Democracy at Risk: Rescuing Main Street from Wall Street

[Dave Stratman <Newdem@AOL.COM>]

Hi--

I'm passing this on from a friend. It describes the social order in which the
educational policies which we are opposing are being made and which they are
intended to legitimize. How many people, young and old, must be crushed so
that they will accept their place in this still evolving social order?

Dave Stratman
*******
From: ASchinella@aol.com
Subject: Democracy at Risk: Rescuing Main Street from Wall Street

Yesterday, while signature gathering for Ralph Nader in NH, I heard an
interview with author Jeff Gates concerning his book "Democracy at Risk:
Rescuing Main Street from Wall Street." On the web site
[http://www.sharedcapitalism.org], I found some very interesting statistics,
all footnoted by Gates on his site, concerning the state of the American
economy. You draw your own conclusions. Here is an edited version of some of
this information:

Ownership Statistics: Why a Shared Capitalism is Needed...

Current trends in economic inequality, both domestically and abroad, pose
dangers to human dignity, democracy, political stability, fiscal
sustainability, social justice, freedom, civil society, physical/mental
health and environmental sustainability. These dangers are palpable, real
and
on the rise.

These statistics are also included in the newest book by the President of
the
Shared Capitalism Institute, Jeff Gates. Look for Democracy at Risk:
Rescuing
Main Street from Wall Street; A Populist Vision for the 21st Century,
published by Perseus Books in May, 2000. See the book page for more
information.

     The financial wealth of the top one percent of households now exceeds
the combined wealth of the bottom 95 percent.
    The wealth of the Forbes 400 richest Americans grew by an average $940
million each from 1997-1999 while over a recent 12-year period the net worth
of the bottom 40 percent of households declined 80 percent.
    For the well-to-do, that's an average increase in wealth of $1,287,671
per day. If that were wages earned over a 40-hour week, that would be
$225,962 an hour or 43,876 times the $5.15 per hour minimum wage.
    The Federal Reserve found in its latest survey of consumer finances that
although median family net worth rose 17.6 percent between 1995 and 1998,
family wealth was "substantially below" 1989 levels for all income groups
under age 55.
     From 1983-1997, only the top five percent of households saw an increase
in their net worth while wealth declined for everyone else.
    As of 1997, the median household financial wealth (marketable assets
less
home equity) was $11,700, $1,300 lower than in 1989.
    Anticipated Social Security payments are now the largest single "asset"
for a majority of Americans. Funded by a levy on jobs, the Social Security
payroll tax is now the largest tax paid by a majority of Americans (the
largest for 90 percent of GenXers), funded with a flat tax of 12.4 percent
on
earnings up to $72,600. For the first time since the Great Depression, the
national savings rate turned negative (during the first quarter of 1999).
     What about the largest intergenerational transfer of wealth in history
-- that $12 trillion in the hands of baby-boomers' parents?
    Current wealth patterns indicate that one-third of that pending transfer
will go to 1 percent of the boomers ($1.6 million each). Another third will
go to the next 9 percent ($336,000). The final slice will be divided by the
remaining 90 percent (an average $40,000 apiece).

A Boom for Whom?

     The richest 400 Americans hold wealth equivalent to one-eighth of the
GDP.
    The average wealth of the Forbes 400 was $200 million in 1982, just
after
the enactment of the Reagan-Bush "supply-side" tax package - paid for with
$872 billion in deficit financing. By 1986, their average wealth was $500
million.
    In 1982, inclusion on the Forbes 400 required personal wealth of $91
million. The list then included 13 billionaires. By 1999, $625 million was
required for inclusion on a list that included 268 billionaires.
     The federal debt was $909 billion in 1980. At the close of the
Reagan-Bush era, the debt was $4,202 billion. It currently hovers around
$5,700 billion.
     Government debt securities are owned dominantly by upper-crust
households. The latest figures show that tax-exempt interest was reported on
4.9 million personal tax returns for 1997, about 4 percent of all taxpayers.
Total tax-exempt interest income was $48.5 billion in 1997.
     The combined net worth of the Forbes 400 topped $1 trillion in
September
1999, up from $738 billion 12 months earlier, for an average one-year
increase of $655 million each ($12.6 million per week).
    Less than one-fifth of that increase ($48.4 billion) would have been
enough to bring every American up to the official poverty line, leaving each
of the Forbes 400 with an average one-year increase of $534 million ($10.2
million per week).
    While the number of households expanded 3 percent from 1995 to 1998,
households with a net worth of $10 million or more grew 44.7 percent.
    Eighty-six percent of stock market gains between 1989 and 1997 flowed to
the top ten percent of households while 42 percent went to the most
well-to-do one percent.
     If Congress adopts Martin Feldstein's proposal for the partial
privatization of Social Security, the U.S. Treasury will pump budget
surpluses equal to 2.3 percent of the national payroll into the stock market
each year. That's $100 billion-plus per year in tax revenues to boost stock
prices.

 In a Nation of Equals

    In 1998 the top-earning one percent had as much income as the 100
million
Americans with the lowest earnings.
    From 1983-1995, only the top 20 percent of households saw any real
increase in their income while the middle-earning 20 percent, if they lost
their jobs, had enough savings to maintain their standard of living for 1.2
months (36 days), down from 3.6 months in 1989.
     Economist Robert Frank reports that the top one percent captured 70
percent of all earnings growth since the mid-1970's. The Federal Reserve
found that "median income between 1989 and 1998 rose appreciably only for
families headed by college graduates."
     On an inflation-adjusted basis, the median hourly wage in 1998 was 7
percent lower than in 1973 - when Richard Nixon was in the White House.
    The pay gap between top executives and production workers grew from 42:1
in 1980 to 419:1 in 1998 (excluding the value of stock options).
    Executive pay at the nation's 365 largest companies rose an average 481
percent from 1990 to 1998 while corporate profits rose 108 percent.
     Had the typical worker's pay risen in tandem with executive pay, the
average production worker would now earn $110,000 a year and the minimum
wage
would be $22.08.
     Business Week reports that in 1998 the average large company chief
executive was paid $10.6 million, a 36 percent jump over 1997. That omits
unexercised stock options.
     Compensation expert Graef Crystal identifies five CEOs who each saw
their wallets widen by more than $232 million in 1998 as they exercised
their
stock options. For a 40-hour week, that's $116,000 per hour.

    In the Pursuit of Happiness

    The work year expanded by 184 hours over the past decade, an additional
4-1/2 weeks on the job for the same or less pay.
    Household working hours reached 3,149 in 1998, roughly 60 hours a week
for the typical family, moving Americans into first place worldwide in the
number of hours worked, nudging aside the workaholic Japanese.
    According to the Bureau of Labor statistics, the typical American now
works 350 hours more per year than a typical European -- almost nine full
weeks.
     More than 65 million anti-depressant prescriptions were written in
1998.
     Parents spend 40 percent less time with their children today than they
did thirty years ago.
     A 40-hour week at today's minimum wage of $5.15 per hour nets a pre-tax
annual income of $10,300. That's $6,355.00 below the official 1998 poverty
line for a family of four.
     Had increases in the minimum wage kept pace with inflation since the
1960s, the minimum wage would now exceed the earnings of nearly 30 percent
of
U.S. workers.
    The after-tax income flowing to the middle 60 percent of households in
1999 is the lowest recorded since 1977. Among the bottom fifth of
households,
average after-tax income fell nine percent from 1977 to 1999.
     In New York, the highest-income five percent of families gained nearly
$108,000 in average income per family from the late 1970s to the late 1990s,
while the lowest-income 20 percent of New Yorkers lost $2,900.
     The Census Bureau reports that the pretax median income was $1,001
higher in 1998 than in 1989. For the decade of the 1990s, that's an average
annual raise, adjusted for inflation, of $111.22, or 0.3 percent.
     According to the Census Bureau, the top fifth of households now claim
49.2 percent of national income while the bottom fifth gets by on 3.6
percent.
    Except for inflation adjustments, today's poverty formula remains
unchanged since 1965 when it was designed by Lyndon Johnson to address
severe
nutritional deprivation but only if "the housewife is a careful shopper, a
skillful cook and a good manager who will prepare all the family's meals at
home."
    The national poverty rate remains above that for any year in the 1970's.
     One in every four preschoolers in the United States now lives in
poverty.
     Bill Clinton reported a 12.7 percent poverty rate in September 1999,
the
lowest level in a decade.
    Raising the poverty threshold to $19,500 (as recommended by the Census
Bureau) boosts the poverty rate to a record-high 17 percent, leaving 46
million Americans short of that minimal level.
     In 1998, the nation's three primary income security programs -- Social
Security, Medicare and civil service pensions -- consumed $805.2 billion in
federal tax revenues. Meanwhile, the U.S. General Accounting Office (GAO)
reports that we need $112 billion to repair dilapidated public schools.
    In 1973, the United States imprisoned 350,000 people nationwide. By
1998,
the prison population was 1.8 million or roughly 674 people in prison per
100,000, while Europe-wide the imprisonment rate is 60 to 100 per 100,000.
Florida now spends more on corrections than on colleges. California spent
nine percent of its 1998 budget on prisons as it responded to an 8-fold
increase in its prison population over the past two decades. The Rand
Corporation projects that California's prison spending will top 16 percent
by
2005.

Whose Wealth of Nations?

     In 1998, Disney CEO Michael Eisner received a pay package totaling
$575.6 million, 25,070 times the average Disney worker's pay.
     In the same year (1998) when one American (Bill Gates) amassed more
wealth than the combined net worth of the poorest 45 percent of American
households, [Note 36] a record 1.4 million Americans filed for bankruptcy --
7,000 bankruptcies per hour, 8 hours a day, 5 days a week. Personal
bankruptcy filings topped 1.3 million in 1999.
     Since 1992, mortgage debt has grown 60 percent faster than income while
consumer debt (mostly auto loans and credit cards) has grown twice as fast.
The fastest growing segment of the credit card market consists of low-income
holders, with the average amount owed growing 18 times faster than income.
     Nine years into the longest economic expansion in the nation's history,
labor's share of the national income remains two to four percentage points
below the levels reached in the late 1960's and early 1970's.
     Household debt as a percentage of personal income rose from 58 percent
in 1973 to an estimated 85 percent in 1997.
     In 1997, 142,556 people reported adjusted gross income of $1 million or
more, according to the IRS, up from 86,998 for 1995.
     For 1999, the Congressional Budget Office (CBO) projects that the top
one percent will report average before-tax income of $786,000 and average
after-tax income of $516,000. The top one percent pocketed, on average, an
annual tax cut of $40,000 since 1977, an amount exceeding the average annual
income of the middle fifth of households.
     If the richest one percent of the population had received the same
share
of the nation's after-tax income in 1999 as it did in 1977, it would have
received $271 billion less in 1999 -- $226,000 less per household.
     Between 1977 and 1999, the after-tax income of the top one percent grew
faster (115 percent) than their before-tax income (96 percent).
     In 1998, 9,257 new and existing homes sold for $1 million or more,
triple the number of million-dollar homes on the market in 1995. Annual
mortgage interest payments on a newly purchased $1 million home total
$79,247
(assuming 10 percent down and a 30-year adjustable rate mortgage at 8
percent). The home mortgage interest deduction for someone in the top
39.6-percent tax bracket saves on that house $31,382 a year in federal
income
taxes. When that saving is added to the $40,000 average annual tax cut
allowed the top one percent since 1977, that $1 million home costs $7,865
per
year, or $655 per month.
     Federal tax law allows a personal income tax deduction on home mortgage
interest costs up to $1 million. If that limit were reduced to $300,000, the
CBO calculates that federal tax receipts would increase by $40.8 billion
over
nine years. In 1998, four percent of new mortgages exceeded $300,000.
     For every age group under 55, home ownership remains below where it was
in the early 1980s. [Note 45] Minorities and Foundations
     The percentage of black households with zero or negative net worth
(31.3
percent) is double that of whites.
     As of 1997, the net worth of white families was 8 times that of
African-Americans and 12 times that of Hispanics. The median financial
wealth
of African-Americans (net worth less home equity) is $200 while that of
Hispanics is zero.
     The poverty rate among blacks, 26.1 percent, is 2.5 times greater than
the rate for whites. For Hispanics, the rate is 25.6 percent.
     Black applicants were granted less than one percent of total home
mortgages approved between 1930 and 1960.
     Only in 1999 did home ownership among blacks recover ground lost since
1983.
     Black-owned small businesses were three times as likely as whites to
have their loan applications turned down in the 1990s.
     The United States has 18,000 black farmers, down from 925,000 in 1920.
Less than one percent of farmers are black, and they are abandoning farming
at three times the rate of whites. In 1999, the Agriculture Department gave
its long-delayed assent to a class-action settlement to compensate black
farmers who have complained for decades at being shut out of federal loan
programs due to racism.
     In 1865, blacks owned 0.5 percent of the nation's net worth. In 1990,
their net worth totaled 1 percent. [Note 51] Black students scored 144
points
less on the SAT than white students where the parents of both earn over
$70,000. When black test scores are compared to those of white students with
the same family wealth, the "achievement gap" disappears.
     If your financial wealth is $225,000 (about 20 times the national
median) and you give $1,500 to charity, how large a donation would be
required for Bill Gates to experience a similar dent in his net worth?
According to Wired magazine, $6.7 billion. That's almost seven times the
amount he pledged in September 1999 to provide 20,000 minority scholarships
over the next two decades.
     With the December 1999 completion of Windows 2000, the value of Gates's
personally held Microsoft shares rose to more than $130 billion, almost 12
times the $11 billion or so in securities owned by all 33 million
African-Americans combined.
     If an entry-level Forbes 400 member gives away $1 million of their
income, how much would a median-level household need to donate to make a
similar financial sacrifice? A bit less than $60.

     Making the World Safe for Plutocracy

     The world's 200 richest people more than doubled their net worth in the
four years to 1999, to more than $1 trillion, for an average $5 billion
each.
Their combined wealth (the top seven are Americans) equals the combined
annual income of the world's poorest 2.5 billion people.
    Microsoft co-founders Bill Gates and Paul Allen plus Berkshire
Hathaway's
Warren Buffet have a net worth larger than the combined GDP of the 41
poorest
nations and their 550 million people.
    Warren Buffet's 1999 net worth ($31 billion) equals the GDP of Kuwait.
     The wealth of the world's 84 richest individuals exceeds the GDP of
China with its 1.3 billion people.
     If the value of Bill Gates's Microsoft stock continues to grow at the
same pace as it has since Microsoft's 1986 initial public offering (58.2
percent a year), Wired projects he will become a trillionaire in March 2005,
at the age of 49, and his Microsoft holdings will top $1 quadrillion (one
million billion) in March 2020, at the age of 64. The Gross World Product
for
1998 was $39,000 billion.
     The UN Development Program (UNDP) reports that 80 countries have per
capita incomes lower than a decade ago. Sixty countries have been growing
steadily poorer since 1980. Three billion people live on less than $2 per
day
while 1.3 billion of those get by on less than $1 per day.
    In 1960, the income gap between the fifth of the world's people living
in
the richest countries and the fifth in the poorest countries was 30 to 1. By
1990, the gap had widened to 60 to 1. By 1998, it had grown to 74 to 1.
     With global population expanding 80 million each year, World Bank
President Jim Wolfensohn cautions that, unless we address this "challenge of
inclusion," 30 years hence we will have 5 billion people living on less than
$2 per day.
     The UNDP reports that two billion people suffer from anemia, including
55 million in industrial countries. Current trends suggest that in three
decades we could inhabit a world where 3.7 billion people suffer from
anemia.
     UNDP's assessment of today's development trends: "Development that
perpetuates today's inequalities in neither sustainable nor worth
sustaining."
     In Indonesia, 61.7 percent of the stock market's value is held by the
nation's 15 richest families. The comparable figure for the Philippines is
55.1 percent and 53.3 percent for Thailand.

     A Closer Look at Globalization

    The world's 200 largest corporations account for 28 percent of global
economic activity while employing less than one-quarter of one percent of
the
global workforce.
    The World Bank estimates that $100 billion to $150 billion has flowed
out
of the former Soviet Union since the fall of the Berlin Wall. As of July
1999, one-third of Russians were living below the official poverty line of
$38 per month.
    The UNDP identifies six core ingredients as minimal conditions for a
decent life: safe drinking water (1.3 billion people lack access to clean
water), adequate sanitation, sufficient nutrition, primary health care,
basic
education (one in seven children of primary school age is out of school),
and
family planning services for all willing couples.
    UNDP calculates the cost at $35 billion each year for the next 15 years.
That's about what the United States spent in 1999 to maintain its nuclear
readiness, a decade after the fall of the Berlin Wall. For the world
community to bear the cost would require 1/7 of 1 percent of global GDP; the
United States contributes to the UN 0.09 percent of its GDP.
    Every jet fighter sold by a developed country to a developing country
costs the schooling of three million children.
    The cost of a submarine denies safe drinking water to 60 million people.
    In the 1997 fiscal year, the United States exported $8.3 billion of arms
to non-democratic countries. The Clinton-Gore Administration is calling for
a
$110 billion increase in the Pentagon budget, including a 50 percent
increase
in weapons procurement through 2004; Republican Congressional leaders insist
on considerably more funds for military remobilization.
    What if those individuals who have captured the most wealth in the
global
economy were to bear this $35 billion development cost? An annual 3.5
percent
levy on the $1 trillion in assets owned by the world's 200 wealthiest people
would raise the requisite funds.
    Three-quarters of those people live in OECD countries; one-third of them
reside in the United States. Experts report that the well-to-do have hidden
at least $8 trillion in tax havens. If the international community
identified
the owners of that $8 trillion -- held in an estimated 1.5 million offshore
corporations (up from 200,000 just since the late 1980s) -- an annual
"freeloader levy" of 3.5 percent, less than the typical sales tax, could
generate $280 billion each year.
    That's enough to build 140,000 schools at $2 million apiece.
    That's also the bulk of the $300 billion that environmental researchers
at Cambridge and Sheffield Universities report would be required each year
to
"save the planet."

(c) 2000 by The Shared Capitalism Institute

Dave Stratman
Editor, New Democracy
www.newdemocracyworld.org
5 Burr Street
Boston, MA 02130
(617)524-4073

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