"Power Law of Participation"

"Power Law of Participation" by Ross Mayfield on flickr

Three hundred million Americans can take control of the economy and country

The Roman philosopher and statesman, Marcus Tullius Cicero, said, “Freedom is participation in power.”  By that standard, Americans are not free.  We do not participate in power. We do not even have power over our own economic lives, our elected “representatives” ignore us and listen to the moneyed interests sending the United States in the wrong direction on issue after issue.  The American people know better, would govern better and need to participate in power.

When you dispassionately review the reality of the U.S. economy, it is a depressing state of affairs that screams out for Americans to get up, stand up and shout: “we can do better than the political and economic elites.”  The opportunity to stand up is here: October2011.org.

This article focuses on the domestic policies that are destroying the most powerful economy in history, but war spending, which makes up more than half of discretionary federal spending, is one of the root causes of the economic collapse.  Nobel Prize winning economist Joseph Stiglitz writes, “Today, America is focused on unemployment and the deficit. Both threats to America’s future can, in no small measure, be traced to the wars in Afghanistan and Iraq.” He and Linda Bilmes calculated America’s war costs three years ago conservatively at $3 trillion to $5 trillion – these costs have escalated since then.

Domestically, the brutal failure of government is evident in the way working Americans are treated.  The high levels of unemployment are not the only story. Four decades of stagnant incomes and decreasing share of the gross domestic product going to workers are long term trends. The fragility of peoples’ personal finances, record foreclosure, high student debt and the lack of control over our economic lives all show the need for an economic transformation to a new, democratized economy.

Unemployment is persistently high. Roughly 31% of U.S. workers experienced unemployment or underemployment at some point in 2009.   President Obama has never put forth a real jobs program, instead preferring to tinker with corporate tax breaks – a proven non-solution now resulting in zero job growth.  The official unemployment rate greatly underestimates unemployment because it has been used as a political tool and has been changed over the years. For example, in 1994 the government stopped counting discouraged workers who have given up looking for employment. At a time when an all-time high number of Americans are “not in the labor force,” this manipulation of data has a dramatic impact.  An apolitical analysis of unemployment that counts the total number of people in need of employment results in a current unemployment rate of 22.5%. An all-time record total of 34 million people are currently in need of work.

There are many examples of high unemployment, underemployment and people dropping out of the labor market, but one that got my attention most recently was a report from the Bureau of Labor Statistics, reporting that an astounding 51% of youth are unemployed:

“In July, the employment-population ratio for youth—the proportion of the 16- to 24-year old civilian noninstitutional population that was employed—was 48.8 percent, a record low for the series… (The month of July typically is the summertime peak in youth employment.)”

Fifty-one percent of youth unemployed and even more underemployed is a very dangerous situation for the future workforce as it comes at a time when students are leaving school in greater debt than ever before. A recent report by Moody’s Analytics found record borrowing by college students who are graduating without jobs. In an economy where people had power we would see free college education rather than cuts in Pell Grants and rapid tuition increases at state colleges.

In a Labor Day report, the Economic Policy Institute demonstrates that unemployment leaves long-term scars on families and communities.  The pain caused by persistently high unemployment is not limited to workers who are currently unemployed but extends to the broader workforce and the country in general through lost wages, income and wealth, as well as higher poverty.

As one example of many, in California one in four families had trouble feeding their children. Indeed 68.6% of students in schools in Fresno County and 65.6% in Los Angeles County were eligible to receive free or reduced-price meals in 2010. Nationwide, the National Academy of Sciences released a report that concluded 52,765,000 Americans, 17.3% of the population, lived in poverty in 2009. And, for children, census data show a total of 15.5 million American children lived in poverty in 2009 – 20% of all children. According to a 2011 report from the Children’s Defense Fund, “every day in America 2,573 babies are born into poverty.” All of these levels of poverty have worsened in the last two years since the Census Report, so they are underestimates.

The economic collapse resulted in the average U.S. household wealth declining by 28%. This represents a loss of $27,000 per household – in households that make less money today than they did back in 1971. Currently, at least 62 million Americans, 20% of U.S. households, have zero or negative net worth. Indeed, a majority, or 64%, of Americans don’t have enough cash on hand to handle a $1,000 emergency expense, according to the National Foundation for Credit Counseling.

An August 2011 report by the National Employment Law Project concludes jobs created since the recession officially ended are reducing worker income: 73% of the jobs created since the supposed recovery began have been low-wage jobs, where workers make between $7.51 (the national minimum wage) and $13.52 an hour ($15,621 to $28,122 a year for full-time). In contrast, 60% of the layoffs were in mid-wage jobs that made between $28,142 and $42,973 per year.

An important reflection on Labor Day is: are we seeing the death of the middle class? Are we in what Marx described as the self-destruction of finance-dominated advanced Capitalism?  Labor’s share of the gross domestic product has shrunk while the profits for capital have risen. The investor class knows their wealth comes from reducing the cost of labor.  JPMorgan recently told their investors: “US labor compensation is now at a 50-year low relative to both company sales and US GDP . . . reductions in wages and benefits explain the majority of the net improvement in margins.” Indeed, according to JPMorgan, 75% of the increase in profit margins directly correlates with the reduction in workers’ wages.

The desire for excessive short profits is creating an irreversible economic decline, because labor can no longer consume enough or borrow enough to keep the economy afloat with its cash and credit-based consumption. As David Cay Johnston puts it, “A weak foundation cannot properly support a massive superstructure.”

Further evidence of this advanced stage of finance-capital is on the other side of the equation, the concentration of wealth. The richest 400 people in the U.S. have as much wealth as 154 million Americans or 50% of the population. The wealthiest 1% of the U.S. population now has a record 40% of all wealth – more wealth than 90% of the population. According to an extensive study by auditing and financial advisory firm Deloitte, U.S. millionaire households now have $38.6 trillion in wealth in addition to an estimated $6.3 trillion hidden in offshore accounts.

Only 74 Americans are in this elite top bracket, people with annual income of $50 million or more. The average income within this category was $91.2 million in 2008. As astonishing as that is, in 2009 they averaged $518.8 million each, or about $10 million per week. This means, in the depths of the economic collapse, the richest 74 Americans increased their income by more than 5 times in one year. These 74 people made more money than 19 million workers combined.

Indeed, during the recession the rich are getting richer while the rest of us are getting poorer. In 2009 alone, the pay of America’s highest earners quintupled, while more Americans found themselves on food stamps than ever before. CEOs got a 23% raise last year and corporate profits are at record highs while the minimum wage has less buying power now than in 1956.

If we stay on the present course, the wealth amassed by millionaire households is set to increase by more than 100% over the next 9 years. From a total of $92 trillion held by the world’s richest in 2011, by 2020 the world’s millionaire households will possess $202 trillion, or roughly 4 times current global GDP. If you think the wealth divide is bad now, unless significant changes are made it is going to get much worse.

The rich are getting richer while the poor are getting poorer and the middle class is disappearing, not because the wealthy are smarter or work harder, but because of corrupt crony capitalism. The wealthy have worked to dominate government since the early 1970s.  President Obama’s $1 billion re-election campaign exemplifies this. He is holding fundraisers where he charges $35,800 for admission – that is more than the median income of American workers.  The twelve members appointed to the Joint Select Committee on Deficit Reduction got nearly $64.5 million in donations from special interest groups over the past decade, with legal firms donating about $31.5 million and Wall Street firms donating about $11.2 million. And since they were appointed to the commission, they have been seeking contributions from Wall Street.

As a result of this bribery disguised as campaign donations, policies are skewed for the wealthiest. Some examples among many:

.  1,470 Americans earned over $1 million in 2009 and didn’t pay any taxes.

.  Historically the U.S. had an excess profits tax on the super-rich in tough economic times, now politicians talk about lowering the rate on top tax brackets.

.  The tax burden on the super-rich is unfairly low. IRS statistics released this May reflect that in 2008, the most recent year for which statistics are available, the tax rate is 18.1% on the wealthiest 400 Americans, while someone who has net taxable income of $60,000 after deductions and exemptions pays 25%.

. Warren Buffet describes paying only 17.4% income tax because of policies that coddle the rich, “If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.”

.  Many major corporations pay no taxes, indeed many receive huge tax refunds, despite record earnings.

.  Corporate taxes have dropped consistently since the 1950s, with more and more burden falling on small businesses.

.  The SEC has been covering up the crimes of Wall Street by destroying evidence.

.  The Federal Reserve loaned banks and other companies as much as $1.2 trillion of public money at very low interest rates.

It doesn’t have to be this way.  The 1% wealthiest should not have more political power than 300 million people.  The people have the answers – if the views of Americans were followed the country would be on the right track on many critical issues. We can democratize the economy and give people more control over their own lives and influence over the economy. But it is the responsibility of the people to demand politicians listen to them.

The traditional tools of elections and lobbying no longer work.  Americans need to build an independent movement and independent media along with independent politics to challenge the deep corruption in American government caused by corporatism. That starts on October 6, 2011 when Americans come to Washington, DC and occupy Freedom Plaza to call for an end to corporatism and militarism.

The destruction of the economy for 98% of Americans has been a long-term trend that the people can turn around – you can be sure the government will not do so. It is up to us. On this Labor Day, Americans need to look honestly and deeply into the corruption of government by economic and political elites and demand that we participate in power.

Kevin Zeese co-directs Its Our Economy and is on the steering committee of October2011.org.