Class differences and class warfare have existed since the beginning of Western civilization, with the Greeks and Romans, and since our nation was founded. It was reflected in the different philosophies of Thomas Jefferson and Alexander Hamilton and presently between liberals and conservatives. It is keenly expressed in who gets admitted to Harvard or Yale and who attends second- or third-tier colleges; only 3 percent of students at the nation’s top 146 colleges come from families in the bottom economic quartile (or the lowest 25 percent).
The gap in income and wealth between the rich (the top 10 percent) and the rest (the bottom 90 percent) has increased steadily in the last twenty-five years. In 2005 the average worker in the United States earned $43,506. Among Fortune 500 companies, the average executive pay was $11.3 million, including stock options, which have the potential effect of doubling or tripling the earnings of a CEO. The nation is heading for a financial oligarchy, much worse than the aristocratic old world that our Founding Fathers feared and tried to avoid.
In 2005 the bottom 90 percent of the population earned $117,000 or less while the top 0.01 percent earned $16 million or more. From 1950 to 1970 for every additional dollar earned by the lower 90 percent—what I call the “new struggling class”—those on the top 0.01 percent earned $162. From 1990 to 2002, for every dollar earned by the lower 90 percent, these top taxpayers earned an additional $18,000. This kind of income gap is eventually going to shred the middle class and then the democratic process.
For the last twenty years, real wages of the working class have remained flat at about $15 to $16 per hour. Job loss and job insecurity are at an all-time high in the United States, as reflected in the loss of high-paying jobs and the outsourcing of white-collar jobs, as well as the reduction or elimination of company-funded pensions and health insurance. Replacement jobs result in a one-third reduction in wages, regardless of retraining and education.
Despite continuous growth in the economy since the 2000 stock market bubble, nearly two-thirds of new jobs—more than 5 million in total—pay less than $35,000 a year. The largest U.S. employer is Wal-Mart, where the average worker earns about $7.50 per hour and has minimal health insurance coverage.
As many as 85 percent of American families remain in the same class or move up or down one quintile three decades later. During a twenty-five-year period, ending in 2004, 61 percent of families in the lowest income quintile were stuck at the same level. In reverse, 59 percent in the highest income quintile remained at the same level.
The middle class is struggling and shrinking. The average consumer debt was more than $9,300 in 2005; the savings rate was a negative 4 percent, the first time since the Depression in 1933 that Americans’ spending exceeded disposable income. Educated young Americans are in worse shape. The average debt from student loans among college students graduating with a bachelor’s degree was more than $18,000 and among graduate students was approximately $45,000 in 2005.
Tuition at private colleges has increased 110 percent in the last decade, compared to 60 percent for four-year state colleges; however, income for the bottom 50 percentile increased 35 percent; and after considering inflation, there was no gain. Measures designed to make colleges more affordable, such as tuition tax breaks and special tax-free savings accounts for college, disproportionally benefit families in the top 40 percentile.
Today 23 percent of all people sixty-five to seventy-four years old hold jobs, compared to 16 percent just two decades ago. The number of workers in the sixty-five to seventy-four group grew three times the rate as the overall workforce in 2004 and ten million previously retired people were forced back to work in order to make ends meet. Although most seniors want to keep their homes, 44 percent of home-owners at age seventy will have sold their houses by age eighty-five to pay for living costs and basic needs.
The Medicare trust is expected to start running a deficit in 2013 and Social Security is expected to go bust by 2044. Looming deficits in both social programs are forcing the government to curtail benefits. Some 50 percent of the American populace are without pensions and are relying on Social Security for retirement. While hundred of billions of dollars are passed on yearly to the offspring of the rich (the top 10 percent) and superrich (the top 1 percent), 86 percent of U.S. households will receive less than $1,000 in cash value or no inheritance at all.
Education is no longer the great equalizer. Schools and colleges cannot overcome the difference between those born on third base and those who are struggling to get up at bat. The American dream is slowly evaporating and becoming more unattainable for the under-thirty generation.
So long as American have the view that the Michael Eisners, Michael Dells, and Michael Jordans of the world, and all their descendants, are entitled to all their wealth because they worked hard, founded highly successful companies, or could shoot a ball through a hoop, then the millions they make will continue to create economic imbalance and doom the rest of us to a bleak future characterized by vast inequality.
A democratic society requires some kind of balance between achievement and equality. Endpoints or benchmarks are needed to establish economic ceilings and floors. A moral society, one that is fair and just, sets limits on the accumulation of wealth and inherited privilege and also guarantees a safety net for the less fortunate. Without such limits, social mobility and opportunity become abstract and unachievable ideals, representing nothing more than propaganda derived from a sham notion of a classless society driven by the American notion of equality and the Protestant work ethic.
Cultural and social differences and religious views, reflected in red and blue voting patterns, mask important economic and safety net issues such as jobs, pensions, Social Security, health-care and college tuition costs. New laws and policies are required including government regulation of Wall Street and the financial and banking industries, as well as increased safety nets for the American people.
There needs to be a redistribution of wealth in order to make U.S. society more democratic, fair, and just. Recommended are a host of taxes, including but not limited to luxury taxes, windfall profit taxes, estate taxes, and fuel taxes. Other recommendations include eliminating taxes on food, drugs, and low-cost clothing, free state college tuition for above-average students, and zero tax on the first $50,000 earned in annual wages for all Americans.
A strategy is outlined in order to restore the social contract that is supposed to exist between the government and the people. The U.S. standard of living and quality of life for the bottom 90 percent of the economic scale is at stake. The idea is for people to vote for the pocketbook, and not be derailed by secondary or side issues.