Wall Street Protests and Millionaires

All you really need to know about the Wall Street protests is that when I was growing up, a “millionaire” was someone with a net worth of one million dollars.  Today, a “millionaire” is someone with an annual income of one million dollars or more.  At a 5% rate of return, that means today’s ‘millionaires’ are worth $20 million or more in equivalent net worth given their incomes.  That’s roughly a twenty-fold increase in what wealth means at the top level.

At the same time, over the last thirty years, the income of the average working American has gone nowhere.

Wouldn’t that make anyone mad?  The spiral in executive pay began thirty years ago in the 1980s.  It didn’t bother most Americans as long as their consumption level was going up too. Buoyed by rising home prices, a rising stock market, and easy credit, even people whose earnings were stagnant could boost their consumption, buying bigger homes and stuffing them with goodies. They could feel confident about their retirement too, as long as home and stock prices seemed headed upward.

Those dreams have all come crashing down since 2008.  Home prices have tanked, pushing many into foreclosure or negative net home values. The stock market hasn’t shown any net gains in over ten years.  Easy credit is a distant memory.  Oh, and the super-wealthy chief executives and finance professionals who had a hand in causing that crash?  They are doing just fine, thank you — corporate profits are at record levels, executive pay is almost back at the same heights it reached in 2006-2007, and consumption of super-luxury goods, $25,000 watches, $8,000 hand bags, and multi-million-dollar second and third homes, is better than ever.

Wouldn’t that make anyone mad?  And what has the government done about this to help Main Street?  Way too little.  Nothing that has had much impact on the housing market or foreclosures or jobs.  What has the government done to help corporations and banking professionals?   Bailed out the worst-off ones with taxpayer loans (paid off, yes, but taxpayers can’t get the same deal on their homes and businesses!).  Offered unlimited free money to the banks to invest and offset their bad loans.

This was supposed to be the stuff of Tea Party protests.  But Tea Party protestors have targeted Obama and his health care and supposedly ‘socialist’ policies.  The Wall Street protestors are directly protesting the excess pay, bailouts, and benefits to top executives and finance professionals, and the failures of the Obama administration not to do more to help ordinary workers and the declining middle class.

Organized labor is joining in, and the movement is spreading nationwide.  The U.S. Senate’s recent funding switch — let’s pay for the Obamajobs bill with a tax of 5.6% on ALL income above $1,000,000 per year, including capital gains and interest — may be a response to this shift in popular mood.

The Tea Party and Republicans will of course yell ‘class warfare.’  But the real class warfare is now shifting to the streets. As one executive said [I am paraphrasing here] —  “Asking me to pay 5% more in taxes on my top income is NOT class warfare; it is tax restructuring.  Having people demonstrate at my business,  or attack it, or even attack me or my home – that is class warfare, and I hope we can avoid it by having the rich pay a little more in taxes.”

Republicans used to say over and over “you can’t solve our problems by taxing the rich.”  So it may be a bit surprising that the Democrats believe the Congressional Budget Office will confirm that you CAN pay for ALL of Obama’s jobs bill with a tax on the upper-end income of those earning more than $1,000,000 per year.  Yes, there is so much money being made by the top 0.2% in America that just a 5.6% tax on their incomes above $1 million per year will produce nearly $50 billion a year to pay for jobs, infrastructure, and other employment-creating investments for the rest of the country.

Yet Republicans are still saying “no” even to those taxes.  Wouldn’t that make anyone mad?  We’ll see….

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About jackgoldstone

Hazel Professor of Public Policy at George Mason University
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