There was a brief debate focused on the following question: would the gains of the economy continue to accrue to the top 1% once the recovery started, or would the top 1% have a weak post-recession showing in terms of raw income growth as well as income share of the economy? The top 1% had a rough Great Recession. They absorbed 50% of the income losses, and their share of income dropped from 23.5% to 18.1% percent. Is this a new state of affairs, or would the 1% bounce back in 2010?
Well we finally have the estimated data for 2010 by income percentile, and it turns out that the top 1% had a fantastic year. The data is in the World Top Income Database, as well as Emmanuel Saez’s updated Striking it Richer: The Evolution of Top Incomes in the United States (as well as the excel spreadsheet on his webpage). Timothy Noah has a first set of responses here. The takeaway quote from Saez should be: “The top 1% captured 93% of the income gains in the first year of recovery.”
… As you can image, this has increased the percentage of the economic pie that the top 1% takes home. As Saez notes, “excluding realized capital gains, the top decile share in 2010 is equal to 46.3%, higher than in 2007.”
… It’s also worth mentioning that, pre-Recession, inequality hadn’t been that high since the Great Depression, and we are looking to rapidly return to that state. It’s important to remember that a series of choices were made during the New Deal to react to runaway inequality, including changes to progressive taxation, financial regulation, monetary policy, labor unionization, and the provisioning of public goods and guaranteed social insurance. A battle will be fought over the next decade – it’s been fought for the past three years – on all these fronts. The subsequent resolution will determine how broadly-shared prosperity is going forward and whether or economy will continue to be as unstable as it has been.
The low taxing of capital gains plays a huge part in this. The special treatment it is given should’ve stopped. But, as Meteor Blades says, the 1% thinks taking the 93% of the recovery is the way things should be.
See Sue Run (or deficit polling and taxing workers to fund programs for people who could get by without help) [New]
The National Journal polled Americans on questions surrounding the federal budget deficit (linked from Jon Walker). Did Americans blame the safety-net programs for the deficit in the federal budget?
As important, the survey found Americans unconvinced that safety-net programs represent a major source of the deficit problem. When asked to identify the biggest reason the federal government faces large deficits for the coming years, just 3 percent of those surveyed said it was because of “too much government spending on programs for the elderly”; only 14 percent said the principal reason was “too much government spending on programs for poor people.” Those explanations were dwarfed by the 24 percent who attributed the deficits primarily to excessive defense spending, and the 46 percent plurality who said their principal cause was that “wealthy Americans don’t pay enough in taxes.” While minorities were more likely than whites to pin the blame on the wealthy avoiding taxes, even 43 percent of whites agreed.
Given that diagnosis, it is perhaps not surprising that relatively few respondents said they would support major reductions in safety-net programs to reduce the deficit. Fully three-fourths of those polled said Social Security should be cut “not at all” to reduce the deficit, and exactly four-fifths said the same about Medicare. Nearly two-thirds even agreed that Medicaid should be entirely spared from cuts; just 5 percent said it should be cut a lot. There was more receptivity to retrenching food stamps and housing vouchers for the poor (only 51 percent said they should be entirely spared), but even so, just 9 percent said they should be cut “a lot.” Twice as many said defense should face big cuts.
And the accompanying graphic:
The 53% who think “the government taxes workers too much to fund programs for people who could get by without help” left me wondering who exactly are those “people who could get by without help.” Because Wall Street, Big Oil, Big Banks and so on certainly don’t need any government help. Another portion will define “people who could get by without help” as those that receive help from safety net programs. Probably many of those exclude themselves from those who get government help that they don’t need. B. Deutsch at ‘Alas! a Blog’ (linked by Meteor Blades), used data from Suzanne Mettler’s “Reconstituting the Submerged State: The Challenge of Social Policy Reform in the Obama Era” that was published in Perspectives on Politics on September 2010 (pdf) and built a revealing table showing how little many people know about the government programs that they receive a boost from:
Percentage of Program Beneficiaries Who Report They “Have Not Used a Government Social Program” Program “No, Have Not Used a Government Social Program” 529 or Coverdell 64.3 Home Mortgage Interest Deduction 60.0 Hope or Lifetime Learning Tax Credit 59.6 Student Loans 53.3 Child and Dependent Care Tax Credit 51.7 Earned Income Tax Credit 47.1 Social Security—Retirement & Survivors 44.1 Pell Grants 43.1 Unemployment Insurance 43.0 Veterans Benefits (other than G.I. Bill) 41.7 G.I. Bill 40.3 Medicare 39.8 Head Start 37.2 Social Security Disability 28.7 Supplemental Security Income 28.2 Medicaid 27.8 Welfare/Public Assistance 27.4 Government Subsidized Housing 27.4 Food Stamps 25.4
Deutch based a cartoon on the data he gathered:
Go Bernie, go. Can we draft Bernie to run against Obama in the Democratic party? Honestly, he’s the only politician who says anything, ANYTHING, about the impact of all this debt ceiling hoo hah has on real Americans, the 99% of us who are not millionaires. He even uses the word immoral. Which clearly means Bernie is out of touch.
Excellent smackdown of the media and economists and politicians who are not in touch with real people and what they have to deal with every day. It’s also a rhetorical road map for any real progressive at the federal and state level who wants to win in November 2012, whether running for State Assembly or President or Governor.
From Senator Sanders YouTube Channel.
UPDATE: Kudos to the Wall Street Journal opinion page for publishing a version of Sanders’ speech. If you’re like me and refuse to pay money to Rupert Murdoch, the full opinion piece also is on Senator Sanders’ website. While I doubt his viewpoint will prevail, it’s great to see it get some hearing. Then again, read the comments on WSJ.com and you’ll see there’s a hard core of people who refuse to realize what will happen if the middle class gets wise and, like the rich, also refuse to pay taxes that go to build courthouses, roads, bridges, and all the rest. We’ll see how that works out.
This is why I love Alan Grayson, his rhetorical skills:
Because Washington is now divided between the “Meanies” and the “Weenies.” That’s the real two-party system today in Washington, the Meanies and the Weenies. The Meanies want to take Social Security and Medicare away from Grandma and Grandpa, and the Weenies are quite willing to go along with it and “compromise.” Well, people need Social Security and Medicare to live. And there is no compromise between life and death. There is no middle ground. The average person who retires in America today has less than $50,000 in savings. That’s good for one, maybe two years. And those people live for close to 20. There is no way anybody in America can get by without Social Security and Medicare, and that’s what the right wing in America wants to take away. I say, “No. No compromise.” We need to strengthen Social Security and Medicare. I want to see Medicare cover dental work. I want to see Medicare cover hearing aids. I want to see Medicare cover actual medical needs.
Here’s the video:
A smart mouthy guy like Grayson is a huge asset for more delicate politicians in the Democratic party. He can plow ground, get people excited, get the opponents pissed off, and set the terms of the debate. If only Reid, Pelosi, and Obama knew how to use the climate Grayson has created and can create. Or wanted to use Grayson’s gifts. At this point, I believe Obama and Reid, in particular, suck because they want to suck. They’re Republicans to their core. They believe the status quo only needs a few tweaks. They are able to look past all the human and economic carnage of the past three decades.
From a NY Times editorial the other day:
AS a labor lawyer I cringe when Democrats talk of “saving” Social Security. We should not “save” it but raise it. Right now Social Security pays out 39 percent of the average worker’s preretirement earnings. While jaws may drop inside the Beltway, we could raise that to 50 percent. We’d still be near the bottom of the league of the world’s richest countries — but at least it would be a basement with some food and air. We have elderly people living on less than $10,000 a year. Is that what Democrats want to “save”?
“But we can’t afford it!” Oh, come on: We have a federal tax rate equal to nearly 15 percent of our G.D.P. — far below the take in most wealthy countries. Let’s wake up: the biggest crisis we face is that most of us have nothing meaningful saved for retirement. I know. I started my career wanting to be a pension lawyer. In the 1970s, lawyers like me expected there to be big pots of private pensions for hourly workers. By the 1980s, as factories closed, I was filing hopeless lawsuits to claw back bits and pieces of benefits. Now there are even fewer bits and pieces to get.
A recent Harris poll found that 34 percent of Americans have nothing saved for retirement — not even a hundred bucks. In this lost decade, that percentage is sure to go up. At retirement the lucky few with a 401(k) typically have $98,000. As an annuity that’s about $600 a month — not exactly an upper-middle-class lifestyle. It’s too late for Congress to come up with some new savings plan — a new I.R.A. that grows hair, or something. There’s no time. We have to improve the one public pension program in place. Should we means-test it? No. I don’t care if they go out and buy bottles of Jim Beam: let our elderly have an occasional night out at a restaurant.
This is a great argument, especially calling out that imposing the payroll tax that funds Social Security on all income, wages and capital gains, would not only “fix” Social Security (it’s not currently broken) but allow us to provide retirement income slightly below first world countries. The factoids also are interesting.
Of course, chances are this will never happen in the current political and media climate. We’re supposed to punish anybody not wealthy, not help them. And we’re supposed to coddle the wealthy as a reward for their virtue which is the only thing that made their wealth possible.
The FAIL is strong with this one (Warning: Watching the video on this link isn’t a good idea if you value your health):
First, let’s declare Obama’s ‘Two part spending cuts, one part tax increases’ deficit reduction plan as the left side of the debate:
Senator Dick Durbin, D-Ill., says the bi-partisan group of senators working to find a way to reduce the deficit — the so-called “Gang of Six” — is near agreement on a plan that will chart a middle ground between the House Republican budget and the plan outlined last week by President Obama.
And while other top Democrats say Social Security should be untouched, Durbin says Social Security changes should be made now.
“You have the House Republican budget from Congressman Paul Ryan, who I know and like, which is going to be placed somewhere on the right side of the spectrum. You have the president’s suggestion, which will be on the other side of the spectrum. And if and when we reach an agreement, it will be in the middle, a bipartisan effort, which I think has a chance to succeed,” Durbin said in an interview for ABC News’ “Subway Series.”
Durbin criticized a resolution put forward by Sen. Bernie Sanders, a liberal independent from Vermont, that says Social Security should not be cut under a deficit reduction plan. Durbin said he would not vote for such a resolution.
“I think Bernie is going too far with his language,” Durbin said.
“In 2037, as we know it, Social Security falls off a cliff,” he said. “There’s a 22 percent reduction rate in payments, which is really not something we can tolerate. If we deal with it today, it’s an easier solution than waiting. I think we ought to deal with it. Many of my colleagues disagree, put it off to another day. But from my point of view, leaving it out makes it easier politically, including it, I think, meets an obligation, which we have to senior citizens.”
Third, let’s criticize the people whose votes/time/money I need:
“Many of my friends on the left — they are my friends, these are my roots politically — are going through the stages of grief: denial, anger, frustration, sadness, resignation,” Durbin said. “They are going through those stages because they understand that borrowing 40 cents for every dollar you spend, whether it’s for missile or food stamps, is just unsustainable. But you’ve got to do something.”
Paul Ryan (R-WI) Proposes Medicare Plan Under Which Seniors Would Pay Most of Their Income for Health Care [New]
That is what headlines would look like if the United States had an independent press. After all, this is one of the main take aways of the Congressional Budget Office’s (CBO) analysis of the plan proposed by Representative Paul Ryan, the Republican chairman of the House Budget Committee. Representative Ryan would replace the current Medicare program with a voucher for people who turn age 65 in 2022 and later. This voucher would be worth $8,000 in for someone turning age 65 in that year. It would rise in step with with the consumer price index and also as people age. (Health care expenses are higher for people age 75 than age 65.)
According to the CBO analysis the benefit would cover 32 percent of the cost of a health insurance package equivalent to the current Medicare benefit (Figure 1). This means that the beneficiary would pay 68 percent of the cost of this package. Using the CBO assumption of 2.5 percent annual inflation, the voucher would have grown to $9,750 by 2030. This means that a Medicare type plan for someone age 65 would be $30,460 under Representative Ryan’s plan, leaving seniors with a bill of $20,700. (This does not count various out of pocket medical expenditures not covered by Medicare.)
According to the Social Security trustees, the benefit for a medium wage earner who first starts collecting benefits at age 65 in 2030 would be $32,200. (This adjusts the benefit projected by the Social Security trustees [$19,652 in 2010 dollars] for the 2.5 percent annual inflation rate assumed by CBO.) For close to 70 percent of seniors, Social Security is more than half of their retirement income. Most seniors will get a benefit that is less than the medium earners benefit described here since their average earnings are less than that of a medium earner and they start collecting Social Security benefits before age 65.
So, a 65 year old person in 2030 would get a $32,200 benefit from Social Security, and would have to write a check for $20,700 to the private health insurance industry. That is the definition of a death panel!
Dean Baker continues:
Read the rest of this entry »
“50% of beneficiaries under the Social Security program use those moneys as their sole source of income. So we’ve got to protect today’s seniors. But for the rest of us? Listen, we’re going to have to come to grips with the fact that these programs cannot exist if we want America to be what we want America to be.“
Don’t be under any illusions that Republicans and their friends want to protect Social Security. They think programs like Social Security “cannot exist if we want America to be what we want America to be.” Oppose any non-progressive changes. Even better: support expanding Social Security.
Looking at the current political environment and gaming out the possible actions that could be taken it seems abundantly clear that progressives best course of action on Social Security is to simply refuse to even think about allowing any changes in the program. Progressives should also follow Harry Reid’s advice by sticking to this “just say no” position for decades to come.
Obviously, if and only if Republican agree to total ideological surrender and follow the will of the American people by just lifting the cap on the payroll tax to give the program solvency forever, progressives should agree. But the Republicans care more about tax cuts than anything, so this theoretical option isn’t on the table, leaving the best game plan as totally refusing any changes.
Walker goes on to explain his ‘don’t agree to any non-progressive change’ strategy and how the more time passes the better for progressives.