Friday, January 25, 2019

Massive income inequality leads to massive political disruption

America's massive income inequality, a fairly recent development, can become very dangerous - to the wealthy.  What has happened in the past when the income inequality got too big?

1790s - The French Revolution. The impoverished revolted and cut of the heads (guillotine) off the aristocracy.  Marie Antoinette, the Queen of France, was supposed to have said "Let them eat cake (brioche)" in response to hearing that the impoverished could not afford bread.  They revolted crying out for Liberty, Equality, and Fraternity. And chopped off their heads.

In an odd parallel, the U.S. Secretary of Commerce, billionaire Wilbur Ross, said that those who were unemployed or unpaid during the current shutdown of the government by President Trump should just go get a temporary loan until the government reopened.  He was unaware that some people do not qualify for a loan (other than perhaps usurious despicable Payday Loans); nor did he understand that loans take longer than many workers can wait for in order to eat either bread or brioche.

1917 - The Russian Revolution.  A bit more than 100 years later, the Russian impoverished rose up and killed the Russian Tsar Nicholas and his family and established the disastrous Communist Revolution. 

2019 - Now, after another 100 years, the inequality in America has reached shocking levels.  Today, the top 1% own as much as the bottom 95%! 

How does that compare to the past? 
  • 1960 - top 1% had about 28%, bottom 95% had about 42%.
  • 1970 - top 1% had about 27%, bottom 95% had about 45%
  • 1980 - top 1% had about 23%, bottom 95% had about 49%
Then Reagan happened with Supply Side Economics and deregulation
  • 1990 - top 1% had about 27%, bottom 95% had about 49%
  • 2000 - top 1% had about 33%, bottom 95% had about 43%
  • 2010 - top 1% had about 39%, bottom 95% had about 37%
  • 2016 - top 1% had about 39%, bottom 95% had about 38%
So Obama flattened the curve some, but the damage was done.  See chart below.



So, what is happening now? 



In 2016, amazingly, a billionaire Real Estate mogul and television star convinced those suffering from the job dislocations due to technology and globalism that he could get their jobs back by building a wall to keep brown people out, and he would deregulate finances and industry and that would create jobs for them.  And they bought it!  Those suffering from the inequality in the country turned to a 1%-er to save them.  They are going to notice that it didn't work.


What else is happening now?  Democrats are looking at major reshaping of the economic landscape.  Presidential candidate Elizabeth Warren wants to place a wealth tax on the top 0.1% of the richest in America.


And young freshman House member, Alexandria Ocasio-Cortez, is proposing a top marginal tax rate of 70% on the ten millionth dollar earned.


Seems to me that taxes are better than guillotines or Communist Revolutions.