Forum Post: The Basic Malfunction of Our Economy - and the fix.
Posted 13 years ago on Oct. 7, 2011, 11:46 a.m. EST by Scroot
(2)
from Pasco, WA
This content is user submitted and not an official statement
Since most of our manufacturing jobs have been outsourced, we are a "Service" economy. So say the United States' 99% has $10. The United States' 1% has $10. And foreign countries have $0 of our money.
The way US citizens are now "making" money is NOT by making things and selling them to another country to increase that our $10, rather, we cycle that money within ourselves, providing services.
As we are playing musical chairs with that $10, we are importing everything from China and oil from other countries. So that $10 is slowly depleted. Now 9,8,7,6, now $5. The only exception is the banks who get their cut by charging interest on the 99%'s trying to keep up their $10 by borrowing. They then channel that interest and value of repossessions and foreclosures to the "decision makers" - the 1%.
So as it stands, the 1% now has $12, other countries have $7, and our 1% have $5.
HENCE: The 1% are responsible for reinvesting their extra $2 into the U.S., or we are ALL going down the tubes. Eventually, the dollar will be worthless and EVERYONE will suffer as the 1% are now.
great analogy, thanks
Here is the real problem, the massive "wealth redistribution" that has gone on for the last 30 years. The top 1% now controls over 42% of our nation's wealth and the top 10% now controls a staggering 70% of our entire nation's wealth. The bottom 50% only control a meager 2% of all of our nation's wealth.
The middle class spends their wealth on goods/services and the corporations have redistributed their wealth by paying their profits all out to the executives and shareholders. Middle class wages have stagnated for 30 years while executive wages have gone up 256% in since 1980. Even last year executive compensation went up another 11%. The top 1% now controls over 42% of the entire nation's wealth. We have not seen numbers like this since the great depression. The top 10% controls 70% of the entire nation's wealth. All of our nation's wealth has been redistributed into the hands of the few.
The middle class was roped into replacing wages with easy credit. So instead of paying people living wages, corporations fooled us into thinking we were doing well and could afford things by giving us easy credit instead of wages. Instead of having wages to buy t.v.'s, furniture, etc. we were given easy loans. So the middle class became a debtor class. There used to be a tax disincentive to paying out all of corporate profits at the top because in the 1950's income was taxed at 90% over a certain amount money and now that tax disincentive has disappeared. In 1950's the highest marginal tax rate was 90%. In 1960-1970's it was 70%. In 1980's it dropped to 49%. In 1990's dropped to 39%. Under George Bush it dropped to a mere 36%. We have had over 30 years of massive tax cuts for the wealthy.
There is now no tax disincentive to paying out all of the corporate wealth at the top. And there is no employee bargaining power because now less than 12% of all of our jobs are unionized. Corporate profits are at an all time high, healthcare company profits are at an all time high, and oil profits are at an all time high. We don't have a healthcare crisis we have a healthcare company profit-taking crisis that no politician will doing anything about. Healthcare and oil companies have enjoyed a decade of record profits while we have had a decade of massive premiums for little coverage and a decade of outrageous gas prices.
The problems are: 1) deregulation of the banks by the Republican-controlled congress in 1999; 2) hedge funds are exempt from regulation; 3) tax system no longer has a disincentive against paying outrageous executive salaries (highest marginal tax rate has dropped from 90% to 36%); 4) commodities market is exempt from regulation (Republican-controlled Congress exempted it in the Commodities Future Modernization act of 2000); 5) the Supreme Court has ruled that corporations can spend unlimited funds in campaign elections (thus politicians on both sides favor the wealthy/corporations) and 6) the rise of corporate/billionaire propaganda media "news." Because of the need to raise massive sums in politics today, we no longer have a party that represents the people. The Democrats have to chase the corporate and big money donors too.
What can we do about this: 1) re-instate Glass-Steagall Act regulating the banks; 2) regulate hedge funds and the commodities market (because the commodities market is not regulated speculation has caused prices for commodities to go through the roof); 3) get rid of the money in politics (have federally funded elections with clear limits on spending and no outside groups allowed to have ads); 4) get rid of 1980's laws stating that corporations' only duty is to maximize shareholder profits; and 5) regulate "news" channels and newspapers (no more "slanted opinion news" masquerading as hard news) and reinstitute the fairness doctrine across all news outlets to ensure that both sides get equal time.
Corporations should have duties to society and to their workers too. They should have to balance their duties to maximize shareholder profits against their reinstated duties to their employees and to society. The laws saying that corporations' only duty is to maximize shareholder profits have led to the destruction of long-term business plans and care for their workers and have created short-term profit monsters at the expense of workers and society.
Surely we can do better than Glass-Steagal which was written in 1933. Here is my suggestion http://occupywallst.org/forum/a-simple-plan-for-banking-from-an-experienced-bank/ I am also opposed to #5 because it is too close to censorship. For years many of the news channels were sickeningly liberal and FoxNews showed up and proved that they could out do slanted reporting going the other way. Let me see all the news, find the nuggets of truth and decide for myself what to believe. Usually it is somewhere in between.
Read my comment below and see if you feel like you are getting real news or billionaire propaganda news. Did you think that Clinton was responsible for deregulating the banks and not the Republican-controlled Congress? And not the three Republicans that sponsored and passed the bill? The Republicans controlled Congress from 1995-2006. Congress writes and passes the legislation, but because Clinton was President when the Republicans passed it, Fox News has everyone believing that it was Clinton that deregulated the banks.
You forget that Glass-Steagall gave us 70 years of stability. It took less than a decade after getting rid of it for our financial system to collapse. While many want people to believe that it was just greedy people taking out mortgages that they could not afford, the truth of the matter is that the deregulation decoupled the risk of making the loan from the loan. So, banks could make any loan, take the fees, and then bundle them up and resell them to Fannie & Freddie or someone else. The bundled mortgages could be sold as mortgage-backed securities (which Moody's and the other credit ratings agencies rated as triple A) and then the pension funds, which were required to invest in triple A funds), would invest in the mortgage-backed securities.
So, how did the American people get screwed? Banks pushed questionable loans just to get the loan origination fees. Banks sold the bad loans to Fannie and Freddie which are taxpayer secured. Banks sold bad loans as mortgage-backed securities that our pensions invested in. Banks get bailed out. Regular taxpayer Americans foot the bill.
Remember the Republican "Ownership Society" plan? Make everyone a homeowner. Bush announced in 2001 "America's Homeownership Challenge" plan. Go to the George W. Bush White House archives site and search for this.
He challenged the public sector to "loosen credit standards" and make 5.5 million new low income and minority loans -- giving the industry the green light to prey on them. He made HUD offer for the first time taxpayer insured risky 3, 5, 7 year arms. He pushed for zero downpayment federally insured loans which the nonpartisan Congressional Budget Office said would result in massive losses for the federal government.
He then pushed Fannie and Freddie. He said that they were trailing the private sector in low income and minority loans and asked them to loosen credit standards. Franklin Raines responded in a letter that he would meet Bush's challenge and increase low income and minority loans by 66%.
Bush then asked Congress to pass the American Dream Downpayment Act of 2003 which gave people with bad credit and no downpayment, federal taxpayer money to use as a downpayment to get a loan.
The Republican policies caused the housing boom and bust starting with the Republican-controlled Congress passing the Gramm-Leach-Bliley Act in 1999 which deregulated the banks (the Act is named after the three Republican Senators who sponsored it).
I didn't forget, I am well aware of the success of Glass-Steagall. In fact, I support it for the most part and it is somewhat the basis for my plan. I am just saying that it is an 80 year old law and it could be substantially updated. For example, my concept of mage-banks capable of funding a $5B project would have been difficult to say the least under Glass Steagall. Yet, in this day and age we do need large projects in order to stay globally competitive.
I'm the original poster here. I already read the above post and commented that it was well thought out and written.