This post first appeared at CommonDreams.
A recent posting detailed how upper middle class Americans are rapidly losing ground to the one-percenters who averaged $5 million in wealth gains over just three years. It also noted that the global 1 percent has increased their wealth from $100 trillion to $127 trillion in just three years.
The information came from the Credit Suisse 2014 Global Wealth Databook (GWD), which goes on to reveal much more about the disappearing middle class.
1. Each Year Since the Recession, America’s Richest 1 percent Have Made More Than the Cost of All US Social Programs
In effect, a reverse transfer from the poor to the rich. Even as conservatives blame Social Security for being too costly.
Much of the 1 percent wealth just sits there, accumulating more wealth. The numbers are nearly unfathomable. Depending on the estimate, the 1 percent took in anywhere from $2.3 trillion to $5.7 trillion per year. (All numeric analysis is detailed here.)
Even the smaller estimate of $2.3 trillion per year is more than the budget for Social Security ($860 billion), Medicare ($524 billion), Medicaid ($304 billion), and the entire safety net ($286 billion for SNAP, WIC [Women, Infants, Children], Child Nutrition, Earned Income Tax Credit, Supplemental Security Income, Temporary Assistance for Needy Families and Housing).
2. Almost None of the New 1 percent Wealth Led To Innovation and Jobs
In 2005, for every $1 of financial wealth there was 66 cents of non-financial (home) wealth. Ten years later, for every $1 of financial wealth there was just 43 cents of non-financial (home) wealth.
What happens to all this financial wealth?
Over 90 percent of the assets owned by millionaires are held in low-risk investments (bonds and cash), the stock market and real estate. Business startup costs made up less than 1 percent of the investments of high net worth individuals in North America in 2011. A recent study found that less than 1 percent of all entrepreneurs came from very rich or very poor backgrounds. They come from the middle class.
On the corporate side, stock buybacks are employed to enrich executives rather than to invest in new technologies. In 1981, major corporations were spending less than 3 percent of their combined net income on buybacks, but in recent years they’ve been spending up to 95 percent of their profits on buybacks and dividends.
3. Just 47 Wealthy Americans Own More Than Half of the US Population
Oxfam reported that just 85 people own as much as half the world. Here in the US, with nearly a third of the world’s wealth, just 47 individuals own more than all 160 million people (about 60 million households) below the median wealth level of about $53,000.
4. The Upper Middle Class of America Owns a Smaller Percentage of Wealth Than the Corresponding Groups in All Major Nations Except Russia and Indonesia
The upper middle class in the US, defined as everyone in the top half below the richest 20 percent, owns 11.9 percent of the wealth. Indonesia at 10.5 percent and Russia at 7.5 percent are worse off, but in all other nations the corresponding upper middle classes own 12 to 27 percent of the wealth.
America’s bottom half compares even less favorably to the world: dead last, with just 1.3 percent of national wealth. Only Russia comes close to that dismal share, at 1.9 percent. The bottom half in all other nations own 2.6 to 10.2 percent of the wealth.
5. Ten Percent of the World’s Total Wealth Was Taken by the Global 1 percent in the Past Three Years
As in the US, the middle class is disappearing at the global level. An incredible one of every ten dollars of global wealth was transferred to the elite 1 percent in just three years. A level of inequality deemed unsustainable three years ago has gotten even worse.
Solution: A Financial Transaction Tax (FTT)
More appropriately called a Financial Speculation Tax, it would help to limit the speculative trading that contributed to the financial meltdown in 2008.
The FTT has extraordinary revenue-generating potential, on a global scale. The Bank for International Settlements reported in 2008 that annual trading in derivatives had surpassed $1.14 quadrillion. Just one-tenth of 1 percent of that is a trillion dollars.
It’s also a fair tax. While average Americans pay up to a 10 percent sales tax on shoes for the kids, millionaire investors pay a zero sales tax on financial purchases. They pay just a .00002 percent SEC fee (2 cents for every thousand dollars) for a financial instrument.
In addition, the FTT is easy to administer and difficult to evade. Clearing houses already review all trades, and serve as collection agencies for transaction fees.
And as evidence of its suitability, three of the top five countries on the Heritage Foundation’s Index of Economic Freedom are Singapore, Hong Kong and Switzerland, all of whom have FTTs.
People in the US and around the world are being rapidly divided into two classes, the well-to-do and the lower-income majority. This severing of society will change only when progressive thinkers (and doers) agree on a single, manageable solution that will stop the easy flow of wealth to the privileged few.