The Rich Have Gained $5.6 Trillion in the 'Recovery,' While the Rest of Us Have Lost $669 Billion (Part I)
It's no accident.
May 3, 2013
Oh, are we getting ripped off. And now we've got the data to prove it. From 2009 to 2011, the richest 8 million families (the top 7%) on average saw their wealth rise from $1.7 million to $2.5 million each. Meanwhile the rest of us -- the bottom 93% (that's 111 million families) -- suffered on average a decline of $6,000 each.
Do the math and you'll discover that the top 7% gained a whopping $5.6 trillion in net worth (assets minus liabilities) while the rest of lost $669 billion. Their wealth went up by 28% while ours went down by 4 percent.
It's as if the entire economic recovery is going into the pockets of the rich. And that's no accident. Here's why.
1. The bailouts went to Wall Street, not to Main Street.
The federal government and Federal Reserve poured trillions of dollars into Wall Street through a wide variety of financial maneuvers, many of which were hidden from view until recently. When we add it all up, it's clear that most of the money floated right into Wall Street. (Fannie and Freddie were private institutions that also considered themselves part of the Wall Street elite.)
2. Wall Street is Washington, Washington is Wall Street.
Those who shuttle back and forth between Washington and Wall Street designed the basic policies that both led to the crash and that responded to it. Hank Paulson, Bush's Secretary of the Treasury, served as chairman of Goldman Sachs before going to Washington. Timothy Geithner, Obama's Secretary of the Treasury, headed the regional Federal Reserve Board in New York (a board composed of Wall Street's Who's Who) before joining the Obama cabinet.
Countless government officials and congressional staffers can't wait to leave public service for lucrative jobs on Wall Street. Their collective mindset is that the world can't function properly unless the richest of the rich get richer. Any and all policies should therefore protect our biggest banks, rather than hinder them. And, of course, both parties are in hot pursuit of Wall Street campaign cash. Little wonder the so-called "recovery" transferred wealth from us to them.
3. The Federal Reserve banks on trickledown.
The Federal Reserve's ongoing stimulus policy comes down to this: The goal is to reduce interest rates on bonds of all kinds so that money flows into stocks. The more money that goes into the stock market, the higher go the stocks. Rising stock prices leads to what economists call the wealth effect -- those who see their stocks rise dramatically feel richer and spend more. That's supposed to trickle down to the rest of us: The rich spend more, businesses recover and then, maybe, hire more people. It's working beautifully for the super-rich but obviously not for the rest of us.
But wait, don't most of us own stocks either directly or through our pension funds and 401ks? Dream on, says this chart:
4. Washington fails to create enough jobs.
Wall Street's gambling spree tore a gaping hole to our economy. In a matter of months more than 8 million workers lost their jobs due to no fault of their own. What these elite financiers did to us is unconscionable, and they haven't had to pay a dime for the damage they caused. Although the stimulus programs prevented the slide from deepening, it was far too small to put America back to work. So now we're facing the highest levels of sustained unemployment since the Great Depression. The biggest victims of Wall Street greed are the long-term unemployed.
Source: Business Insider: http://www.businessinsider.com/unemp...january-2010-2
5. Government goes on a job-killing spree.
After Wall Street crashed the economy, businesses failed, workers lost their jobs and state and local tax revenues collapsed. In a just world, Wall Street would have been taxed to make up the difference. Instead, public employment was slashed. This further cut back on consumer demand, reduced tax revenues and then created pressure for another round of government job cuts. Of course, the Tea Party right loves the idea of crushing government jobs and public employee unions as well. But the main result is to increase unemployment, which in turn puts downward pressure on wages and increases profits for the wealthy.
As Michael Greenstone and Adam Looney point out ("A Record Decline in Government Jobs: Implications for the Economy and America's Workforce"), "we are in unchartered territory when it comes to government employment." The chart below from their Brookings article shows that among the major state and local job categories, only firefighters saw an increase.
Occupation Employment (2009) Employment (2011) Change in Employment Percent Change in Employment Teachers 3,942,700 3,721,938 -220,762 -5.6% Policemen 666,579 610,427 -56,125 -8.4% Fire fighters 233,051 277,158 44,107 18.9% Emergency responders 69,370 39,170 -30,200 -43.5% Air-traffic controllers 23,959 17,128 -6,831 -28.5%