Subject: [big campaign] New Huff Post from Creamer -- Income Inequality
From: [email-masked]
To: [email-masked], [email-masked]
Date: Tue, 27 Oct 2009 08:59:28 EDT
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Why Growing  Income Inequality is Bad For America 

The recent controversy over the huge bonuses at financial firms like AIG  
and J.P. Morgan Chase have served to highlight both the disproportionate 
growth  of the financial sector, and the perverse incentives that led traders 
and  executives to take reckless risks with their companies and our  economy. 
But they have also shined the spotlight once again on the grave threat  
posed to our society by the growing income inequality that was the trademark of 
 the last thirty years of our economic history.  
Some facts: 
* The CEO of the average company in the Standard and Poor’s Index makes  
$10.5 million.  That means that  before lunch, on the first workday of the 
year, he (sometimes she) has  made more than the minimum wage workers in his 
company will make all  year. That translates to $5,048 per hour – or about 344 
times that pay of  the typical American worker.   
* Most people would consider a salary of $100,000 per year reasonably  good 
pay.  But the average CEO makes  that much in the first half-week of the 
year. 
* And that’s nothing compared to some of the kings of Wall Street. In  
2007, the top 50 hedge and private equity fund managers averaged $588 million  
in compensation each– more than 19,000 times as much as the average  U.S. 
worker.  And by the way, the hedge fund managers  paid a tax rate on their 
income of only 15% -- far lower than the rate paid by  their secretaries. 
There is simply no moral or economic justification for this kind of  greed. 
Just as important, growing income  inequality is a cancer that is attacking 
both the economy, and the social and  political fabric of our society. A 
look at economic history makes several  things clear. 
1) Growth of income inequality  does not result from “natural economic laws,
” as conservatives would like us to  believe. It is the result of systems 
set up by human beings that  differentially benefit different groups in the 
society. 
At the beginning of the Great Depression, income inequality, and  
inequality in the control of wealth, was very high.  Then came the “the great 
compression”  between 1929 and 1947.  Real wages  for workers in manufacturing rose 
67% while real income for the richest 1% of  Americans fell 17%.  This 
period  marked the birth of the American middle class.  Two major forces drove 
these trends –  unionization of major manufacturing sectors, and the public 
policies of the New  Deal that were sparked by the Great Depression. 
The  growing spending power of everyday Americans spurred the postwar boom 
1947 to  1973.  Real wages rose 81% and the  income of the richest 1% rose 
38%.  Growth was widely shared, but income inequality continued to  drop. 
From 1973 to 1980, everyone lost ground.  Real wages fell 3% and income for 
the  richest 1% fell 4%.  The oil shocks,  and the dramatic slowdown in 
economic growth in developing nations, took their  toll on America and the 
world economy.   
Then came what  Paul Krugman calls “the New Gilded Age.” Beginning in 
1980, there were big gains  at the very top.  The tax policies  of the Reagan 
administration magnified income redistribution.  Between 1980 and 2004, real 
wages in  manufacturing fell 1%, while real income of the richest one percent 
rose  135%.  
Much as they like to  tout the magic “natural” effects of the market on 
levels of wages, conservatives  have not been shy about using the power of 
government to affect the distribution  of the fruits of the US economy.  They 
have slashed taxes for the rich and  for corporations, and increased the 
relative tax burden on working people. And  by cutting taxes for the rich, they 
have transferred wealth to the most affluent  people in America from all of 
our children by  increasing the federal debt.  
2. Increased income inequality is  completely unrelated to the relative 
contribution of various groups in the  population to the nation’s economic 
prosperity.   
Who could argue that the executives and traders of the Wall Street  
financial firms, whose reckless speculating ultimately sent our economy into a  
tailspin, made any meaningful contribution to our economic welfare?  Yet they 
often made hundreds of millions  of dollars.  
Remember, much of the  financial sector does not produce anything.  The 
principal missions of the financial sector are to take on risk  and allocate 
capital effectively. Some in the industry – especially many  community and 
regional banks – do just that.  But in the last year, the financial  sector as 
a whole didn’t “take on risk,” it shifted risk to ordinary Americans  
through gigantic taxpayer bailouts.  Many Wall Streeters themselves escaped the 
recent economic debacle,  having salted away hundreds of billions of dollars. 
Fundamentally the financial sector is made up of middlemen, who spend  
their time creating schemes that allow them to funnel society’s money through  
their bank accounts so they can take a sliver of every dollar off of the top. 
 
Right now, the private health insurance industry is busy trying to defend  
its turf against a public health insurance option.  It wants to maintain its 
“right” to take  that tribute off the top of as many health care dollars 
as possible.  Remember, the private health insurance  industry doesn’t 
deliver any actual health care.   
Does the CEO of CIGNA who is going to retire this year with a $73 million  
golden parachute contribute more to our well-being than a nurse who actually 
 delivers health care? 
The same is true of most of the financial sector, many of whom are  
essentially professional gamblers.  It is the farmers, manufacturing firms, the 
health care providers, the  transportation companies, the guys who sweep up 
buildings, the cops and  firefighters, the people who teach our kids – those 
are the people who produce  the goods and services that we consume in our 
economy.  The real incomes of these Americans have  dropped by $2,197 per year 
since 2000, while the “bonus party” on Wall Street  continues even though 
these Americas were asked to reach into  their jeans and pony up hundreds of 
billions to bail out Wall Street’s  catastrophic mistakes.   
3). As political scientists Nolan McCarty,  Kevin T. Poole and Howard 
Rosenthal show in their book Polarized America: The  Dance of Ideology and 
Unequal Riches, inequality in income distribution  causes political polarization. 
It divides our society. Their study found  that there is a direct 
relationship between economic inequality and polarization  in American politics. _[i]_ 
(aoldb://mail/write/template.htm#_edn1)  
McCarty, Poole and Rosenthal measured  political polarization in 
congressional votes over the last century, and found a  direct correlation with the 
percentage of income received by the top 1% of the  electorate. 
They also compared the Gini Index of Income Inequality with congressional  
vote polarization of the last half-century and found a comparable  
relationship. 
Want less  political polarization?  What a more  bi-partisan spirit?  Want  
America to be unified?  Want less hatred and violence in our  society?  
History shows that you  start by once again compressing the difference in 
incomes between the very  richest and the rest of America.  
4). Finally, increased income  inequality is completely undemocratic.  It 
is a betrayal of our most fundamental democratic values. And it is  dangerous 
to our prospects for long-term  survival. 
The increasing inequality of income leads inexorably to increasing  
inequality in the distribution of wealth.  Power in the society is more and more 
concentrated in the hands of a  few.  It becomes more and more  likely that 
some of our most powerful citizens came to that station not because  of their 
merit, but because they got it the “old fashion way” – they inherited  it.  
That is directly contrary to  our shared belief in a more democratic 
society – where power and opportunity are  broadly shared – where no one’s power 
or station in life are determined by  accident of birth. 
The earliest Americans came to this continent to escape tyranny,  
aristocracy and plutocracy.  
Progressives who stand up against the increasing concentration of  economic 
power in the hands of a few are standing for one of the proudest  
traditions of our democracy.  And  our commitment to the democratic distribution of 
power is not simply an  expression of utopian idealism.   
In his brilliant study of why societies in the past have failed, called  
Collapse: How Societies Choose to Fail or Succeed_[ii]_ 
(aoldb://mail/write/template.htm#_edn2) ,  Pulitzer Prize-winning physiologist and 
ethno-geographer Jared Diamond concluded  that one of the most common factors was “rational 
behavior” by actors – and  decision-making elites – that benefited some 
individual or private self-interest  but was harmful to the prospects of the 
entire society.  
He  found that this was often complicated because the benefits to a small 
group that  profited from the action was great in the short run, and the 
resulting damage to  everyone else was not very palpable or immediate, except 
over  time. 
This problem became  especially acute when elites thought they could 
insulate themselves from the  consequences of communal disaster.  Then, they were 
even less prone to make decisions in the public  interest. 
The increased  inequality in the distribution of wealth and income makes 
this kind of  decision-making more and more likely.  We see it when the 
interests of the wealthy stand in the way of solutions  to the problems of climate 
change and environmental destruction --   or when we fail to raise enough  
money for the public education that benefits all children because the few 
who  can afford private schools refuse to pay “higher  taxes.” 
The creation of a  democratic society, built on egalitarian principles, is 
the only real systematic  means of assuring that the interests of the entire 
society are not sacrificed to  those of powerful elites. Most stories of 
decisions leading to  catastrophic collapse involve decision-making elites 
whose interests diverge  from the society at large.  Democracy is the only real 
antidote. 
The undemocratic increase in the distribution of wealth and income is not  
only wrong.  It is also dangerous to  our future survival. 

____________________________________

_[i]_ (aoldb://mail/write/template.htm#_ednref1)  Nolan McCarty, Kevin T. 
Poole and Howard Rosenthal,  Polarized America: The  Dance of Ideology and 
Unequal Riches (Cambridge, MA:  The MIT Press, 2006)
 
_[ii]_ (aoldb://mail/write/template.htm#_ednref2)  Jared Diamond, Collapse 
(New York: Viking Penguin,  2005) 
Robert Creamer is a long time political  organizer and strategist, and 
author of the recent book:  “Stand Up Straight: How Progressives Can  Win,” 
available on _Amazon.com._ 
(http://www.amazon.com/Listen-Your-Mother-Straight-Progressives/dp/0979585295/ref=pd_bbs_sr_1?ie=UTF8&s=books&qid=1213241439&sr=8
-1)  

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