Inequality Will Get Worse Until There’s a Revolution

America’s wealth concentration has increased tenfold since Bill Clinton first ran for president.

By Bob Lord

[via OtherWords.org]

Imagine, after a deep sleep, you suffered the fate of Rip Van Winkle and woke in the spring of 2040. What might you find?

Among other things, maybe a presidential candidate railing against America’s concentration of wealth. Except this time, it’s not the 1 percent that owns as much wealth as the bottom 90 percent — it’s the top hundredth of a percent.

Could it get that bad? Yes, quite easily. In fact, that nightmare is already on the way.

To see this better, take a step back in time. If you woke up 24 years ago, you could hear candidate Bill Clinton lamenting the fact that the top 1 percent owned as much wealth as the bottom 90 percent.

Today, as anyone who’s heard Bernie Sanders give his stump speech knows, it’s the top tenth of 1 percent who owns that much. That’s 10 times more concentrated — and it’s happened over just six presidential cycles. If the trend continues, the scenario I presented at the outset will be a reality.

Here’s another way to look at it: In 1992, when Bill Clinton first found America’s wealth concentration unacceptable, the average person in the top hundredth of a percent was about 1,100 times wealthier than the average person in the bottom 90 percent. By 2012, the most recent year for which statistics are available, that ratio had quadrupled, to approximately 4,500 times.

If the numbers I predicted for 2040 hold, that figure will rise to 9,000 times. If the average net worth is around $30,000 then — a sliver of equity in a modest home — then the average household in the top hundredth of a percent will be worth over $250 million.

Can America avoid such a dismal future?

Yes, but only if the philosophy underlying our tax policy changes. We can’t just raise revenue and distribute the tax burden in a way our leaders deem fair. Preventing undue accumulations of wealth must become a cornerstone of American tax policy.

That would entail three fundamental changes.

First, lawmakers must abandon the policy of taxing investment income — which flows almost exclusively to the wealthiest Americans — far less heavily than income from labor, the income on which the rest of us depend.

Second, they should increase the top marginal income tax rate substantially for those with huge incomes. Ludicrously, current rates subject a billionaire with a nine-figure income to the same top marginal income tax rate as a doctor making $500,000. That’s a major factor in our worsening wealth inequality.

Third, the gigantic loopholes in the estate tax system, which allow even billion-dollar estates to escape taxation when they’re passed on to the next generation, must be closed and the top estate tax rate increased.

Possible? Yes, but it will take a revolution.

16 responses to “Inequality Will Get Worse Until There’s a Revolution

  1. john Huppenthal

    Supply side never works quickly at the state level and i have said that repeatedly on these pages. If you cut taxes expecting a dividend the next year, you are going to be sorely disapointed. However, frugality and effectiveness over many years pays big dividends.

    Even with the huge rate cut put in place by Reagan it took time for all the benefits to blossom. State rate cuts are much smaller.

    • For Sure Not Tom

      Where’s the cherries?

      There are none. Because trickle down was a sales ploy, you’re not supposed to be a grown man and believe in such nonsense.

      Brownback, like you, promised an explosion in job growth and the economy. He’s in his second term now.

      How long does the explosion take? Where’s the boom?

      • John Huppenthal

        After Reagan reduced tax rates at the national level, there was a huge explosion. Reagan had an 8% growth quarter, that means 2% growth in one quarter, one quarter alone. That’s an explosion. But, that was just the beginning, because the dividends kept coming. The 1%went from paying $47 billion in taxes in 1980 to over $450 billion in taxes.

        Now, that’s an explosion.

        Obama is the first president without a 3% growth year. Why? He increased federal regulation by over 5,000 pages, he increased taxes, and he expanded the welfare state.

        In fact, his results were even worse than they appear. Mitt Romney said that Obama didn’t cause the economic downturn, Mitt Romney was wrong. When the probability of Obama becoming president hit 70%, the economy collapsed.

        Robert Lucas won the Nobel prize in Economics for rational expectations theory. Rational expectations says that the future is now, people don’t wait to get off the railroad train when they know its going over the cliff, they get off immediately. When people knew that Obama was going to be the next president, they stampeded and the stock market collapsed and took the economy with it.

        • For Sure Not Tom

          There’s those cherries.

          Nothing in your reply is related to my question, it’s just the usual incoherent gibberish.

          How long until Kansas gets to the boom?

  2. John Huppenthal

    Violent revolution? What would that look like, what new regime policies would improve the outcomes for the poor? It hasn’t gone too well for North Korea, Venezuela, Cuba. The fundamental theory that Picketty advances is that capital is irrelevant for economic growth and that wealth concentration will result in wage income not just getting a smaller and smaller share of the pie but getting an absolute smaller amount.

    All you have to do is to look at Koch industries to see how ridiculous Picketty’s theory is. In 1980, Koch’s 2000 American employees were paid $26.1 million in wage income. Last year, their 60,000 American employees were paid over $3.6 Billion in wages. The Koch brothers are the epitome of wealth concentration and capital accumulation.

    Before his death, Friedman toured Egypt and observed a long line of workers carrying dirt to build a dam. His guide waxed poetic about how many jobs they were creating by not using machinery (capital). Friedman replied “think of how many jobs you could create if you gave them spoons.”

    Picketty is a moron and any theory based on his ideas is moronic.

    Reducing the top tax rate to 25% would cause jobs to explode by 8 million almost immediately. Now that would be a revolution worth having.

    • For Sure Not Tom

      So explain Kansas, disgraced former politician and current racist chatbot John Huppenthal.

      Brownback slashed taxes, repeatedly, promising jobs and revenue growth would explode.

      Kansas is deep in the red, the 250 million in the bank Brownback inherited gone, jobs growing at a snail’s pace, and even Republicans in the state have been telling people to vote for Dems it’s so bad.

      Louisiana is the same, Jindal’s budget disaster is a scandal.

      You know about scandals, right?

      Trickle down has been tested in the laboratories of the states, and it crashed and burned like everyone said it would.

      And you know it’s a scam, too, you’re just trolling.

      • John Huppenthal

        I have explained Kansas. Any tax cut at the state level is small by comparison of a similar tax cut at the federal level. Reagan cut the top rate from 72% to 28%. Even that took years to achieve its full power.

        By comparison, the tax cut in Kansas was in the neighborhood of 2 percentile points. That is insignificant as compared to the debate at the federal level. Still, after the tax cut, their unemployment rate is significantly below the national average and dropped significantly more than the national average. Gross domestic product appears to be on track. So, the jury is still out.

        Kansas appears to have a belief that sales taxes are less damaging than income taxes. Not likely. We only earn so that we can spend. A 1% sales tax does the same damage as a 1% income tax. So, the Kansas sales tax increase took away most of the benefit of the income tax cut.

        • For Sure Not Tom

          Nope.

          The sales tax increase was to help out with the budget train wreck that is Sam Brownback’s tax-cutting philosophy.

          You need to learn how to pick out the good cherries and leave the bad ones in the basket.

          Trickle down was a PR move by Reagan to cut taxes for the rich, as David Stockman admitted in 1981 and then more or less apologized for in a book, it’s not a real thing.

          Everything you post is cherry-picked to make your case. You sound like what dumb people think smart people sound like, but you seem to be mostly incoherent.

  3. Jim Hannan

    We could try a tiered tax on estates. Currently the rate is 40% on estates over $5 million. Under Bill Clinton, it was 55% on estates over $1.5 million.
    A possible tiered rate: 40% for estates from $5 to $20 million, 50% for $20 million to $50 million, 60% for over $50 million.

  4. Tim Wilson

    In response to Mr Huppenthal’s rant there are a couple of points that probably should be raised here.

    1. “Those who make peaceful revolution impossible will make violent revolution inevitable.” John F. Kennedy
    Address on the first Anniversary of the Alliance for Progress.
    March 13, 1962
    Read more at: http://www.presidency.ucsb.edu/ws/?pid=9100

    2. Replacement of our current million+ tax loopholes on 70,000+ pages of IRS tax code, primarily for the rich and corporations with the tax structure instituted by FDR and maintained all the way through the Kennedy administration would be a great step in leveling the playing field for the 99.9+% of us. It would also remove the bogus non-tax status of the SuperPacs. That would certainly set Karl Rove, Grover Norquist and the Koch brothers back on their butts where they belong.

    • John Huppenthal

      I have no problem with eliminating every loophole, all of them. My point is that Roosevelt’s increasing taxes from 25% to 93% didn’t raise a penny. It just deepened and lengthened the Great Depression as people figured out how reorganize economic activity to completely avoid it.

      We have a similar situation now. the tax rate is above the level at which it brings in more revenue. The frisch elasticity of 3.0 along the extensive margin means that reducing tax rates brings in more revenue, a lot more revenue.

      More important than revenue it means that lowering that top tax rate will create jobs, lots of jobs.

  5. John Huppenthal

    What a load of horse hockey: a tax lawyer advocating policies that will put him into the top 1% of all incomes, a profession that is an absolute deadweight loss to humanity. Thanks to tax lawyers and loopholes, the top 1% of 1980 now pay at rates of only 17% and corporations at only 13%. Just make the rate truly 28% and they will carry us all by getting the tax lawyers and special interests off of their backs and returning to work. Within five years, the individuals will be paying a trillion dollars a year and the corporations another trillion and job creation will double.

    Income inequality is an asset, a huge asset, not a liability, not a problem and we need more of it. Income inequality builds highways, parks and provides for the national defense by creating jobs and lifting people out of poverty.

    People in poverty, trapped by the false compassion of an out of control welfare system, now that is a problem. It destroys jobs by sucking people out of the economy and destroying their human capital.

    A revolution indeed. Another mob of morons following a stupid idea.

    When Karl Marx penned The Communist Manifesto in 1848, only 3,000 copies were sold in Russia. Within a decade, Carl Menger wrote his phenomenal Principles of Economics which destroyed the entire labor theory of value foundation of Marx’s research. But, the intellectual community loved the power that Marx’s moronic idea that the Motor Vehicle Department can more effectively produce computers than Apple, transferred to them and Menger’s ideas were bottled up and ridiculed.

    40 million people starved to death in Russia when economic production fell 80 percent. So much for the labor theory of value.

    Now, we have a new crop of morons following an idiot named Picketty.

    • It seems that your comment went to a post you imagined I wrote, rather than the one I actually wrote. My post was about wealth concentration, not income inequality. They’re not unrelated, but they’re not the same either.

      Also, you say I’m advocating policies to help myself as a tax lawyer, yet my post advocated the elimination of two of the worst loophole categories in the tax law, which you also advocate in your comment.

  6. captain*arizona

    liberal elitists are not revolutionaries. the change will come from the rich who fear what will happen if they don’t!

    • You’re probably right. The revolutionaries will be young, and poor. They always are. They’re the ones with the least to lose and the most to gain from a revolution. It could be that the leadership comes from the Black or Latino community as well. And it could be that the rich will act out of fear in a pre-emptive fashion, as they did in the 30’s.

  7. For Sure Not Tom

    Asher Edelman, the inspiration for the Gordon Gecko character in the movie Wall Street, agrees income inequality is a major issue.

    http://finance.yahoo.com/news/real-life-gordon-gekko-supporting-121000214.html

    Hedge fund billionaire Paul Tudor Jones and noted right wing SOB and billionaire Ken Langone agree income inequality is a major issue

    http://www.nytimes.com/2015/08/09/opinion/sunday/capitalists-arise-we-need-to-deal-with-income-inequality.html?_r=0

    These are not “knee jerk liberals”, and there are plenty more of them if one cares to search them out. They understand the current system and their own actions could lead to revolution.

    Here’s some smart folks of interest:

    http://patrioticmillionaires.org

    A quote from their site “Rich people are not the cause of a robust economy, they are the result of a robust economy.”
    Ron Garret, Patriotic Millionaire and Angel Investor

    It’s not about being jealous of millionaires/billionaires, it’s about a rigged system, and how it’s being used to transfer wealth from the middle class to the top .01%, at the expense of everyone else’s right to life, liberty, and the pursuit of happiness.

    Hillary’s supporters and the press misunderstand Bernie’s run for POTUS, he’s trying to start the revolution. I think he’s surprised he’s made it as far as he has, and I’m hoping we’ll all keep the momentum going and the revolution will be soon and gentle, and not fought in the streets.