Dissolving the Union
That's our full faith and credit at work making the world safe for financial markets. And for the elite of Wall Street.
For those who think the US is broke, think again. It's far more serious than that. To renew Bush-era tax cuts for our most well-to-do 2 per cent would reduce US government revenues by $700 billion over the decade. That shortfall will need to be borrowed. Or we could provide college scholarships to 14 million US high school students. Or tuition, room and board for about half of today's college students.
Seven hundred billion dollars is also the interest expense on the $3 trillion that the US is projected to borrow to fund the long-term costs of wars in Iraq and Afghanistan. Of that interest paid to individuals, care to guess what portion finds its way to the topmost 2 per cent? $700 billion is also the amount authorised in October 2008 to stabilise the financial sector as part of the Troubled Assets Relief Program. To boost liquidity, the Federal Reserve just announced $600 billion in "quantitative easing" over the next six months. That sum could be increased by another $300 billion. A December 1st report brought news that, from March 2008 to May 2009, the Fed extended nearly $ 9 trillion in short-term loans to 18 financial institutions. That's our full faith and credit at work making the world safe for financial markets. And for the elite of Wall Street. To show their gratitude to the American public, the financial sector just paid themselves $144 billion in year-end bonuses. Meanwhile long-term unemployment is the worst since the Great Depression and fiscal disorder is now commonplace at the federal, state and local level. States and municipalities have around $2.8 trillion of outstanding bonds. That debt is dwarfed by debts that are off the books, including as much as $3.5 trillion in pension shortfalls. The situation resembles the run-up to the subprime mortgage meltdown. Meanwhile, the first of 78 million Baby Boomers born between 1946 and 1964 reach age 65 in 2011. This demographic bubble ensures fiscal strains unlike anything the US has ever experienced. The topmost few have fared well over the past three decades. Then there's everyone else.
In 1981, a $872 billion tax cut and investment stimulus helped expand national net worth by $5 trillion from 1983 to 1989. 54 per cent was claimed by the half million families who make up the top one-half of one per cent of the US population. That works out to an average $5.4 million gain per already-wealthy household. That's a $65,000 increase in wealth per month or $90 per hour, 24 hours a day.
As with our wars, that surge in personal wealth was financed with debt. While the public got the debt, the well-to-do got ownership of the assets financed with that debt, along with the bulk of the interest. That boost to personal wealth dates to when the stock market was a fraction of what it is today. Now the top 1 per cent have a combined net worth greater than the bottom 90 per cent. The top 1 per cent own 34 per cent of all private net worth; the bottom 90 per cent own 29 per cent. From 2002-2006, the topmost one per cent received two-thirds of the gains in national income. That trend has remained steady over three decades. During the 19771989 period, the top 1 per cent claimed 70 per cent of the increase in household income. The US is now witnessing its widest ever disparities in wealth and income. Reagan-era "supplyside" economics was marketed with campaign rhetoric remarkably similar to what we hear again today. Reagan policies doubled the national debt in just one year.
Over the past several decades, financial freedom has emerged as a proxy for personal freedom and the pursuit of financial returns as a proxy for the pursuit of happiness. The economic environment changed such that those values not calculable in money are, by design, displaced. While that may not be what we want, that's what we were schooled to do.
The trends confirm steadily increasing disparities in both wealth and income. Much as concentrated wealth undermines democracies, concentrated income undermines markets. Americans do not yet grasp how this money-myopic mindset worked its way into education and imbedded itself in law. Yet our shared embrace of a "consensus" mindset induces us to freely embrace the very forces that now jeopardise our freedom. There are no winners in this model, only creditors and debtors. The trends are not even good for the financially well-to-do. Lawmakers are right to worry that civil disorder is emerging as a possibility in reaction to growing social discontent. Lacking the political will to address this steady dissolution of civil society, the US faces increasing instability.