by Holly Sklar
[dropcap]B[/dropcap]efore Wall Street drove our economy off a cliff, bullish Citigroup strategists dubbed the United States a “plutonomy.” They said, “There are rich consumers, few in number, but disproportionate in the gigantic slice of income and consumption they take. There are the rest, the ‘non-rich,’ the multitudinous many, but only accounting for surprisingly small bites of the national pie.”
Inequality had increased so much since the 1980s, Citi strategists noted in 2005, that the richest 1 percent of households and the bottom 60 percent had “similar slices of the income pie!” Even better, they said, “the top 1 percent of households account for 40 percent of financial net worth, more than the bottom 95 percent of households put together.” And the Bush “administration’s attempts to change the estate tax code and make permanent dividend tax cuts, plays directly into the hands of the plutonomy.”
In “Revisiting Plutonomy: The Rich Getting Richer,” Citi strategists considered the risk of backlash. “Whilst the rich are getting a greater share of the wealth… political enfranchisement remains as was — one person, one vote,” they said.
“At some point it is likely that labor will fight back against the rising profit share of the rich and there will be a political backlash against the rising wealth of the rich.” This could be felt, for example, “through higher taxation (on the rich or indirectly though higher corporate taxes/regulation).”
Fast forward. Wall Street wrecked the economy and was bailed out by the rest of us. “Pay on Wall Street is on pace to break a record high for a second consecutive year,” the Wall Street Journal reports. Main Street, meanwhile, suffers record high foreclosures speeded by robo-signers.
Big businesses have a record amount of nearly $2 trillion in cash and are borrowing money cheap to buy other companies, buy back stock and pay out more dividends. Small businesses can’t get credit to buy more equipment or hire more workers.
According to the latest IRS data, the 400 richest taxpayers increased their average income by 399 percent, adjusted for inflation, between 1992 and 2007, and lowered their effective income tax rate by 37 percent — from 26.4 percent to 16.6 percent.
This year, the Forbes 400 richest Americans, all billionaires, enjoyed an 8 percent rise in their wealth — while more than one out of eight Americans depends on food stamps.
The backlash is here, but it’s lashing in the wrong direction. The anti-government Tea Party rage plays directly into the hands of the Kings of Wall Street.
Wall Street has already voted, pouring money into Republican campaigns and anti-Democratic ads by astroturf groups that don’t have to disclose their Big Bank, Big Oil, Big Business donors. “Our target ratio for the 2010 cycle is 80-20 Republican,” American Financial Services Association representative Karen Klugh told Politico.
Wall Street expects a good return on their investment. “Wall Street is preparing for a Republican surge in Congress that could help it block proposed taxes on banks and investments, blunt new financial regulations and regain some of the lobbying firepower it lost during the financial crisis,” Bloomberg reports. “Banks would prefer to have Republicans overseeing the regulators, lobbyists said.”
Wall Street wants freedom to gamble with our money — including the Social Security funds Republicans want to try again to privatize.
“The Republican agenda could also give new life to free-trade agreements with Colombia, Panama and South Korea,” Bloomberg reports. That’s good news for the plutocrats. As Citigroup said in 2005, “Globalization is making it easier for companies to either outsource manufacturing (source from cheap emerging markets like China and India) or ‘offshore’ manufacturing (move production to lower cost countries).”
Average wages are 7 percent lower today, adjusted for inflation, than they were back in 1973. Do you want to go lower?
The richest 1 percent has more wealth than the bottom 95 percent combined, but just 1 percent of the vote.
Wall Street plundered your livelihoods, homes and retirement funds — and now they want you to bail them out, again, with your vote.
They want to sell you bait-and-switch candidates like they sold you bait-and-switch mortgages. And laugh all the way to the bank.
Wall Street has voted. It’s your turn.
Holly Sklar is author of A Just Minimum Wage: Good for Workers, Business and Our Future (www.letjusticeroll.org) and Raise the Floor: Wages and Policies That Work for All of Us. She can be reached at firstname.lastname@example.org.