The Rise Of The Working Poor And The Non-Working Rich
Many believe that poor people deserve to be poor because they’re lazy. As Speaker John Boehner has said, the poor have a notion that “I really don’t have to work. I don’t really want to do this. I think I’d rather just sit around.”
In
reality, a large and growing share of the nation’s poor work full time
– sometimes sixty or more hours a week – yet still don’t earn enough
to lift themselves and their families out of poverty.
It’s also commonly believed, especially among Republicans, that the rich deserve their wealth because they work harder than others.
In reality, a large and growing portion of the super-rich have never broken a sweat. Their wealth has been handed to them.
The
rise of these two groups – the working poor and non-working rich – is
relatively new. Both are challenging the core American assumptions that
people are paid what they’re worth, and work is justly rewarded.Why are these two groups growing?
The ranks of the working poor are growing because wages at the bottom have dropped,
adjusted for inflation. With increasing numbers of Americans taking
low-paying jobs in retail sales, restaurants, hotels, hospitals,
childcare, elder care, and other personal services, the pay of the
bottom fifth is falling closer to the minimum wage.At the same time, the real value of the federal minimum wage is lower today than it was a quarter century ago.
In addition, most recipients of public assistance must now work in order to qualify.
Bill
Clinton’s welfare reform of 1996 pushed the poor off welfare and into
work. Meanwhile, the Earned Income Tax Credit, a wage subsidy, has
emerged as the nation’s largest anti-poverty program. Here, too, having a
job is a prerequisite.The new work requirements haven’t reduced
the number or percentage of Americans in poverty. They’ve just moved
poor people from being unemployed and impoverished to being employed and
impoverished. A very clever scheme by Republicans.While poverty declined in the early years of
welfare reform when the economy boomed and jobs were plentiful, it began
growing in 2000. By 2012 it exceeded its level in 1996, when welfare ended.At
the same time, the ranks of the non-working rich have been swelling.
America’s legendary “self-made” men and women are fast being replaced by
wealthy heirs.Six of today’s ten wealthiest Americans are heirs
to prominent fortunes. The Walmart heirs alone have more wealth than
the bottom 40 percent of Americans combined.Americans
who became enormously wealthy over the last three decades are now
busily transferring that wealth to their children and grand children.The nation is on the cusp of the largest inter-generational transfer of wealth in history. A study
from the Boston College Center on Wealth and Philanthropy projects a
total of $59 trillion passed down to heirs between 2007 and 2061.As
the French economist Thomas Piketty reminds us, this is the kind of
dynastic wealth that’s kept Europe’s aristocracy going for centuries.
It’s about to become the major source of income for a new American
aristocracy. This is what the Koch/Walton Republicans have schemed for; the Gilded Age.The tax code encourages all this by favoring unearned income over earned income.
The
top tax rate paid by America’s wealthy on their capital gains – the
major source of income for the non-working rich – has dropped from 33
percent in the late 1980s to 20 percent today, putting it substantially
below the top tax rate on ordinary income (36.9 percent).If the owners of capital assets whose worth increases over their lifetime hold them until death, their heirs pay zero capital gains taxes on them. Such “unrealized” gains now account for more than half the value of assets held by estates worth more than $100 million.
At
the same time, the estate tax has been slashed. Before George W. Bush
was president, it applied to assets in excess of $2 million per couple
at a rate of 55 percent. Now it kicks in at $10,680,000 per couple, at a
40 percent rate.Last year only 1.4 out of every 1,000 estates owed any estate tax, and the effective rate they paid was only 17 percent.
Republicans
now in control of Congress want to go even further. Last Friday the
Senate voted 54-46 in favor of a non-binding resolution to repeal the
estate tax altogether. Earlier in the week, the House Ways and Means
Committee also voted for a repeal. The House is expected to vote in
coming weeks.Yet the specter of an entire generation doing
nothing for their money other than speed-dialing their wealth management
advisers is not particularly attractive.It puts more and more
responsibility for investing a substantial portion of the nation’s
assets into the hands of people who have never worked.It also endangers our democracy, as dynastic wealth inevitably and invariably accumulates political influence and power.
Consider
the rise of both the working poor and the non-working rich, and the
meritocratic ideal on which America’s growing inequality is often
justified doesn’t hold up.That widening inequality – combined
with the increasing numbers of people who work full time but are still
impoverished and of others who have never worked and are fabulously
wealthy – is undermining the moral foundations of American capitalism.Just pointing out real quick that the moral foundation of American capitalism is enslaving human beings.
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