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Neo-Liberalism Brought On the Fiscal Cliff

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Victors-SpoilsWhile the nation rapidly approaches the so-called fiscal cliff as a result of Republican intransigence on taxes, a few other facts should be highlighted.

  • The data of The Economic Policy Institute (EPI) in its “The State of Working America” analysis shows that between 1983 and 2010 the top 5 percent of income earners increased their share of the pie by 74.2 percent, while the bottom 60 percent of us had our share of national income decrease.
  • As of 2010, the top 1% of households (the upper class) owned 35.4% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 53.5%, which means that just 20% of the people owned a remarkable 89%, leaving only 11% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one’s home), the top 1% of households had an even greater share: 42.1%. (Economist Edward N. Wolff of New York University 2012).
  • Wealth distribution became even more concentrated between 1983 and 2004, in good part due to the tax cuts. Of all the new financial wealth created by the American economy in that 21-year-period, fully 42% of it went to the top 1%. A whopping 94% went to the top 20%, which of course means that the bottom 80% received only 6% of all the new financial wealth generated in the United States during the ’80s, ’90s, and early 2000s
  • New York Times analysis by David Cay Johnston of an Internal Revenue Service report on income in 2004; although overall income had grown by 27% since 1979, 33% of the gains went to the top 1%. Meanwhile, the bottom 60% were making less: about 95 cents for each dollar they made in 1979. The next 20% – those between the 60th and 80th rungs of the income ladder — made $1.02 for each dollar they earned in 1979. Furthermore, Johnston concludes that only the top 5% made significant gains ($1.53 for each 1979 dollar). Most amazing of all, the top 0.1% — that’s one-tenth of one percent — had more combined pre-tax income than the poorest 120 million people (Johnston, 2006).
  • But the increase in what is going to the few at the top did not level off, even with all that. As of 2007, income inequality in the United States was at an all-time high for the past 95 years, with the top 0.01% — that’s one-hundredth of one percent — receiving 6% of all U.S. wages, which is double what it was for that tiny slice in 2000; the top 10% received 49.7%, the highest since 1917 (Saez, 2009).

Here is what Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City, has to say about the neo-liberal economics policy that led to these statistics and why Democrats and Progressives should reject them.

Neo-liberal economics has devastated the global economy and produced all of the predictive failures and evil consequences that progressives have long attributed to its micro-economic myths. Far too many progressives, however, continue to believe the similarly mythical and self-destructive macro-economic myths about deficits, debt, and austerity. It is hard enough countering Pete Peterson’s billion dollar campaign to inflict austerity and unravel and privatize the safety net. Peterson funds myriad front groups. We also have to counter the Wall Street wing of the Democratic Party, which dominates Treasury, OMB, the Justice Department, and the office of the Chief of Staff and favors austerity and unraveling the safety net. We should not have to deprogram progressives indoctrinated into repeating neo-liberal economic dogmas.

Progressives should be able to observe that the neo-liberal macro-economic predictions have been consistently falsified by reality. They should have seen documentaries like Inside Job and Capitalism: A Love Story about the catastrophic failure of neo-liberal economics and economists. They should read sites like New Economic Perspectives and Paul Krugman’s columns that explain why austerity is self-destructive and why the safety net need not, and should not, be attacked. Progressives need to say “no” to anyone who wants to “bleed” the economy through austerity or cutting the safety net.

Prof. Black points to the reason why much of So. America hates neo-liberal economic policies after having to suffer through them decades ago. And it’s why Ecuador’s Rafael Correa refused to enact neo-liberal economic policies after the world wide recession hit. As a result of Correa’s policies, Ecuador’ economy is growing and doing well.

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Written by Valerie Curl

December 28, 2012 at 1:12 PM

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