The Mechanisms of Exploitation

One of the reasons the wealthy in this country are wealthy, is because they are the beneficiaries of massive loopholes inherent in our skewed tax code as well as government subsidies paid for by tax dollars. In other words, the dramatic gains in wealth by the super rich are underwritten by everyone else as a result of skewed values embedded in the U.S. tax code. This means that the top 1 percent of America’s wealthiest households—97 percent of whom are white—are subsidized by the rest of the tax base.

A major contributor to the dwindling of the middle class is that the majority of the taxes they pay rarely benefit them, especially with regard to social safety net programs. Those taxes benefit the wealthy, who then get to sit back and save their money while the middle class covers them by picking up their slack. Remember that wage earners pay taxes on their sustenance, while the wealthy would be paying taxes on their wealth.

 It is also no revelation that most of our taxes go towards the war machine, also euphemistically referred to as “defense department”, subsidies for oil companies and farms and a host of tax breaks for corporations that post record profits while siphoning their wealth overseas to avoid paying taxes, employing cheap labor overseas and paying domestic laborers lousy wages that do not keep up with increased cost of living and general growth.

This lack of equity has lead to the systematic erosion of the middle class by transferring wealth from the bottom to top, thus widening the income gap.

As much as corporations like to whine about hard times that are allegedly prompting them to keep cutting pay, benefits or lay people off altogether, research has revealed that, in fact, foreign profits held overseas by U.S. corporations to avoid taxes at home nearly doubled from 2008 to 2013 to top $2.1 trillion. GE tops the list, followed by Microsoft, Pfizer, Merck and Apple – all companies that are supposed to be the shining example of the American Dream and hard work. Turns out, their un-American, self-serving greed is of the same old garden-variety robber baron kind, only this time the velvet tones are neatly wrapped in wit and charm by these master manipulators who call themselves the purveyors of the American Dream.

The American Dream for whom, one wonders.

The middle class has not experienced much of an income growth for the past three to four decades while the 1% have seen their wealth multiply quite rapidly. General Electric, for example, has neatly stashed away over $100 billion overseas while paying an effective tax rate of merely 5% in the US.

All this has crated a situation whereby the middle class is basically digging its own grave, caught in a vicious cycle of little income growth, coupled with higher cost of living, paying the highest amount of taxes while at the same time not seeing most of that money they paid come back to them in the form of social safety net programs, ultimately resulting in them to slide down the social class ladder even further and with every slide slip deeper into the poverty trap. 

Tax Breaks Are A spending

The hundreds of tax breaks lawmakers have written into the federal tax code –  for instance, special low tax rates on capital gains, and a deduction for home mortgage interest – in order to promote certain activities they deem beneficial to society (which are not), function as a type of government spending. 

In fact, tax breaks are officially called tax expenditures within the federal government because, from the perspective of the government, they are no different from spending on any other government program. That’s because, when the government issues a tax break, it chooses to give up tax revenue – so both spending and tax breaks result in the same outcome, which is less money in the U.S. Treasury.  

The need for the money the government just decided to not collect from certain entities (that also happen to line the pockets of those very government officials – most of whom are millionaires)  does not go away because the tax break was issued. That need is still there. And if the government cannot collect, or will not collect,  it from the wealthy, then it will have to collect it from us.

According to the White House, in fiscal year 2014 tax breaks are expected to cost the federal government  – and by extension all of us who do pay taxes – $1.18 trillion – slightly more than all discretionary spending in the same year.

For the government it means that it does not get to collect the revenue it needs to remain solvent, which in turn results in the government going after the easiest of entities to cut from – the poor who don’t have lobbyists residing in the Capital buying politicians.

This is evidenced by the fact that cuts, usually, almost always begin with and come in the form of slashing food stamps, public assistance programs and a host of other social safety net policies.

The class divide we are facing is facilitated by these very middle class-destroying economic policies that are promoted by politicians in both parties.

Democrats are not any better. They too agree on beginning every cut by going after middle class causes and the poor. They merely disagree with Conservatives over the extent to which those cuts are to take place. While I do want to give credit to some truly dedicated Democratic officials, I want to point out that voting for policies that ultimately go after the most vulnerable and marginalized entities in society to subsidize the privileged does not make you a progressive, nor is it a vastly different position from the Conservative one. That is hardly deserving of accolades. In fact, it makes you part of the problem, just to a slightly lesser degree.

In the end, for the working middle class it means that they have to pick up the slack of those who get tax exemptions.

Coupled with deregulation, lousy labor laws and standards that favor the corporations and their money-making schemes over employee/worker rights and human dignity,  Citizens United, Too Big To Fail, and a host of other middle class busting policies, the middle class has essentially been reduced to nothing but a source of cheap labor and tax revenue, effectively shifting the economic burden of society away from the wealthy – who, among other things, by virtue of paying no taxes, can accumulate wealth easily and rapidly –  and onto the working poor and middle class wage earners.

Given that a good number of our elected officials (including judges) are wholly owned subsidiaries of corporations, this situation is not likely going to change anytime soon. After all, what incentive would a lawmaker have to put a stop to the very corporate greed and exploitation that is subsidizing his or her campaign (and summer house, car elevator, shiny, gold plated bootstraps for his kids etc). 

General Motors, Money and Free Speech

In 2001, General Motors considered, and rejected an ignition switch design that two prominent safety advocates say could have avoided the problem that led the automaker to recall millions of vehicles this year.

The company’s decision to reject the safety switch was motivated by cost. Without much oversight and accountability, GM just decided to forgo this important safety feature, resulting in not only recalls of vehicles but according to GM, the faulty ignition switch has been linked to 32 crashes and 13 deaths.

All so that GM executives may pocket a few million dollars more in bonuses and compensation.

Via the Citizens United ruling and the subsequent ruling earlier this month lifting the ban on aggregate campaign donations,  the crooks in the Supreme Court took a huge step toward giving wealthy donors, including corporations, unlimited freedom to influence elections, considering corporations and the money they can give to influence political outcomes “people” entitled to “free speech” under the First Amendment.

The move to exclude millions of people who do not have the money to influence political outcomes does not only deeply compromise the political integrity of our governmental institutions, but, as Justice Beer wrote in the dissenting opinion, this “decision eviscerates our nation’s campaign finance laws, leaving a remnant incapable of dealing with the grave problems of democratic legitimacy that those laws were intended to resolve.”  

Again, the entities that will be paying the price are middle class wage earners who cannot, on the political sphere, match the wealth of a powerful corporation or a billionaire – not without allies, effectively resulting in only people of extreme means and wealth being able to influence elections.

Equating free speech with spending money in elections is, furthermore, not only deeply undemocratic, but it is no different than making voting contingent upon an individual’s wealth. No one can tell me that the vote of a poor citizen carries as much weight as the “vote” of a millionaire.

Of course, corporations are only people insofar as they can donate unlimited funds to buy  surrogate politicians to do their bidding. When it comes to corporate accountability –  another feature of being a person – however, corporations remain immune and cannot be held accountable.

Case in point, again, General Motors that is currently seeking lawsuit protection in federal courts for knowingly equipping their vehicles with faulty parts, resulting in millions of recalls as well as dozens of crashes and deaths.

This is a company that paid no federal income tax for 2011 despite earnings of $13 billion since 2009. Why? Because the Treasury Department (hint: our corrupt lawmakers that run the Treasury Department) gave GM permission to use the $18 billion in losses from the pre-bankruptcy company, the so-called old GM, to cancel out any profits it has made since it emerged from bankruptcy.

In essence, GM would have to make $1 billion for 18 consecutive quarters before the federal government, which bailed out the company, sees a nickel in income tax from GM.

In other words, GM got bailed out with tax payer monies and it not only not paid them back but is also not getting to put a dime into the very government coffers whose funds bailed them out in the first place!!

Guess who, amid this grand gesture of corporate welfare, will be tasked to pick up GM’s tax exemption? The middle class working stiff. (Not that other corporations in this country pay more, or any, taxes either.  See this).

Bootstraps

Hard work has very little to do with why the wealthy are wealthy. Why corporations and their executives keep getting richer by the minute and have become “too wealthy to fail” while those who work for them cannot afford buying a house or sending their kids to college or have any kind of social safety avenues available to them if some catastrophe were to happen.

The problem with poverty and a vanishing middle class in this country is systemic in nature with corrupt, greedy and self serving entities as the gatekeepers at every level, insuring that those wallowing in wealth remain where they are while those who subsidize them think they are on their way there while at the same time giving up their standard of living, their quality of education, their jobs, their worker protections, their civil liberties, their social safety net, their environment, their economy and their very democracy itself.

We are a at point now where those in the 25-to-34 age group are the best educated cohort in American history, with more than a third having a bachelor’s degree or higher. Yet nearly 50% of those are either jobless or underemployed, indicating that clearly, and while important, education alone does not create jobs and opportunities that lead to prosperity. For that, a fair and functional economy is needed — one in which the government, a government filled with people who have integrity, not the corrupt opportunists that are in its employ now – plays a robust role, alongside consumers and businesses, to promote full employment and to ensure a just distribution of gains.

Advertisements

, , , , , , , , , , , , , ,

  1. Leave a comment

Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: