Al Jazeera: “Why the ‘one percent’ in the US is worried,” by David A Love

The wealthy elite increasingly recognises that the socioeconomic status quo in the US is unsustainable.

The US also has the highest rate of income inequality in the West [File: AP/Mark Lennihan]
The US also has the highest rate of income inequality in the West 

Inequality in the United States has reached such levels lately that even members of the “one percent” have started worrying.

  • Ray Dalio, founder of Bridgewater Associates hedge fund who is ranked 57th wealthiest person in the world by Forbes magazine, quipped in a recent interview that capitalism is denying “equal opportunity for the American dream”. He said that he was “a byproduct of capitalism when it also gave equal opportunity”, adding “I was very lucky to live the American dream by having the proper care and the proper public school education … A number of things have changed.”
  • Former Starbucks CEO and prospective presidential candidate Howard Schultz, who prefers to be called a “person of means” rather than a billionaire (ranked 617th by Forbes), recently observed that “the vast majority of Americans are living paycheck to paycheck” and declared that the next US president must urgently address inequality.
  • CEO of JP Morgan Chase Jamie Dimon (ranked 1,717th) also noted earlier this year that: “A big chunk of [Americans] have been left behind […] Forty percent of Americans make less than $15 an hour. Forty percent can’t afford a $400 bill, whether it’s medical or fixing their car. Fifteen percent of Americans make minimum wages, 70,000 die from opioids.”

Indeed, the growing impoverishment and despair that are plaguing our country are hard to miss. The US also has the highest rate of income inequality among Western nations, with the top one percent claiming 40 percent of US wealth in 2016, in contrast to a 25 to 30 percent share in the 1980s. According to the rather conservative estimates of the US Census Bureau, around 14 percent of the population or 45 million live in poverty. According to the UN, 8.5 million of them face extreme poverty and 5.3 million suffer in “Third World conditions of absolute poverty”.

But in reality, many more Americans struggle to secure a dignified life for themselves and their families. A damning report published by the UN in 2018 found that: “High child and youth poverty rates perpetuate the intergenerational transmission of poverty very effectively, and ensure that the American dream is rapidly becoming the American illusion. The equality of opportunity, which is so prized in theory, is in practice a myth, especially for minorities and women, but also for many middle-class White workers.”

Perhaps parts of the American “one percent” are finally ready to admit that socioeconomic inequality has reached unprecedented levels and that the current status quo is unsustainable because just like South African billionaire Johann Rupert, the prospect of the poor masses rebelling is keeping them “awake at night“. They are now saying that capitalism “needs work” and are proposing various “fixes” – mainly “trickle-down philanthropy”. Some have gone as far as suggesting that social provision should be enhanced and that the wealthy should be taxed.

Yet all of them are quick to outright reject “socialist policies”. In a recent interview for NBC, Melinda Gates, cochair of the Bill and Melinda Gates Foundation and wife of the second richest man in the world, echoed the thoughts of many of the super-rich, saying that: “What I know to be true is I would far rather live in a capitalistic society than a socialist society.”

But Gates is wrong. The current system in place in the US is not capitalism, but rather“socialism for the rich” which favours the “one percent” by granting it ever-increasing subsidies, exorbitant tax breaks, deregulation and executive bonuses. The rest of the population lives in an unfair system of inequality and segregation, struggling to make ends meet under severe austerity and erosion of labour rights. It is a system of “survival of the fittest”, which privileges some over the others based on race and gender.

Economic growth now only “uplifts” the rich, who are able to control the distribution of wealth by influencing the government and making sure it serves their interests and maintain their power. Through the US system of legalised corruption, the wealthy funnel billions of dollars in donations to election campaigns.

Unsurprisingly, the stop-gap fixes that people like Gates, Dimon, Schultz and Dalio are proposing are unlikely to work because they are designed to maintain the current system in place so they can continue to accumulate wealth unrestrained. The only viable solution that would prevent a major socioeconomic disaster in the US and subsequent social upheaval would be to overhaul the system.

Solutions to economic inequality and the excesses of American capitalism are necessary to save capitalism from itself, or better yet, to save people from capitalism.

There is an increasing number of dramatic proposals for economic justice that look promising. These include Congresswoman Alexandria Ocasio-Cortez’s Green New Deal, which envisions a national mobilisation to eliminate carbon emissions and transform the US economy, boosting economic growth and job creation, while seeking economic and racial justice for vulnerable communities. Ocasio-Cortez has also called for a 70 percent marginal tax rate on earnings above $10m.

Congresswoman Elizabeth Warren has a plan to wipe out $1.5 trillion in student loan debt by levying a surtax on the ultra-rich, while Congressman Bernie Sanders has put forward a proposal for universal healthcare. The idea of reparations for slavery, which could help alleviate some of the racial inequality in the country, is also gaining ground.

Although conservatives attack proposals promoting economic justice and equity as dangerous because they could lead to a totalitarian socialist system, such policies have long been a part of the US system. After all, the Green New Deal is named after the New Deal, which was introduced during the Great Depression to protect the poor, strengthen labour rights and impose strict regulation on the financial system.

At the same time, Americans are increasingly in favour of a major overhaul of the system, due to the problematic and corruptive nature of the current one. Existing and proposed government programmes of economic redistribution and equity are popular. Socialism is also gaining popularity, even surpassing capitalism among Democrats, particularly millennials. Such policies, which translate into more democratic ownership and control over the government and greater public accountability, most certainly frighten the wealthy for their effectiveness and political popularity.

If members of the “one percent” truly care about the widening wealth gap, they should not resist the implementation of these policies. An overhaul of the system might make them less wealthy, but ultimately will not be to their detriment. A profit can still be made if workers are paid dignified salaries, provided proper healthcare, and granted social and labour rights.

Indeed the choice of the “one percent” is reduced to either living in a more equal and just society or facing the wrath of angry impoverished masses.

The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial stance. 


To tax or not to tax the rich more, that is the question

Thanks to Alexandria Ocasio-Cortez and Elizabeth Warren, the most important battle in American politics is finally on.

File: Demonstrators take part in a protest against tax cuts for rich people in the Manhattan borough of New York City,US November 27, 2017 [Eduardo Munoz/Reuters]
File: Demonstrators take part in a protest against tax cuts for rich people in the Manhattan borough of New York City,US November 27, 2017 [Eduardo Munoz/Reuters]

Alexandria Ocasio-Cortez and Elizabeth Warren have poked the B-hive. That’s B as in billionaire!

Higher taxes! On the rich.

The two billionaires with presidential ambitions who are associated with the Democratic Party – Howard Schultz (who built up Starbucks to ubiquity) and Michael Bloomberg (who made his billions delivering urgent info to Wall Street) – instantly came buzzing out of their hives.

Taxing the rich was dire! Dangerous! It would mean no more honey!

Mr Schultz threw a full double Caramel Creme Frappuccino right in Ms Ocasio-Cortez’s face! Metaphorically, of course. She, by floating the idea of a top marginal income tax rate as high as 70 percent, had caused him to leave the Democratic Party and announce his run for president as an independent.

Money has played an ever-increasing role in US politics. Members of the media not only know that, they promote it. The viability of candidates is based on their access to funds. Schultz could self-fund. That gave him instant status. All the news networks had him on. Immediately. Normally, it’s considered impossible for an independent to win. Still, Schultz said he had a fully caffeinated vision. There were more independents, 42 percent, than either Democrats, 31 percent, or Republicans, at just 24 percent. They would unite behind him. Plus, he would get anti-Trumpians from the right and centrist Democrats as appalled by anti-rich radicals as he was. What policies would he promote if he won? How would he get everyone else, who were still members of the two parties, to come together on them? In his vision, he saw himself swept into office by such a wave, that rather than defy it, legislators would also become his followers. He would then bring in the “best people”, “real problem solvers”, who would come up with the “best deals” … it sounded appallingly familiar.

Schultz also felt personally insulted by Elizabeth Warren.

She tried to criticise him “for being a billionaire“. His umbrage was not for himself, it was on behalf of the American Dream. “I’m self-made. I grew up in the projects in Brooklyn, New York. I thought that was the American Dream?”

Warren’s actual proposal was that the first $50m in assets would not be taxed. Assets above that would be taxed at two percent. Assets above one billion dollars would be taxed at three percent.

It would affect just 75,000 households.

What would that do to Schultz?

His net worth was reported to be $3.3bn. He would pay two percent on the $950m between the first $50m and a billion, then three percent on the remaining $2.3bn. He would be paying $88m. That sounds like a lot. Until you realise he would be left with $3.21bn! Even with a very conservative strategy, Schultz would expect to make more than three percent on his money. So his wealth would continue to increase in spite of the new tax.

Schultz screamed, “Socialism!!!”

Yes, of course, Americans would stop pursuing their own special dreams if they knew that at the end they might be worth a mere $3.21bn instead of $3.3bn.

Misleading the public

Back in 2012, Bloomberg said, “Raising taxes on the rich is about as dumb a policy as I can think of.”

Bloomberg is a good liberal on many things. But when it comes to taxing the rich, he is a perfect example of the automatic resistance and, this is important, the fundamental dishonesty of much of what we will hear.

He spoke of driving “out the one percent of the people that pay roughly 50 percent of the taxes, or the 10 percent of the people that pay 70-odd percent of the taxes.” Without them, “our revenue would go away, and we wouldn’t be able to have cops to keep us safe, firefighters to rescue us, teachers to educate our kids.”

Those statistics refer to personal federal income taxes. They exclude the many other taxes Americans pay: Social Security, Medicare, sales taxes, property and school taxes, various fees and levies. Add those in, and we find that Americans pay something closer to a flat tax than a progressive tax, with only the very rich and the truly destitute paying significantly less. This quick conflation that makes it seem like the rich already pay for everything is not only misleading, it is employed constantly without correction. We will hear it over and over again in the coming 22 months.

When the ‘S-word’ is not enough

While Schultz used the “S-word”, Bloomberg used both the “S-word” and the “V-word”!

V for Venezuela!

“If you want to look at a system that’s non-capitalistic,” he instructed us, “Just take a look at what was once, perhaps, the wealthiest country in the world, and today, people are starving to death. It’s called Venezuela.”

Venezuela is clearly a country with a lot of problems. However, it’s top marginal tax rate is just 34 percent. Even after the Trump tax cuts, the top US rate is higher, at 37 percent. Nonetheless, the V-word has already become the new synonym for socialism-as-a-disaster and an argument for not taxing the rich.

Neither Ocasio-Cortez nor Warren are backing down. They’re sticking to it and in doing so they have established the standard for the upcoming campaigns. Among the declared and potential Democratic presidential candidates, Kamala Harris, Cory Booker, Julian Castro, and Bernie Sanders have specifically called for tax hikes on the rich. Another potential presidential candidate, Sherrod Brown, said we’re likely to hear many more proposals like theirs, because “clearly, we need to make the wealthiest one percent pay more.”

The battle is on

For the last half-century, the number one issue for Republicans has been tax cuts for the rich. Increasing both their wealth and power.

The Democrats have been sadly complicit, routinely servicing their own big donors, those members of the financial elites, like Bloomberg and Schultz, who are socially liberal. The policies of the two parties combined have led us to ever increasing inequality. That condition underlies America’s social unrest and the dissatisfaction with democracy that has spread worldwide.

The only real way to address it is with taxes.

That debate is on. That debate will be a battle. It will be fierce, loud, full of lies, and, at last, some real elements of truth.

Neither Schultz nor Bloomberg has issued their own tax plan. Though Schultz says, urgently, that we need “comprehensive tax reform.” With not even a hint of what it will entail, except the getting the best people on it.

Then, there’s Kamala Harris plan. It is both “progressive” and very problematic, both politically and economically. 

It’s ending the Trump tax cuts and reaiming them at the least well off, from the genuinely poor up to the middle, using payments. This is necessary since she’s speaking of federal taxes and federal income taxes only take money from the top 50 percent, so you can’t reduce them on the bottom 50 percent, you can only give out money. 

The political problem is that really does come off as handouts. The crudest form of redistribution. The practical problem, as with Obama’s tax cuts, is where does that money go? Does it go to places that grow the economy or to buying cheap goods from China? How does it build business and raise wages? The economic problem is that it retains the ever-growing Trump deficits. 

In any case, the battle is on. It promises to be as busy and noisy as a busted open beehive. 

It is also the most important and only real political debate in American politics – which translates to world politics – in decades. 

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The views expressed in this article are the author’s own and do not necessarily reflect Al Jazeera’s editorial stance.