issue but some jobs will be low pay, requiring subsidization of living expenses by tax payers.
      Ultimately, higher wages come from investing in education, technology and innovation concentration, an Obama mantra. Each party has portions of the right answer. However, since we can only choose one in November, we have to choose which fixes come first. Neither candidate is willing to put a viable jobs, housing and credit program in place yet. My vote is still in a holding pattern in hopes one will.
      Thanks
      For your
      Comments..

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