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5 things the one percent doesn’t understand about America
You didn’t build that. You rode it.
Reddit’s favorite politician wants to pull a Robin Hood.
Last week, Bernie Sanders (D-Vt.) gave an interview with CNBC in which he called for a “transfer” of wealth from the richest Americans to the lower classes. Sanders’ plan would call for a financial transactions tax to encourage long-term investments, intensive campaign finance reform, regulation of Wall Street, and the active splitting up of America’s big banks. This also includes, of course, higher taxes for the one percent. His interview quickly went viral.
As Sanders reminds us, America’s current economic system is broken. When Warren Buffett pays a lower tax rate than his cleaning lady, you know something is wrong.
But the sad truth is that conservative, Reagan-era economic mindsets continue to be the norm in too many sectors of the American economy, especially among those with power and influence; thus, nothing is likely to change. In 2011, Obama backed “The Buffett Rule,” a policy that would have increased the tax rate on households earning more than $1 million, but as Buffett recently told Politico, our nation’s tax problem “hasn’t been fully corrected.”
This perpetuates a system where the rich are held to different standards than the rest of the country, a disparity that too many one percenters still fail to grasp. GOP presidential candidates Ben Carson and Mike Huckabee have already floated flat taxes on all Americans, with the Columbus Dispatch reporting Monday that potential GOP contender John Kasich (R-Ohio) also plans to get on board with the flat tax. This would lower taxes on the wealthy while raising them on the poor, serving to further punish those who already struggling to get by.
This policy is not just a matter of being out of touch but speaks to a profound inability to grasp the reality of those who lack the privileges that millionaires like Carson, Huckabee, and Kasich enjoy. As we can see, this doesn’t just lead to misinformation but also bad policy, ones that hurt the populations one percenters claim to be helping.
1) A laissez-faire market does not guarantee competition
America’s system of laissez-faire economics has largely stayed in place—unchecked and unregulated—for decades. Functioning under the belief that an unregulated market is better for competition, laissez-faire economics has provided another excuse to let the rich get richer, while the middle-class and the poor stay exactly where they are.
“In a laissez-faire world, wealth creation is a reward for risk taking and innovation,” writes the Financial Times’ Subitha Subramaniam. “In a world of financial repression, it is linked to central bank policies pushing up asset prices, which disproportionately benefits the older and wealthier segments of society.”
But as the financial crisis of 2007 and 2008 made evident, we are not living in a laissez-faire world, where financial risk begets great rewards for those who are willing to make the leap. We are living in a world where financial risk is a dubious proposition for anyone who does not belong to the one percent—thus making economic competition an unequal prospect to anyone without capital already in place to fall back on.
Whereas the one-percent views laissez-faire economics as a chance to compete under the assurance that as long as you work hard, you will be rewarded, that continues to be true only for those whose work the system rewards.
The best example of this is exemplified by the debate surrounding the #FightFor15. While the one percent may view raising the minimum wage as a threat to economic competition, the rest of America isn’t trying to compete—because they aren’t even playing on the same field. The 99 percent is just worried about getting by.
2) Trickle-down economics doesn’t work
There may be no phrase more controversial among financial experts than “trickle-down economics.” What trickle-down economics denote is a belief that the rich create jobs, infrastructure, and financial mechanisms designed to benefit lower classes, thereby letting their wealth “trickle down,” without using that wealth to benefit lower classes directly.
Taxes on the rich are notoriously low for this very reason. But as United for a Fair Economy explains, cutting the top tax rate does not lead to economic growth, income growth, wage growth, or job creation. All it leads to is more money for those who already have plenty of it and greater economic inequality overall.
In an essay for Bill Moyers’ website, venture capitalist Nick Hanauer notes that trickle-down economics are backward. “The fundamental law of capitalism is: When workers have more money, businesses have more customers,” Hanauer writes. “Which makes middle-class consumers—not rich businesspeople—the true job creators. A thriving middle class isn’t a consequence of growth—which is what the trickle-down advocates would tell you. A thriving middle class is the source of growth and prosperity in capitalist economies.”
And it’s investing in the middle class where America struggles most. Although working at McDonald’s is supposed to be the province of high school students who need a little cash, the 99 percent increasingly needs to rely on such jobs for support. Currently, the average age of a fast-food worker is 28, and trends suggest that by 2014, 48 percent of all American jobs will be low-wage service jobs.
Writing for Vanity Fair, famed economist Joseph E. Stiglitz finds that America’s trickle-down policies have yet to rain prosperity on the many. Stiglitz cites the high rate of youth unemployment (“at around 20 percent”), the one-sixth of American workers unable to find a full-time job, and the one-seventh of Americans relying on food stamps to put a meal on the table. He then concludes, “There is ample evidence that something has blocked the vaunted ‘trickling down’ from the top 1 percent to everyone else.”
3) Government regulation has a different meaning for people without money
There’s no bigger sin among conservatives than the idea of “big government,” and nowhere is this approach more evident than in economics. The idea of any distribution of wealth has become so equated with “socialism” on the right that the mere mention of the government intervening in anything so much as a parking ticket speaks of a post-apocalyptic nightmare.
While history has taught us that a government which controls everything can only be a detriment to its people, a government which ignores its people—save for the wealthiest among them—can only be just as pernicious, and just as vulnerable to collapse.
As the New York Times’ Paul Krugman writes,
In the 1930s, after the mother of all banking panics, we arrived at a workable solution, involving both guarantees and oversight. … This system gave us half a century of relative financial stability. Eventually, however, the lessons of history were forgotten. New forms of banking without government guarantees proliferated, while both conventional and newfangled banks were allowed to take on ever-greater risks. Sure enough, we eventually suffered the 21st-century version of a Gilded Age banking panic, with terrible consequences.
What people fail to realize is that the one percent and the 99 percent need government for different reasons. One-percenters see government as a way to make sure their wealth stays untouched, while the rest of us need government for everything else. As Joseph Stiglitz reminds us, “the rich don’t need to rely on government for parks or education or medical care or personal security—they can buy all these things for themselves.”
Government regulation may not be popular in the broad sense of the (“Regulation” with a capital “R”), but Pew Research findings show that most Americans actually support regulation when it’s less abstract, including protections for food production and the environment. While Pew reports that 52 percent of Americans think regulation hurts businesses, the Bureau of Labor Statistics shows that’s far from the case, as regulation barely affects job loss. In 2013, just .3 percent of workers were laid off because of tougher government restrictions.
4) You didn’t build that
According to the one percent, they’ve already done enough to help this country. They are titans of industry, after all, masters of fortune and finance. Who has done more to help the economy than they have? This perpetuates the myth that rich white guys are the “men that built America,” as a recent History channel special put it, men like Henry Ford and Andrew Carnegie.
Here’s the History Channel waxing nostalgic for hypercapitalism and robber barons:
John D. Rockefeller, Cornelius Vanderbilt, Andrew Carnegie, Henry Ford, and J.P. Morgan rose from obscurity and in the process built modern America. Their names hang on street signs, are etched into buildings and are a part of the fabric of history. These men created the American Dream and were the engine of capitalism as they transformed everything they touched in building the oil, rail, steel, shipping, automobile and finance industries. Their paths crossed repeatedly as they elected presidents, set economic policies and influenced major events of the 50 most formative years this country has ever known. From the Civil War to the Great Depression and World War I, they led the way.
However, that’s far from the case. The Huffington Post’s Jonathan R. Cole writes, “As Elizabeth Warren… suggested recently in a stump speech, this one percent doesn’t seem to recognize that the roads that they drive to work on or the workers who are skilled enough to get jobs in their businesses are products of the 99 percent’s tax dollars and are the products of government programs.”
In an infamous 2012 speech, Obama agreed, “If you were successful, somebody along the line gave you some help. … Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business, you didn’t build that.”
That‘s true, but it doesn’t tell the whole story. It’s not just that the rich received a helping hand in the form of regulation or privilege but that America was built by workers, particularly slaves. In an op-ed for the New York Times, Maurie D. McInnis argues that “the economic engine of the slave trade helped to fuel America’s prosperity,” and while conditions have changed, America’s overworked, underpaid workers continue to be the backbone of the economy today.
If billionaire Bill Gross argues that the wealthy “rode” in on others’ success, it’s the 99 percent that continues to get trampled by that prosperity.
5) Where you come from are says a lot about where you’re going
What the rich don’t want to admit is that they wouldn’t have achieved many of their accomplishments were they not born on third base. The myth of the American Dream espouses platitudes about “pulling yourself up by your bootstraps” and working hard for everything you have. But that’s hardly the reality.
In his Huffington Post essay, Cole explains that privilege breeds privilege. “The educational achievements of your father and mother have a very significant effect on a child’s achievement, independent of other factors,” Cole writes. “The quality and prestige and income of the jobs held by parents are also very good predictors of the success of their offspring… because of where they are located in the social system, these privileged youngsters of the one percent have further cumulating advantages in the people that they meet and the social networks they form.”
If they say that it’s not about what you know but who you know, that’s especially true for the children of the wealthy, who will have doors opened for them that continue to be locked to the rest of us. Although rags-to-riches success stories do happen—from Starbucks CEO Howard Schultz to Oprah Winfrey—a great deal of economic success comes down to who your parents were and who they introduced you to. According to a 2012 survey from United for a Fair Economy, nearly 60 percent of the Forbes 400 list were born into wealthy families.
But as the case of Oprah Winfrey shows, being rich doesn’t mean you have to hoard all the wealth and privilege for yourself. The talk show titan regularly tops lists of the most philanthropic celebrities, giving away nearly $40 million in 2010 to charity. Overcoming obstacles should only make those other 40 percent of CEOS more charitable, not less.
And Warren Buffet, the son of a Congressman, was hardly born without his share of advantages. If he gets it, there’s no excuse for anyone else.
At a time when the poor are fighting to earn a basic living wage, there’s never been a better time for the one percent to wake up. If America’s workers built this nation, it’s time for them to finally reap the benefits of its future.
Chris Osterndorf is a graduate of DePaul University’s Digital Cinema program. He is a contributor at Heave Media, where he regularly writes about TV and pop culture.
Photo via thomhartmann/YouTube
Chris Osterndorf is an entertainment reporter and movie critic based in Los Angeles. He holds a degree in cinema from Chicago’s DePaul University. His work has appeared on the Daily Dot, Mic, the Script Lab, Salon, the Week, xoJane, and more.