The Occupy Wall Street protest and other attendant demonstrations around the world have been a pretty smoky fire thus far. The protesters have generated a general sense of discontent with economic inequality and with the lack of individual accountability suffered by the heads of the financial institutions who crashed the economy, threw the housing market into an ongoing tailspin, wiped out almost $10 trillion (yes, with a T) in household wealth, sowed the seeds for the ongoing sovereign debt crises in Europe and elsewhere that may yet suck us in to an even deeper recession or depression, and then sucked up more than $100 billion in federal bailout money so that the businesses that they ran into the ground wouldn’t fail, leaving the rest of us to muddle along in a stagnant economy with near-record unemployment and little prospect for immediate hope. For a better idea of the damage done by this cabal of greedy financial propeller heads, that $10 trillion in lost household wealth works out to more than $32,000 for every American. Doing math for my four-member household, that’s $128,000. And what do you know, if I add up the lost value in our home and the hit my retirement benefits have taken, that’s pretty much spot on. Gee, thanks, guys.
So yeah, the protestors are pissed. But aside from the Fire Your Bank Day thing, which is a pretty sensible proposal, the messaging from the protesters has been poorly articulated and unfocused. And that leaves the movement susceptible to the rantings from the right, which is trying to dismiss the protests as a childish tantrum thrown by uneducated anarchist socialists who don’t understand the wonders of capitalism and are just engaging in politically motivated class warfare.
(By the way, this Fire Your Bank Day thing? You want another reason to think about that? Remember when the wheels came off a couple years back and the same financial institutions that had engaged in all the reckless lending and derivatives shenanigans that blew up the economy were teetering on the brink of collapse? Remember all the too-big-to-fail crap? How if Citibank or Morgan Stanley went down, we’d all go down with them? So the Feds, meaning the taxpayers, meaning you and me, had to cough up billions in bailout dollars to save the same private companies that their own executives had ruined, crashing our economy in the bargain. To get the bailout bucks, though, the investment banks had to agree to abide by the more stringent regulations overseeing depository institutions instead of the fly-by-the-seat-of-your-pants crap they’d pulled to land us all face down in their shit. They had no choice, so they went ahead and called themselves banks and hid in Uncle Sam’s skirts and took our money. Now, they’ve decided they don’t like the regulations. They want to go back to being investment banks. So screw them. Find a nice, local bank or credit union and put your money there. Hey, everybody wants to be a locavore all of a sudden, be a locasaver, too. And if we can suck enough money out of those gargantuan rapacious bastards that butt-fucked our economy just to line their executives’ pockets, the next time they screw the pooch, they’ll be small enough to fail and we can just watch.)
Where was I? Oh yeah. Class warfare. I think, if you assemble the facts, you’ll see that the class war has been going on for better than a generation now, and that it’s time that most of us fought back, because we’ve been getting our asses kicked.
First, a little confession. I may not be in the top one percent, but I’m in the top ten. I make a good living, and I still have my jobs. I was a late bloomer economically, though, so I don’t have nearly as much socked away as I should, and I lost a decent chunk of what I had saved, since many of my retirement investments have tanked over the last five years. But I’m better off than most. Much better off.
That still leaves me nowhere close to secure. If I were to lose my job today, my situation would be pretty damn dire in a year or less. And I know plenty of guys like me that have lost their jobs. So even with a decent income, some money in the bank, and some more in 401(k)s and such, there’s still this feeling that I’m tottering on the edge – that everything I’ve spent better than 30 years achieving could all be gone in a blink. I can’t imagine what people in the lower percentiles must be feeling.
But I digress. Let’s look at the class warfare order of battle since, say, 1970.
Consider this chart In 1970, the average compensation of a CEO at a US corporation was about 25 times that of the average worker. Now, it’s almost 500 times more. That’s not a global trend, by the way, that’s a US trend. Look at the numbers for some of the other countries, and also look at the countries closest to us. Venezuela? Mexico? When did the US decide to ditch the first world and start hanging out with oligarchies?
Hold on a sec, the CEO apologists say. CEOs earned that money. Up until a few years ago, our economy was riding the longest winning streak in its history, and riding it on the back of the corporations that these visionary CEOs and been driving to Olympian heights. It’s a CEO’s job to increase corporate profits, and when he succeeds, then he should be handsomely rewarded.
A couple of problems with that thinking. First, are you telling me that there are no successful corporations in any of those other countries where CEO earnings haven’t so rapaciously outstripped those of their workers? Second, let’s look at the numbers. OK, granted, since 1970, corporate profits have done pretty well – they’re up about 250 percent. But CEO compensation is up 430 percent. Which means CEO pay has outstripped corporate profits by 172 percent.
Of course, CEOs aren’t the only people getting paid. Companies also have workers, and, as all of you who have been workers know, you are your company’s most valuable asset. They tell you that every time they have one of their Kumbaya meetings to blow smoke up your ass, usually when they are trying to convince you they still really care about you even though they are cutting your benefits again, or not giving out raises on account of the economy, or slashing headcount one more time because, darn it, they have to stay competitive, so you’ll be working another five hours a week to pick up the slack.
And, if you are the average American worker, well you have picked up the slack. As this chart shows, the productivity of the American worker is up some 400 percent since the late 1940s, and has more than doubled since 1970. Way to go guys!
Hold on then. It’s a CEO’s job to increase profits, right? And it’s a worker’s job to produce stuff. So if CEOs average pay has outstripped profits by 172 percent over the past few decades, then the average worker’s pay must at least have increased as much as their productivity, right?
Wrong. Look at the chart again. Average pay and productivity had a pretty close correlation up until the mid-1970s. Since then, average wages have been stagnant while productivity has continued to skyrocket. Funny, that’s right around the time that CEO salaries went through the roof.
And, lest you think all those productivity gains are due to improved technology, keep in mind that 85.8 percent of full-time US employees work more than 40 hours a week. Hell, I know I haven’t worked less than 50 hours a week in months. Not to mention that, while more than 130 countries around the world have laws limiting the total work week, the US does not. While all other members of the G8 and most other industrialized nations have laws mandating parental leave for new parents, the US does not. While every major industrialized nation has a law mandating some annual leave, the US does not. And, while workers in other major industrialized nations average more than 20 days of vacation a year, Americans average less than ten.
But at least this is America, where everybody pays their fair share, right? So let’s look at taxes. In 1970, the top marginal income tax rate, the one the CEOs were paying, was right around 75 percent and the tax on long-term capital gains was 39.875 percent. Now, the top marginal income tax rate is 35 percent and the long-term capital gains rate is 15 percent. In other words, while average CEO compensation has increased by 430 percent, they are paying less than half the income taxes and a little more than a third of the capital gains taxes that they did in 1970.
What about the average worker? For a married couple earning the median household income of $8730 in 1970, the marginal tax rate was 25 percent. Today, the average household income is $47,600, keeping our hypothetical average couple’s tax bracket at 25 percent. Keep in mind that our average couple is paying an additional 7.65 percent in FICA taxes on all of their income, so their real tax rate is actually almost 33 percent, while our CEO friend is only paying FICA on the first $106,800 of income, which in only a sliver of his compensation.
The overall picture? Compensation for CEOs has increased by 430 percent since 1970, growing 173 percent more than corporate profits, while their income taxes have been slashed by more than half and their capital gains rates, which actually affect them far more than income taxes, have been cut by almost two-thirds. Meanwhile, while the productivity of the average American worker has more than doubled over that same period, their real wages have remained stagnant and their taxes have remained the same.
Yes, there’s been some class warfare going on all right, if you want to call it that. It looks a little bit more like the Mai Lai massacre – the rich machine gunning the poor in the ditches and then whining about how it’s the poor’s fault.
So, if you’re wondering what this Occupy Wall Street thing is all about, maybe forty years of economic rape might be part of the answer.