A recentĀ postingĀ detailed how upper middle class Americans are rapidly losing ground to the one-percenters whoĀ averaged $5 millionĀ in wealth gains over justĀ three years. It also noted that the global 1% has increased their wealth from $100 trillion to $127 trillion in just three years.
The information came from theĀ Credit SuisseĀ 2014 Global Wealth Databook (GWD), which goes on to reveal much more about the disappearing middle class.
1. Each Year Since the Recession, America’s Richest 1% Have Made More Than the Cost of All U.S. Social Programs
In effect, a reverse transfer from the poor to the rich. Even as conservatives blame Social Security for being too costly.
Much of the 1% wealth just sits there, accumulating more wealth. The numbers are nearly unfathomable. Depending on the estimate, the 1% took in anywhere from $2.3 trillion to $5.7 trillion per year. (All numeric analysis is detailedĀ here.)
Even the smaller estimate of $2.3 trillion per year is more than theĀ budgetĀ for Social Security ($860 billion), Medicare ($524 billion), Medicaid ($304 billion), and the entireĀ safety netĀ ($286 billion for SNAP, WIC [Women, Infants, Children], Child Nutrition, Earned Income Tax Credit, Supplemental Security Income, Temporary Assistance for Needy Families, and Housing).
2. Almost None of the New 1% Wealth Led To Innovation and Jobs
In 2005, for every $1 of financial wealth there was 66 cents of non-financial (home) wealth. Ten years later, for every $1 of financial wealth there was justĀ 43 centsĀ of non-financial (home) wealth.
What happens to all this financial wealth?
Over 90% of the assetsĀ owned by millionaires are held in low-risk investments (bonds and cash), the stock market, and real estate.Ā Business startupĀ costs made up less than 1% of the investments of high net worth individuals in North America in 2011. A recentĀ studyĀ found that less than 1 percent of all entrepreneurs came from very rich or very poor backgrounds. They come from the middle class.
On the corporate side, stock buybacks are employed toĀ enrichĀ executives rather than to invest in new technologies.Ā In 1981, major corporations were spending less than 3 percent of their combined net income on buybacks, but inĀ recentĀ yearsĀ they’ve been spending up to 95 percent of their profits on buybacks and dividends.
3. Just 47 Wealthy Americans Own More Than Half of the U.S. Population
OxfamĀ reported that just 85 people own as much as half the world. Here in the U.S., with nearly a third of the world’s wealth, just 47 individuals own more than all 160 million people (about 60 million households) below the median wealth level of about $53,000.
4. The Upper Middle Class of America Owns a Smaller Percentage of Wealth Than the Corresponding Groups in All Major Nations Except Russia and Indonesia.
The upper middle class in the U.S., defined as everyone in the top half below the richest 20%, ownsĀ 11.9 percentĀ of the wealth. Indonesia at 10.5 percent and Russia at 7.5 percent are worse off, but in all other nations the corresponding upper middle classes own 12 to 27 percent of the wealth.
America’s bottom half compares even less favorably to the world: dead last, with just 1.3 percent of national wealth. Only Russia comes close to that dismal share, at 1.9 percent. The bottom half in all other nations own 2.6 to 10.2 percent of the wealth.
5. Ten Percent of the World’s Total Wealth Was Taken by the Global 1% in the Past Three Years
As in the U.S., the middle class is disappearing at the global level. An incredibleĀ one of every ten dollarsĀ ofĀ global wealthĀ was transferred to the elite 1% in just three years. A level of inequality deemed unsustainable three years ago has gotten even worse.
Solution: A Financial Transaction Tax (FTT)
More appropriately called aĀ Financial Speculation Tax, it would help toĀ limit the speculative tradingĀ that contributed to the financial meltdown in 2008.
The FTT has extraordinary revenue-generating potential, on a global scale. The Bank for International Settlements reported in 2008 that annual trading in derivatives had surpassed$1.14 quadrillion. Just one-tenth of one percent of that is a trillion dollars.
It’s also a fair tax. While average Americans pay up to aĀ 10% sales taxĀ on shoes for the kids, millionaire investorsĀ payĀ aĀ zero sales taxĀ on financial purchases. They pay just aĀ .00002%SECĀ feeĀ (2 cents for every thousand dollars) for a financial instrument.
In addition, the FTT is easy to administer and difficult to evade. Clearing houses already review all trades, and serve as collection agencies for transaction fees.
And as evidence of its suitability, three of the top five countries on the Heritage Foundation’sIndex of Economic FreedomĀ are Singapore, Hong Kong, and Switzerland, all of whom have FTTs.
People in the U.S. and around the world are being rapidly divided into two classes, the well-to-do and the lower-income majority. This severing of society will change only when progressive thinkers (andĀ doers) agree on a single, manageable solution that will stop the easy flow of wealth to the privileged few.
Paul Buchheit teaches economic inequality at DePaul University. He is the founder and developer of the Web sitesUsAgainstGreed.org,Ā PayUpNow.orgĀ andĀ RappingHistory.org, and the editor and main author of “American Wars: Illusions and Realities” (Clarity Press). He can be reached atĀ [email protected].
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