Redistribution of wealth. A popular term currently. Republicans think that it is bad. Democrats think that it is good. They are both right. And they are both wrong. Our government has a responsibility. We may have different opinions on what role the government should have. But virtually all Americans agree that government must protect us (military and consumer protection) and to assist those of us who need a little help along the way (social assistance programs). To meet these obligations, the government needs money. They generate money by taxing us.

So what is the redistribution of wealth? It is when the rich pay a higher rate of tax (or pay a higher tax burden) that the middle class or the poor to pay for programs that are intended primarily for the middle class and poor. Or so we think…

When the term “redistribution of wealth” is used today, it is usually at a Tea Party-type anti-socialism rally, where talk is that the rich are being bled dry to help the poor. The truth is, a massive redistribution of wealth in the opposite direction, is now occurring, which has not happened since before the Great Depression.  Currently we are living through a period in which there are greater imbalances between the distribution of wealth. Social services are being stretched to the limit, as increasingly the middle classes are unable to meet their financial demands.

That is one of the ironies of the current fiscal situation: if there was a greater economic balance between rich and poor, people on all points of the spectrum would be much better off and we wouldn’t need to spend so much on social services such as welfare, food stamps and unemployment checks.

At any time in history when we’ve had such income disparity, the economy and society itself virtually unraveled. We haven’t seen an imbalance such as this since 1928 and well, you know what happened then. And we know what is happening now, though there are many who choose not to heed the lessons of history, as if the results will somehow be different. When you look back, it was really during the Reagan era that we started to drastically offset the balance of income. Robert Reich recently noted that in the 1970s, the top 1 percent received 8 to 9 percent of total income, but thereafter income concentrated so rapidly that by 2007 the top received 23.5 percent of the total. Here’s another gem from Reich:

During almost three decades spanning 1951 to 1980, when America’s top marginal tax rate was between 70 and 92 percent, the nation’s average annual growth was 3.7 percent. But between 1983 and start of the Great Recession, when the top rate was far lower — ranging between 35 and 39 percent — the economy grew an average of just 3 percent per year. Supply-siders are fond of claiming that Ronald Reagan’s 1981 cuts caused the 1980s economic boom. In fact, that boom followed Reagan’s 1982 tax increase. The 1990s boom likewise was not the result of a tax cut; it came in the wake of Bill Clinton’s 1993 tax increase.

Recently, Bernie Sanders wrote a great piece that listed some cold, hard facts about the past decade. Here are a few that illuminate the situation:

  • During the Bush years alone, from 2000-2008, median family income dropped by nearly $2,200 and millions lost their health insurance.
  • The 400 richest families in America, who saw their wealth increase by some400 billion during the Bush years, have now accumulated $1.27 trillion in wealth. Four hundred families! During the last 15 years, while these enormously rich people became much richer their effective tax rates were slashed almost in half. While the highest paid 400 Americans had an average income of $345 million in 2007, as a result of Bush tax policy they now pay an effective tax rate of 16.6 percent, the lowest on record.
  • Last year, the top 25 hedge fund managers made a combined $25 billion but because of tax policy their lobbyists helped write, they pay a lower effective tax rate than many teachers, nurses, and police officers. Warren Buffett, one of the richest people on earth, has often commented that he pays a lower effective tax rate than his secretary.
  • As a result of tax havens in the Cayman Islands, Bermuda and elsewhere, the wealthy and large corporations are evading some 100 billion a year in U.S. taxes.
  • In 2009, Exxon Mobil, the most profitable corporation in history made $19 billion in profits and not only paid no federal income tax — they actually received a $156 million refund from the government. In 2005, one out of every four large corporations in the United States paid no federal income taxes while earning $1.1 trillion in revenue.

So we have massive unemployment, depleted savings accounts, people literally so broke they don’t know how to survive and yet, it doesn’t have to be this way. Think for a moment of the history of America over the past hundred years and try to recall a time when the middle class and working class were doing well, at least as well as can be expected at the lower half of our economic universe. Was it after the New Deal? After World War II? During Clinton’s tenure in the ’90s? While we can discuss the peaks of economic balance, we can also identify the worst disparities in economic strata: the Great Depression and the Bush years and their respective aftermaths. It would be difficult to find a positive trend during any Republican administration in recent times but the period under George W. Bush surely qualifies as one of the worst ever. The Republicans only success has been convincing Tea Partiers and Grizzly Mama’s that everything we are suffering through is Obama’s fault. The unfortunate thing is many of them will actually be voting for the same people who helped create this disaster. A recent study has even shown how income equality makes the poor more conservative, a fact that can’t be lost on the Republicans who have worked as hard as they can making the lower 99 percent as poor as possible.

Find me a President that has done a better job than Bush on creating monumental debt out of a positive economy and budget surplus. Not paying for two massive tax cuts for the wealthiest Americans, two major foreign wars and a Medicare Prescription Drug bill has left us in a hole so deep it threatens the global economy and our social fabric. President Obama has no easy choices to get us out of this hole, and unfortunately, no help from the other side of the aisle. The same Republicans who helped Bush pass all these budgetary nightmares have been blocking every single one of Obama’s efforts to try and solve the problem they caused. They shriek that we can’t spend our way out of this, not acknowledging it was GWB and the GOP that maxed out the national credit card. It will take a rebalancing of fiscal policy and taxation to right the good ship America so everyone can stay above water, even on the lowest decks. To those living on the top decks and enjoying the view (along with all those unpaid-for Bush tax cuts) don’t forget that the highest berths on the Titanic couldn’t save the lives of John Jacob Astor IV and Benjamin Guggenheim, two of the then-richest Americans. When the good ship sinks, we all go down together.

Robbie Gennet – The Huffington Post

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