How did we get here and where to next?

[flamin lib]

In 1776 Thomas Paine published Common Sense, the first best seller in America. In it he railed against hereditary succession—the royal monarchy. “To the evil of monarchy we have added that of hereditary succession; and as the first is a degradation and lessening of ourselves, so the second . . . is an insult and an imposition on posterity.” In later life he applied the same distain to hereditary wealth. The founding fathers knew that a healthy democracy needed a healthy economy, one with an equitable access to wealth and capitol by the majority of its citizens. That’s why they taxed inheritance as heavily as possible—they were opposed to a small wealthy class controlling the wealth of our nation.

The Bush administration with the help of the rubber stamp congress (may it rest in peace) passed tax legislation that would drastically cut inheritance taxes from a high of 47% to 15%. That legislation sunsets in 2007 unless made permanent by further legislation. The Democrats successfully held them off and now it seems the permanent extension of the tax cut is a dead issue.

Does this mean we are safe from the tyranny of the wealthy class, a small group of people who control the majority of wealth? No, it doesn’t. A recent UN study reveals that 2% of the world’s population controls 50% of the world’s wealth. Here in the US it’s about the same with 1% controlling 38% or our wealth and the next 19% controlling another 47%. How did this come to be? If our founding fathers were suspicious of the creation of a wealth-controlling uber class how did all this wealth fall to so few?

Skip forward about 150 years from 1776 and the country has gone from an agrarian society to an industrial one. The land and therefore wealth was no longer spread more or less equitably across the spectrum of our population as people left the farm and moved to cities. From 1940 to 1980 congress was controlled by Democrats and through legislation and economic policy wealth remained more or less accessible to most of the population. Labor laws, tax policy on unearned income and a graduated income tax were all factors in keeping the national debt flat, inflation even, employment stable and executive compensation a 50-80:1 ratio to the average company employee salary.

Then it happened. In 1980 Ronald Reagan took office and with the aid of the Contract for America launched by a Republican House a new era of voo-doo economics began. De-regulation of businesses and banks and tax reform made it possible and even attractive to hide corporate income from taxes. Businesses were allowed to move headquarters to tax friendly foreign countries, executive compensation moved from salary to stock options, bonuses and other non taxable perks. Executive compensation to average employee income rose to 200:1, the national debt began to climb and borrowing from foreign countries to finance the daily expenses of government became the norm.

There was a brief reversal of the trend under Bill Clinton, but with the Republican takeover of both houses of congress in 1994 and the selection of Bush 43 in 2000 all restraints and moderation on spending and borrowing were gone. W made Reagan look like a tightwad. Four hundred billion dollars for the Pentagon without any oversight—they can’t find $100 billion a year. Financing government by borrowing, mostly from Japan and Cnina, has run the national debt to $8.7 trillion or about $30,000 for every man, woman and child in the country. Executive compensation grew to 500 times the average employee income. Corporate profits rose to the point that Exxon/Mobile earns more profit in ONE MINUTE than the janitorial staff of 5000 for the home office in Houston earns in A YEAR.

Where do we go from here? We’ve made a start with the new Congress. If we have the good fortune to take the White House for two or more terms we can begin to repair the 25 years of damage done to the country domestically and internationally.

First revise the tax structure to a more heavily graduated plan, with top incomes of both individuals and corporations taxed at much higher rates. Close loop holes that make it possible to move corporate offices to foreign countries. Put higher taxes on income generated in foreign countries to encourage keeping jobs inside the US. Increase the inheritance tax on the top 5% of estates to a minimum of 70% over $3 million per heir. Tax un-earned income at the same rate as income earned by the sweat of your brow. Tax corporations profits 80% on executive compensation over a 50:1 ratio to average employee.

More has to be done on the spending side as well. Cut Defense spending on useless programs like Missile defense, buy only what the Pentagon actually needs and requests instead of padding aircraft orders (congress increased the number of C-17s the Air Force requested) and develop fewer duplicate high tech systems like the F-22 and Joint Strike Fighter. Remove the cap on Social Security taxes to fully fund that program. Give the President a constitutional line item veto to remove earmarks like bridges to nowhere.

I could go on, but the shortest way to to fiscal responsibility and to regain international stature is, very simply, to reverse every single thing the Republicans have done in the last 25 years.

[The_Warmth]

1. Nice post.

Some wonderful information in there, thanks.