How Can the World's Richest Country Let Children Go Hungry? 6 Tricks Corporate Elites Use to Hoard All the Wealth
“Squeezed by rising living costs, a record number of Americans, nearly 1 in 2, have fallen into poverty or are scraping by on earnings that classify them as low income."
“Study: 1 in 5 American children lives in poverty."
“In 2010, 17.2 million households, 14.5 percent of households (approximately one in seven), were food insecure, the highest number ever recorded in the United States.”
What’s going on here? Aren't we the richest country on earth?
Day in and day out we are told that if the government doesn’t tighten its belt, we’re all headed for debtor’s prison. Social Security, Medicare and Medicaid are under attack. State budgets are in disarray. Teachers and firemen are getting canned. Public services are slashed. This is the new America and we'd better get used to it, the pundits proclaim. You would think we were a poor country.
But we’re not. We’re filthy rich, but the money is hidden away by the 1 percent while poverty rises all around. Here’s why.
1. Productivity continues to rise but the 99 percent doesn’t share in the benefits.
The key to the material wealth of any nation is productivity – how much we produce per worker hour. Productivity is a crude measure of our overall level of knowledge, technique, organization, skill and cooperative work practices that produce the sum total of our goods and services. Lo and behold, there’s nothing at all wrong with productivity in America. It continues to rise and rise just like it did during our post-WWII boom years. What’s changed is that the average American wage has stalled since the mid-1970s — which is precisely the time that we started to deregulate Wall Street and cut taxes on the rich.
During the 1950s and '60s boom years, almost all Americans shared in the fruits of productivity leading to rising real wages (after inflation). But now the productivity lines and wage lines have pulled apart. The gap between the two lines represents trillions of dollars that once went to the average American but are now going almost entirely to the super-rich.
2. Large corporations pay next to nothing in state and local taxes.
As a result of the Wall Street-created crash, state and local governments are struggling to make up for lost revenues and rising costs to care for the jobless and the destitute. In a fair society we would be asking Wall Street to pay for the damage it created. Instead, Wall Street has used its enormous lobbying muscle to make sure politicians are asking states to cut back public services of all kinds.
Meanwhile, large corporations use every trick in the book to avoid paying state and local taxes. A recent joint report by the Institute on Taxation and Economic Policy and Citizens for Tax Justice reveals that 265 large corporations avoided $42.7 billion in taxes from 2008 to 2010. That’s enough money to hire more than one million teachers! Instead, we are firing teachers in the name of fiscal austerity.
3. Money that should go toward the common good pours into the pockets of the 1 percent.
In 1970 the federal marginal tax rate on millionaires was 70 percent. That means for the next dollar the super-rich earned, 70 cents went to the federal government to pay for building what was then the most productive infrastructure in the world. Now the official top rate has fallen to 35 percent. But it’s much worse than that. Most of the super-rich take full advantage of the senseless 15 percent capital gains rate which pours hundreds of billions into the pockets of the super-rich. As a result, the real overall tax rate for the super-rich has plummeted to less than what the average secretary pays.
4. The biggest corporations are sitting on a mountain of cash.
While politicians lament the debt crisis, America’s largest corporations are refusing to invest more than $1 trillion in cash because of the lack of consumer demand (resulting from high levels of unemployment caused by the Wall Street crash). That money is doing little for our economy. It’s not putting our people to work. It’s not helping to close state and local budget gaps. It’s not helping to improve our depleted infrastructure.
5. Hedge funds have over $1.917 trillion in misused investment capital.
Wall Street investment firms are loaded with investment capital looking for ways to make outsized profits while paying as little in taxes as possible. This is the money that floods Wall Street casinos and that led directly to the housing bubble and crash. The money is still there just itching to ride up and down the next bubble. Approximately 80 percent of all stock market transactions come from the manipulations of these funds. And much of the money jumps in and out of the markets in nanoseconds using high-speed automatic trading techniques that extract hidden taxes from the rest of us. Most of this speculative capital serves no broader economic or social purpose except to enrich the super-rich.
6. Many of the 1 percent cheat on their taxes.
When you have enormous sums of money, you can hire high-powered accountants and lawyers to help you avoid taxes. But these maneuvers aren’t just taking advantage of tax loopholes. It’s about cheating. Many of the super-rich hide their money in offshore tax havens. They place it in secret bank accounts without declaring it. They just pretend it doesn’t exist. How much money are we talking about? The tax revenues lost in the U.S. are estimated to be $337 billion a year according to a November report by the Tax Justice Network. This is more than enough to put America back to work rebuilding our crumbling infrastructure.
So there hides our nation’s wealth. We are as productive as ever, but 99 percent aren’t getting their fair share. Instead the 1 percent are channeling our collective wealth away from our daily needs through investment hoarding, tax loopholes and outright tax cheating. Rather than using it to create badly needed jobs, they pocket it. And then our financial elites have the nerve to ask the rest of us to tighten our belts because the public trough is running low due to a financial crash they created! It’s an outrageous fabrication designed to shift the debate away from the obvious: Wall Street and its minions took down our economy, got bailed out and now refuse to pay anything to repair it. Instead they want us to pay for the damage they created.
This is the material basis for Occupy Wall Street and we should salute the occupiers for changing the national dialogue back to where it belongs. But we will have to go much further if we hope to create employment, alleviate rising poverty and bring a modicum of justice to our society. We will have to do nothing short of democratizing Wall Street from top to bottom so that our financial elites can no longer manipulate the economy and politics to serve their ends.
We are still the richest nation on earth, but our wealth has been captured and hidden from view. We can’t expect Occupy Wall Street to rectify this ungodly mess on its own. It’s time for the rest of us to join the fight to recapture our nation’s wealth while resurrecting our society’s fundamental decency.
No one should ever be poor in a country so rich.
Les Leopold is the executive director of the Labor Institute and Public Health Institute in New York, and author of The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity—and What We Can Do About It.