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Who are the 1%?

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posted Friday, November 18, 2011 - Volume 39 Issue 46

Who are the 1%?
by Janice Van Cleve - Special to the SGN

If the Occupy Wall Street movement has accomplished anything so far, it is to underscore the huge income disparity in this country and indeed around the world. Framing the message as a simple, direct contrast between the 1% and the 99% is clever, compelling, and really catching on.

By any measure, most of us can identify with the 99%. Did you get a government bailout in the last three years? No? You are in the 99%. Did you receive a ginormus bonus this year? No? You are in the 99%. Has Ben Bernanke (chair of the Federal Reserve) or Timothy Geitner (U.S. Treasury Secretary) cut you any sweetheart deals lately? No? You are in the 99%. Did you recently buy an election or a senator? No? You are in the 99%.

Very smartly, the Occupy Wall Street movement has positioned itself as the spearhead of the vast majority of Americans. While we may not be camped out in front of City Hall or marching in the streets, we can hear that the protestors are singing our song. They are out there as a visible demonstration of our frustration and anger. They are showing the rest of us that we are not powerless. They are showing us that we can reframe the debate about our economy. We can shine a spotlight on the 1% and illustrate how far removed they are from the reality of the 99% in the mainstream. So who are these people in the 1%?

Based on the records of the Internal Revenue Service as published by The Week magazine (November 4 issue), it takes an annual income of just above $516,000 to qualify as one of the richest 1% in America. Who makes that kind of money? We all know the big bankers, hedge fund managers, and securities traders are up there, but according to The Week, they only constitute 14% of the super wealthy. Another third are from non-financial firms - like Wal-Mart.

One example is Alice Walton. The Wal-Mart heiress spent $65 million for one painting for her new museum of art in (of all places) Arkansas. At the same time, Wal-Mart workers slave away at minimum wages and are actively prevented from forming a union. One out of six of the 1% are in the medical field (presumably Big Pharma) and one in 12 is a lawyer.

Here's the kicker: Over half of U.S. senators and representatives are in the exclusive 1% club. Is it any wonder that Wall Street gets bailouts at public expense and the 99% get foreclosures? Is it any wonder that members of Congress enjoy single-payer health care that they deny the rest of us?

Now this 1% claims they pay more taxes than the 99%, and they have a point. Just looking at tax rates, according to the nonpartisan Tax Policy Center, the 238,000 American households with annual taxable incomes of $1 million or more will pay an average of 29%, while what's left of the middle class - those taking home $50,000 to $75,000 - will pay 15%. Yet the records show that 7,000 of the 1% paid no taxes at all. Warren Buffett even confessed that he paid half the tax rate of his secretary! Obviously a simplistic flat tax like 9-9-9 would hand the 1% a huge tax break while the 99% would end up paying 18% in taxes.

The 1% claim they already pay 40% of all federal income taxes. So what if they do? They own a third of the total cumulative wealth of the United States and every year they take home 21% of the total incomes. As Elizabeth Warren, Obama's appointee for Wall Street watchdog and now running for U.S. Senate from New York, pointed out so well, the richest 1% made their money thanks to the infrastructure paid for by the public and the property laws passed by the public that enabled them to get that wealth and keep it. They owe a larger chunk of their incomes back to the public.

The Republicans claim that forcing the 1% to pay higher taxes would stymie job growth. Oh yeah? In the 1950s, the highest tax bracket paid 91%, but the economy not only paid off the debts from World War II, it thrived. The highest tax bracket was 70% in the 1970s and over 50% during all but the last two years of the Reagan presidency. President Clinton raised taxes on the super-rich from 31% to 39.6% in 1993 and the economy boomed. We even enjoyed a budget surplus.

Conversely, President Bush cut taxes on the super rich and the economy stagnated. The 1% are not the so-called 'job creators' that the Republican politicians make them out to be.

Bailouts, tax breaks for corporations, and incentives for the 1% don't work to improve the economy, either. All that public money that bailed out Wall Street banks did not translate into easier credit for small businesses and homeowners. The 1% used the money to buy out each other. If they were 'too big to fail' in 2007, they are many times bigger now.

Such a gross income gap is not sustainable. The 1% cannot continue to exploit the advantages of America, which all of us built, to benefit only themselves. They cannot continue to expect the 99% to support them in good times and bail them out in bad times. Sooner or later one of three things always happen:

1) They run out of people to exploit and their tottering towers come crashing down like a Lehman Brothers collapse.

2) In their greed, they attack each other and bring world wide ruin like the Great Recession, the Great Depression, or even World War I.

3) The 99% wake up and force a national course correction like the French or Russian revolutions.

America was built on the hope and promise that if you worked hard or had a good idea, you could make a good living, maybe even climb the economic ladder, and provide a better life for your kids. Without a middle class ladder, however, there is no hope, and the 1% become isolated in their narrow, little, unstable make-believe world.

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