My colleague at Institute for Policy Studies, Betsy Wood, has coined a new phrase, “siphon-up economics,” which describes perfectly our economic policies of the past 34 years. Hopefully, “siphon-up economics” will replace “trickle-down economics” and “supply-side economics” in the lexicon, as it far more accurately describes what conservative economic policy is all about. Here’s Betsy’s op-ed piece from today’s issue of OtherWords:
The Scourge of Siphon-Up Economics
Addressing inequality head-on will put our nation’s wealth back where it belongs — with all of us.
By Marjorie E. Wood
When the Census released the latest data on inequality, most mainstream media outlets shrugged it off.
That’s quite a contrast from earlier this year when inequality was all the rage. Reporters were scrambling to write about it. In January, President Barack Obama made it the focus of his State of the Union speech. And Thomas Piketty’s 700-page book about inequality shot to the top of Amazon’s bestseller list in the spring.
What do the new data say? The gulf between America’s richest and poorest is growing.
In 2013, the top 5 percent of households had an average income of $196,000 while those in the bottom 10 percent brought in only $12,400. The total number of Americans living in poverty remains at the record levels reached years ago: 45.3 million people.
And though the poverty rate for children edged down from 21.8 percent in 2012 to 19.9 percent in 2013, children remain far more likely to face economic hardship than either working-age adults or senior citizens. All signs point to inequality getting worse in the years to come unless something changes.
Maybe you think that sounds too grim to think about. But you should still care, and here’s why. The growing gap between the wealthiest Americans and everyone else is about much more than dollars. It’s about everything that matters to you most — your kids, their education, your family’s health, your community, your quality of life, and the democracy you live in.
Growing inequality is damaging all of these things. As the rich get richer, they gain more political influence that enables them to hoard their wealth. American corporations have turned tax avoidance into an art form, while 31 states no longer collect estate or inheritance taxes from millionaires and billionaires. A new report by Standard & Poor’s found that rising income inequality is itself responsible for declining state revenue.
That means federal, state, and local governments have trouble paying for public education, parks, highways, infrastructure, financial aid, and other social programs. It means that the quality of your community may decline. It means that your child may attend schools that are understaffed and over-crowded. Down the road, it means your child may have to take on massive debt just to attend the local state university.
As the rich get richer, they also disempower workers through union-busting, worker misclassification, wage theft, and lobbying against a minimum wage hike. Why? Because their wealth actually depends on your lack of mobility. For instance, 66 percent of low-wage employers in America are large, wealthy corporations who lobby against increasing the minimum wage.
In this “siphon-up economics,” the rich get richer by draining wealth from the rest of us. The new Census data reveal that since the late 1980s, incomes for the bottom half of Americans have stagnated while those of the top 10 percent have steadily climbed.
And the people hogging the pie are also growing more powerful. Corporate lobbying is at an all-time high, and the Supreme Court is handing down decisions that enshrine the political influence of wealthy Americans.
As a result, your ability to make your voice heard is eroding.
As if that weren’t enough, inequality also affects life expectancy. A growing body of research shows that people at the top of the income scale are living longer while those at the bottom are dying earlier. Not surprisingly, more affluent counties tend to have more doctors, better preventative care and information, healthier lifestyles, and higher rates of health insurance coverage.
The next time you hear the word “inequality,” remember that it’s not just about a gap in income or wealth. It’s about everything you hold near and dear.
There’s only one way to ensure that our communities, our kids, our health, and our democracy can thrive. We must address inequality head-on and put our nation’s wealth back where it belongs — with all of us.
OtherWords columnist Marjorie E. Wood is a senior economic policy associate at the Institute for Policy Studies and the managing editor of Inequality.org. IPS-dc.org
Distributed via OtherWords.org
You made the point spot on Steve —
“Where on earth did you get the idea that wealth “belongs to all of us”?
It follows a mind-set of the day that the world “owes me a living” — and I want my share in the name of equality. I dont care how you earned it, you dont deserve such wealth because I say so!
Among the respondents to this post, there are two business owners and they are virulently opposed to what she has to say. That is a small percentage of the respondents. There is no surprise in the that. The number of people who create jobs is always small in comparison to the number of people who work for the job creators. That is why the job creators have to fight so hard to keep others from taxing them out of existence. Lots of people want to kill the Golden Goose.
It does explain why Ducey received near unanimous support from the Small Business Association of Arizona. I find many reasons not to vote for Ducey and have been leaning towards Duval, but Duval frightens me because, if elected, he will raise taxes. He doesn’t have to say so. He is a Democrat, so he will raise taxes. Ducey won’t. That is an important issue for me. If you add gun control to the mix, it gets even more dificult to decide.
Steve, your concern about state tax is misplaced, for two reasons. First, if you look at state taxes overall (sales, property, income), you’ll find that they are either flat or regressive, so you as an affluent business owner would not be uniquely impacted by a tax increase. Second, any change in state tax is really marginal. A one percentage increase in the income tax rate would be HUGE at the state level, but the net effect, after taking into account the federal deduction for state income tax, would be a whopping six tenths of a percentage point.
And besides, the legislature will be Republican anyhow, so tax increases are highly unlikely.
Hm-m-m. I didn’t know that. Thank you for the information. It makes it easier to make up my mind. It never occurred to me to ask my Tax Accountant about that as I should have. But why pay him when I get good free advice from you… ;o)
Inequality and more Inequality. I will certainly admit to being poorly read nor being an economist. Perhaps I’m missing the point is Wood taking about a need for distribution of wealth? And just how would that work?
Would labor dictate the living wage (what ever that may be) and then let industry entities (who ever that may be) figure out how to create businesses/employment to accommodate that living wage? Kinda like the tail waging the dog?
Is that how our capitalist system works? — Here is “the” living wage “I want” Ameria, you go out and figure out how your going to do it!!!
Is that what we are talking about Bob?
I may not be an economist but I know something about creating (two) businesses profitably and successfully.
It was based on a cost effective product and service that business not only wanted but needed. In that process clients were served, equipment, materials and labor was paid for and I made a profit. At no time did anyone in that process including my employees (paid at the going market/skill rate) bring up the issue of inequality of wages and vendors cost of doing business. So what is this inequality your’e talking about? Do you want to go into commerce and labor/wage/skill-sets and market demand?
“In this “siphon-up economics,” the rich get richer by draining wealth from the rest of us.”
How?!?!? How do they “drain wealth” from the rest of us? By providing a service or a commodity we want? How shameful of them! Actually doing something productive and providing services and/or commodities for which we are willing to pay money we earned…often earned while working for other wealthy (and sometimes not so wealthy) people that created a commodity or service that we provide others.
Would we be better off without them generating the wealth with their ideas? Without the jobs they create? Without the availability of what they have to sell? I don’t think so. Yet, somehow, you feel you have a right to take what they have earned because you have this twisted idea that their “…wealth belongs to all of us.”
Inequality, inequality, and inequality. What is inequality? Is a brick layer equal to an architect? A Private equal to General? A paper delivery boy equal to the President of the US? or: Da Vinci, Newton, Hitler, Christ, Darwin, George Washington, Shakespeare, Galilei, Tesla, and on and on on. Have I made my point Wood?
One more thing, the corporations you bash, are US, we the people own those corporations who then create the jobs.
To say you’re poorly read would be to say the Siberian winter is a tad chilly. The issue is not inequality, but the degree of inequality. Your comment would justify some level of inequality, but nobody is making an issue of that. So, perhaps you’ve made your point, but you’ve kind of taken the role of master of the obvious.
“We must address inequality head-on and put our nation’s wealth back where it belongs — with all of us.”
From each according to ability, to each according to need.” – Communist Manifesto
Where on earth did you get the idea that wealth “belongs to all of us”? Do you know of any Nation that successfully operated under this mantra? Did you invent Microsoft? WalMart? Subway? Why do you think that the people who actually DID invent those entities and took the risk to make them successful should now give you the proceeds from their invention? Should they give it to you because you DIDN’T invent them? Why? Do you live in Bizarro World?
Steve, nobody is making the argument for communism, at least not the author of the article. The question is not whether inequality is acceptable, it’s what degree of inequality is acceptable, and how concentrated should our wealth be? Right now, we’re pushing 60% of our wealth jammed into the top 3%. If that’s not too concentrated for you, then what is? How about one family, the Waltons, controlling as much wealth as over 150 million Americans? If you woke up a decade from now and the Koch brothers controlled half the country’s wealth, would you say “oh, they’re smart and they worked hard, they deserve to have a hundred million times more wealth than anyone else”?
Bob, you strike me as being a good man and I respect your opinion on many things. I have even softened my positioned on the progressive income tax a little bit because of your influence, but when I read her article – especially the last paragraph – I am not as certain as you are that she wasn’t talking redistribution of income (communism).
You mentioned the Waltons and their fortune equaling the wealth of 150 million Americans. Well, what have the Waltons provided to amass that wealth? They provided something that Americans REALLY want: quality products at low prices. If Americans didn’t buy their offerings, they wouldn’t be that wealthy. I’ve heard the complaints about their business practices and how they treat their employees, but they have never had problems selling their products nor hiring staff. All people have to do to bankrupt the Waltons is to stop buying their products. That won’t happen, of course because they provide what people want. You imply, however, that because they are successful at doing that, we should be taking away a significant portion of their wealth simply because they ARE successful.
I do think that those who make more money can afford to pay more in taxes, and they should do so. The problem is that, for those like the author of the article, there is never enough being taken. I don’t know what your criteria is for that 3% at the top, but I might well fit in there. I served a career in the Army and when I retired I had an idea for a small business. I worked hard on it and now have more than 250 employees that depend on me to make payroll every month. And I depend on them to make my business successful. But be clear about this: If I had not founded this Company, they would not have the jobs working for me. Now they are top quality people, and they would undoubtedly work for someone else, but I am responsible for creating THESE 250+ jobs. Not my employees, not my neighbors, not you, not the author of the article. Because I had the initiative, the energy, was willing to take the risk, went through the bureaucracy, and built the Company from the ground up, people who had NOTHING to do with that feel entitled to take ever increasing amounts of my earnings because the wealth “belongs to all of us”.
“The problem is that, for those like the author of the article, there is never enough being taken.”
Steve, you have it exactly backwards. The problem is that no matter how uneven things get, those at the top (and I’m not really speaking about you unless you’re in a very select group), are taking steps to make things more uneven. You addressed my first two specific questions, but not the third, and not the more general question of how much is too much. We can argue about whether the Waltons are deserving (and remember it really was Sam and not the current Waltons who created Walmart), but at some point they’re overpaid. Stop and think about how silly it is for one family to have $1 Billion. The Waltons now have close to $150 Billion. And they and the Mars family, who control a mere $75 Billion, are fighting to eliminate the estate tax.
Over the past 34 years, nobody has “taken” from those at the top. Instead, they have pushed rates on the taxes that apply to them to the lowest levels seen in 70 years and, in doing so, have put a tremendous strain on the ability of the Federal and State governments to provide services (education, roads, bridges) for the masses.
I’ll leave you with one more statistic to consider. Forget about the top 3%. The top .1%, just 300,000 people, fewer than live in the city of Mesa, now hold 25% of our wealth.
Bob, you have some astounding facts on your side and you you know I can’t just shrug them off. Yes, it does seem stupid that .1% should hold so much wealth and in accordance with what I believe, they should be giving more than others because they can afford it. But how much? I am sure you remember back when Kennedy was in office the top tax rate was 90%. Is that fair? Kennedy didn’t think so. My fear is that if Democrats ever get in control again, the tax rate will creep back up there again. Perhaps Republicans do push the rate too low, but under Obama it has been creeping up again. When is it enough, Bob?
By the way, I’m sorry about telling you about myself. That’s what happens when it is late at night, you are tired and you had one too many margaritas. I would not normally expose myself so much on a “hostile” site like this. ;o) It won’t happen again…
Steve, there is no inherently fair or unfair rate. Fair flows from the economic model, capitalism, under which we operate. Capitalism left unchecked drives wealth and income to the top. Think about the constraints on the accumulation of wealth that apply to the super wealthy, as opposed to those that apply to the rest of us. Most people are forced to consume most of their income on living expenses and taxes that apply to income from labor. The wealthy spend only a sliver of their income on those two items (most of their income is from capital). So the rate of tax on income from capital and the passage of wealth (the estate tax) need to be set at rates high enough to offset the concentration of wealth that otherwise would occur. If we don’t do that (and we haven’t for over 30 years) wealth will concentrate at the top without limit. That’s why the Forbes 400 holds between 3 and 4 times the share of our wealth it used to hold, and why a population the size of a bedroom community holds 25% of our wealth.
I thought quite a bit about what you said, Bob, and I was troubled by your statement that “…there is no inherently fair or unfair rate…”. The implication of that statement is that you think there is no such thing as an unfair amount because if you thought there was a fair amount, you would either quantify it or describe it.
We see this issue from entirely different perspectives. You are correct when you say that there is only so much money can be used by an individual during his or her lifetime. You think any money left over (or a significant portion of it) should be turned over to a common till (estate taxes) to be redistributed by the Government as it sees fit. I believe that the wealth still belongs to the individual who earned it and he or she should be able to pass that wealth along to whomever or whatever they choose. We have currently selected a middle ground with the $2 million lifetime exemption and the use of trusts. I am sure you think that is too generous and I think it is too little.
When I served in the Army, my pay and other entitlements were not lucrative in any sense of the word. It was adequate, as was the retirement pension I received when I left the Service. Since then, I have accumulated some wealth beyond my immediate needs, and I want to pass that on to my children, not the Government. I make use of every legality in the tax system to do that, both while I am alive and once I pass on. I am not one of the VERY wealthy (that 3% of which you speak), but when you go after them in the name of “fairness” I will get stepped on in the process.
I won’t go into a long discussion about capitol gains except to say that like every other of this type of tax, it taxes my success.
As a result, I am forced to oppose ALL discussions about the estate or capitol gains taxes because, for Democrats, there is no amount that is considered unfair when it comes to taking from people they consider “wealthy”. The sad part, Bob, is I don’t think most Democrats hold this position out of altruism and a sense of the good that could be done with the wealth. I fear it is more out of envy and a desire to punish the wealthy. And I am convinced that if the majority of Democrats could switch places with one of these wealthy people, their attitude about taxation would switch 180-degrees.
You entirely missed my point, Steve. Also, I don’t know why you fear Democrats so much on the tax front. They’re in the hip pocket of those at the top just like their Republican counterparts. If you put aside issues of social justice and civil liberties, the two parties really are not that distinguishable.
I am sorry I missed your point. I like understanding what you are telling me because it is usually very informative. I guess I have blinders on when it comes to this. I agree with you that there isn’t much difference between the Parties with the exception of social justice, but I am not so certain about civil rights.
However, that social justice is an expensive idea because it means programs, and programs need money, and money comes from taxes (or borrowing against future income – taxes). This is where I don’t trust Democrats. You have largely convinced me to vote for a couple of Democrats in the election coming up; but only at the local and State level, not the National level.
Anyway, again…I am sorry I missed your point. I feel like I really missed something.
“A growing body of research shows that people at the top of the income scale are living longer while those at the bottom are dying earlier.”
There is nothing new in that. The wealthy have ALWAYS lived longer than the less wealthy. In general, the less wealth you have the worse health you have. That is not unique to these times…
Actually, Steve, the gap has grown considerably in the last decade or so. And if you compare the gap in America to the gap in Japan and Western Europe, you’ll see we’re doing far worse on this front.
To shrug something like this off is unlike you, Steve. You’re better than that.
I wasn’t trying to shrug it off because health care is a serious matter. But the wealthy DO get better health care, always have and always will.
As far as health care is concerned (going off topic a little bit here, Bob) I was one of the few conservatives around that was willing to give ObamaCare a chance in the hope it might get quality health care to most, if not all, Americans. I have been a little disappointed in the results, but it is still early.
Forgive my slight aside, but the irony of Obamacare is that it was lauded as affordable, but it’s well past my ability to afford healthcare.
Your situation is an example of why I am so disappointed in Obamacare. I was skeptical about it, but I hoped it might be the key to affordable health care for most Americans (and maybe even ALL Americans), but it isn’t working out that way. I think it is a shame that our Nation cannot provide health care to every citizen.
“unequality” was a theme the communists worked in its early movements, and then turned into a corrupt class of its own. If Wood had researched as much on how the rich create their wealth instead of their status it would be more informative. Cherry picking and half truths and whinning about our capitalist system is overworked. If the rich can game the system, so can you, and balance the scales. Who determines what is “equality”, you Wood???
So, is inequality per se not a problem, in your mind, or is there some level at which it becomes a problem? If the latter, what level would that be? One hundred years ago, we took clear steps to address inequality. Was it wrong to do so?
What happened 100 years ago, Bob? World War 1? Because that War wasn’t about “equality”? It was about National agos and pride. And it didn’t do a very good job solving that; hence World War 2.
The estate tax and the progressive income tax, Steve.
Ah-h-h. I forgot about those. I would think that as much as I dislike those concepts, I would have remembered that. Silly me. Thank you for reminding me.
Siphon-up makes you sound stupid as it is not physically possible. Try suck-up or vacuum-up., hoover-up. Anything other than siphon. Of course you could also change it to “Siphon-off”or “Siphon-away”, both of which are scientific methods of removal 🙂