Can capitalism be preserved in a "monoclass" age?

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St. Louis Post-Dispatch (Upside Down)
October 12, 2010

Over the next two weeks, this page will make its recommendations on candidates and issues on the Nov. 2 election ballot. Before that process begins, we'd like to offer a preface.

As always, the Post-Dispatch editorial page is guided by the philosophy espoused 103 years ago by Joseph Pulitzer in the Post-Dispatch Platform, printed each day on this page. His words, particularly the ones about "predatory plutocrats," resonate this year.

The single issue most important in this year's election is income inequality. The recession of 2007-2009 and its continuing legacy of high unemployment have exacerbated the problem, but they did not create it.

In the past 30 years, government cut-and-spend policies have created a situation in which the richest 20 percent of Americans -- those making six figures a year or more -- collect about half of the wage income and control about 84 percent of all forms of wealth.

The richest 1 percent of Americans -- those who earn $368,000 a year or more -- control 18 percent of its earnings. The top 1/10th of 1 percent -- those who earn a million a year or more -- control 8 percent all by themselves.

In 2007, former Fed Chairman Alan Greenspan, nobody's idea of a class warrior, said that income inequality "is where the capitalist system is most vulnerable. You can't have the capitalist system if an increasing number of people think it is unjust."

This page wants to preserve the capitalist system. To do that, we are looking for candidates and policies serious about real reforms.

Every time we write about this disparity, letter writers point out that wealthy people pay a huge percentage of the federal income tax. True. The richest 10 percent of households paid about 73 percent of the income taxes collected by the federal government, according to the nonpartisan Tax Policy Center.

Conversely, the center reports, thanks to tax credits and deductions, about 45 percent of all American households paid no income tax at all in 2010. They paid Social Security and Medicare taxes through the payroll tax if they had jobs; sales taxes (at the same rate as the wealthy) on the necessities of life, gasoline taxes and property taxes if they owned their homes.

They may have escaped the federal income tax, but rich and poor alike get nicked in countless other ways. And the poor can afford it less.

And besides, a new report out this week says that the federal government will spend nearly $400 billion this year on "asset building" programs that don't benefit the poor at all. The rich may be paying more in taxes than the poor and working poor, but the rich are getting benefits the poor and working poor never see.

"Upside Down" is a study done by the Corporation for Enterprise Development and the Annie E. Casey Foundation. The report examined tax programs developed in response to what it calls the "abiding ethic" of the United States -- that anyone with enough gumption can climb the economic ladder.

So Congress, in its wisdom, for years has enacted provisions in the tax code intended to help families build assets -- homes, businesses, savings and education -- necessary to keep climbing that ladder.

In 2009, the government gave up $384 billion in taxes to underwrite home-mortgage interest deductions or small-business loans; or money invested in a 401(k) retirement plan or an IRA; or money from Pell Grants or tuition tax credits.

Good programs, all of them. But the study found that more than half of the $384 billion in benefits accrued to those who were already pretty high up the income ladder, those making $167,000 a year or more.

People who don't own a home, or don't itemize deductions, receive almost nothing from these programs, the study says. A household making $50,000 a year -- almost precisely the median national income -- gets an average of about $500 a year. Nearly 80 percent of the home mortgage and property tax exemptions went to families earning six figures or more.

Prudent people would be saving for retirement or stretching for the kids' college educations. But those dreams increasingly are being put on hold, the study says, as "prices for necessities -- such as medical care, housing, food, household operation and cars -- are growing more than twice as fast as prices for all other purchases."

The study concludes, "At a time when the economic downtown has left many low- and middle-income families struggling to get by, we can ill afford a federal wealth-building strategy that primarily helps those who are already wealthy."

We understand political reality. The home mortgage deduction isn't going anywhere. But in this political year, we're looking for candidates who understand issues related to income inequality and who are willing to address real-world solutions.

(And by this, we're looking for something a little more nuanced than "Cut taxes. Create jobs," the mantra of the last decade that helped to bring us to our current state).

"Never lack sympathy with the poor," Pulitzer said. Today, the poor and working poor are beginning to look like lost causes, and the middle class is an endangered species.

"The middle class is over. It's not coming back," the Canadian novelist and self-described "radical pessimist" Douglas Coupland wrote in last Friday's Toronto Globe and Mail. He added, "Enjoy the new monoclass!"

We would prefer to be radical optimists. But in this political season, it's become hard. Very hard.

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This page contains a single entry by CFED published on October 13, 2010 4:25 PM.

Breathing new life into an old trailer park was the previous entry in this blog.

Living without a bank account is the next entry in this blog.

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