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Blog of Mass Destruction

Yes...Soak The Rich

By The Reverend Published: February 19, 2013

If you review a chart of productivity gains by business from 1948-2011 as compared to worker compensation over the same period, you will find that from 1948 until 1973, worker compensation and business productivity tracked along the same incline. As businesses became more productive, they shared those productivity gains with their workers in the form of higher wages.

But starting around 1973, workers compensation and business productivity began to diverge. During the period from 1973 until 2011, business enjoyed an 80.4% gain in productivity while workers saw hourly compensation grow by only 10.7%. If you exclude the years 1995-2000 (dotcom boom) average compensation gains for workers from 1973 until 2011 would be only 4.9% over the period.

It's important to note that at the same time worker compensation began to diverge from business productivity....union participation began to decline. Here is a chart showing middle class incomes declining as union membership declined from 1967 to the present.

Furthermore, the period between 2000-2011, the "productivity-to-median compensation gap has grown the fastest."

Brief overview....

Wage inequality at the bottom.....has primarily been driven by periods of high unemployment and the erosion of the minimum wage. The continuing growth of the wage gap between high and middle earners is the result of various laissez-faire policies (acts of omission as well as commission) including globalization, deregulation, privatization, eroded unionization, and weakened labor standards. The gap between the very highest earners—the top 1 percent—and all other earners, including other high earners, reflects the escalation of CEO and other managers’ compensation and the growth of compensation in the financial sector.

Those are the numbers, the facts...the rationale.

Given those clear it any doggone wonder that our number one drag on the economy following the bankster collapse is lack of consumer demand? Wage growth for workers has increased by only 11% over the last 40 years. That fact helps to explain why Americans became so reliant on debt over this same period. Here is yet another chart showing the radical rise in household debt from 1980 to the present.

The most alarming chart, however, is this one. While 80% of all income-earning Americans have seen little-to-no increases in their compensation, and while the next 19% have seen moderate increases in compensation.....the top 1% of income earners have seen their compensation almost leap off the chart.....making out like bandits ever since 1980.

The top 1% are the ones responsible for NOT sharing productivity gains with their employees. The top 1% are the ones who are making the decisions to outsource. And this top 1%, purely by happenstance I'm sure, is the group which keeps Congressional candidates flush with re-election cash.

Income disparity charts are not charts of envy. The numbers that make up those charts are not biased or partisan. Mathematics can't be bullshited.

Now ask you think that the top 1% and their media servants are aware of all the information in the above charts? Of course they are. Perhaps that is why we rarely hear or see a serious discussion over income disparity gaps in the U.S.

Another question.....are you confident that our glaring problem with income disparity will improve for America's average working families? Neither am I. Average American working families can't buy political candidates or media pundits....but the top 1% can....and are.

So what's the solution...if there is one? Soak the rich. heard me correctly. Soak 'em. The highest income tax rate in 1980, the year compensation for workers began declining, was 70%. Today, even after the "compromise" in late December, 2012, the top income tax rate is 39.6%.....the highest capital gains tax rate ( the tax often paid by America's richest) is 20%.

While the top 1% have witnessed their tax rates basically cut in half over the last 30 years, they have also seen their incomes skyrocket to unbelievable levels. For average income earners it is just the opposite. Tax rates for average income earners haven't varied much at all, relatively speaking, while their compensation levels have flat lined.

The government can't make international corporations share their productivity gains with workers. In fact, the government can't make the top 1% do anything, from what it looks like. So the only way to make a serious dent into the huge income disparity gap which exists today is to....yes,....soak the rich. Increase the capital gains rate and income tax rate on everything over $1 million to 50%.

Use the increased revenue for job training, job creation and education.

Otherwise we will resemble Mexico in a couple of generations.

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