This is not about immigration or our borders. It is not about cultural differences or becoming more Hispanic. This is about a growing income inequality in the United States that is just now beginning to mirror some parts of Latin America.
While we are in the midst of the Great Recession, the United States has many opportunities ahead. A Depression or Recession is a serious decline in the value of goods and services but it is not a permanent state unless we allow it to be. We need to tell ignorant and misinformed people to stop running around creating panic and spreading idiotic rumors about Socialism. If we do not, we will all witness the end of a great society and live a future that will be considerably less affluent than it is today. We will become Latin America.
The reason Latin America has only a few very wealthy individuals and a vast poor population is that Latin America was settled very differently from the United States. Fully one-third of the people of Latin America live in poverty…in other words, on less than $400 per year. Latin America ranks at the top of income inequality, outranked only by Sub-Saharan Africa.
The rest of the world recognizes the problem, as do the governments of Latin America, and they are at last attempting to use taxation as a tool to redistribute income in a more equitable way. It is necessary because modern economics demonstrates that the higher the income inequality, and the lower the incomes at the bottom, the faster it is necessary to accelerate production to increase GDP. In other words, the poor drag down the economy but a strong middle class automatically accelerates the economy.
The difference between the United States and the OECD countries, and now an emerging group of Latin American countries, Brazil included, is that in the in the United States government has been run by the Neoconservative, Right Wing Party. Our laws and courts have been controlled by and for an elite composed of wealthy, uneducated, unsophisticated, superstitiously-religious owners of oil, energy,natural resources, health care, and huge manufacturing and media corporations. This has to stop or we are headed for disaster.
They have been able to control the media and create a misunderstanding of true economics to the point that a large segment of the people vote and actually advocate against their own best economic interests. Even worse, they have now created a large and loyal base of followers with racist, religious and other ideological reasons for supporting them, much like the Jihadists.
After the election of an African-American President, the Neoconservative Republicans, whose goal is to support the large landowners, corporate owners (60% or more of corporate stock is owned by the top 1% of income earners) oil and energy companies and international corporations began to promote racism as an underlying theme in recruiting people who otherwise are the very people whose social services they want to restrict.
The experience of Latin America is the model for the Neocon groups who hope to become part of the elite and let the rest of the country–the bottom 80%–sink into poverty. In fact we may yet discover that they the current economic crisis was a deliberate attempt to restore that inequality by impoverishing a larger segment of the population on a permanent basis. Studies of Latin American countries prove that, once strong inequality is established, climbing out of that situation is very difficult, in fact, almost impossible.
The current Neocon argument is that the national debt is a huge problem which will bankrupt the country. First of all, it is necessary to state, categorically, that this is not so. It is only so if we continue to allow the top income earners in this country to pay only somewhere between 15% and 24% of their income in taxes. Many people say that we should have a flat tax. But it depends on the rate. A flat tax of 25% would not be good for the wealthy as many of them have sufficient wealth to live with annual incomes over a million dollars on tax-free annuities.
It is only the idea of taxing the wealthy, as we currently do, with incentives to keep and spend their money that we cause society to lack resources. The Republicans cut taxes for the rich, continue to spend on wars and more government and then claim that we are going broke. We have actually starved our industrial base with improper and ineffective tax structures that only encourage greed. Our tax structure at the top level should offer incentives for both personal and societal growth.
As the Latin American countries are moving from the colonial attitude, oddly the United States which has always been considered the modern and progressive society in this hemisphere has retarded its growth and become the reactionary.
Brazil and Argentina, from their earliest settlements in the 1500s belonged to Monarchic countries. By the time they separated from their European masters, the composition of the countries already included a great number of individuals who were part of an aristocratic tier. Largely landowners and owners of the natural resources, they prospered and the indigenous populations diminished. The first few settlers, given land by the crown, left descendents who exploited those resources, creating a small, elite upper class.
The difference in the United States was expediency. Our forefathers, the ones who became the leaders, were basically expatriates. These were people who left England not to seek fortune in the New World but left because they wanted one thing: freedom. We broke away from our original colonial masters and openly created a society based on merit. Even so, early families often amassed wealth and political power through ingenuity, good luck and hard work. But they created a society where others could come and find a place where they could live their lives independently with opportunity.
The monarchies who came originally, seeking wealth, pure wealth, often were people who already had it…the British Crown and the French Royalty and the Spanish nobility. Later, in the mid to late 19th Century adventurers came for gold or other potential riches. And of course the later waves of immigrants seeking jobs and land and freedom.
Latin American settlement was different. Brazil was settled and ruled by the Portuguese monarchy and controlled by it until the mid-19th Century. Once independent, it was ruled by a small group of those granted land by the Portuguese crown. The country remained a dictatorship until well after WWII and even with a gradual phasing out of dictatorial powers in the late 1980s, was still the country in the North American hemisphere with the greatest income disparity.
In the mid 1970s, with American influence and American technical assistance, these largely oligarchic societies across Latin America created an inter-country para-military force to police the rise of Socialist and Communist groups. Operation Condor, as it was called literally did away with, murdered, at least 60,000 people. The reason they could do this was that the power of government still remained in the hands of those same families the descendents of those who had come to Brazil, Argentina, Chile and other Latin American countries sponsored and sent by the monarchies.
These were relatively small groups in control of society. They wanted to prevent income redistribution. Marxism and Communism became the symbols of redistribution and anyone who sought to change society became not merely the enemy of one country but of them all. The United States had no small part in promoting and fostering this approach. And now we have private armies, the CIA and NSA looking into our personal lives.
Today in Brazil, for example, a number of former European families, Portuguese and Spanish families control much of the country’s economy, while the majority of the people are as poor as anywhere in the world. (Minimum wage amounts to less than $400 a year.) But enlightened economists are making headway in persuading these governments that progress must raise all boats or it eventually becomes too heavy a lift and all suffer from a moribund society.
Today, in the United States, we are rapidly approaching a two-tier society. The problem with this is that the top-tier now controls the message. And the message is that society must reduce taxes so that more people (in reality fewer people) have more of their own to spend. The second part of the message is that government takes too much of the citizens’ money and delivers too little. And the final part of the message is that, if government has too great a participation in citizens’ lives, it will control their lives, take away their freedom and impoverish them. Of course, none of this is true. The opposite is not true, but what the Neocons propose will happen is not true.
For example, many people are very happy on Medicare. Those who have Social Security and some other means of support are happy with it. The Neocons maintain that this system is unsustainable. Of course it is unsustainable if we keep cutting taxes and letting the rich take more and more out of the GDP and put it into their bank accounts.
So that we can put some things into perspective, the budget deficits of the Bush years were estimated to be, although they were probably higher, something like $250 billion per year. That was probably before the $1.3 trillion that Bush left Obama. So that would not be enough to cover the roughly $5.5 trillion that the deficit went up during the Bush years.
But this could be handled. First of all, we could trim the budgets to get down to $250 billion. Then we could reinstate the Bush tax reductions. That would add about $100 billion per year to the national revenues. We could add a tax of 2%, billed at port of entry on products manufactured by U.S. firms abroad. That would add another $40 billion per year. Then we could bring troops home from Iraq, cut the military budget by 10% (the largest military budget in the world, larger than all others, including Russia and China combined) and that would give us another $60 billion.
So now we are short by only $50 billion. Because the taxes on individuals at all levels would go back to the rates that they were when Bill Clinton was in office, we could then tax bonuses of Wall Street and non-Wall Street executives over $1,000,000 per year at 70% rather than 35% or 15% which they are now. We could then make that tax either payable immediately or allow the investment in domestic industry with a guarantee of only 10% capital gains on those funds invested in domestic, job-producing industries.
Jack Kennedy cut the top marginal tax rate from 90% down to 70% to stimulate industry. At that time we had an economy that was slowing, after the post-war boom years, and 90% taxation was choking off investment funds. What we need now is to do what the Neocons so proudly cheer, take up the Jack Kennedy tax policies. We need a 70% top rate. Just as on the Wall Street bonuses, we should allow a special tax deferral for that portion—up to say 30% of the 70% that is invested in domestic industry, with capital gains taxed later at only 10% on that specific income. The increased domestic productivity would more than make up for the 5% capital gains discount and the GDP would soar.
Those measures alone will take care of our current income, increase domestic product, increase manufacturing and will offer the same or better returns to those in the top income brackets. That would be structural solvency. If we still had a shortfall in Social Security, we could do any one of several measures, even a VAT tax with a sunset on it. Once the Baby Boomers pass through the Social Security system, it will be solvent forever.
So the question becomes one of where we want to go. Do we want to allow ourselves to slip into a permanent situation in which the top 1% control all aspects of the country—run our lives, own our courts, our corporations, our national and state governments—and where the people become poorer and poorer. If the fools supporting the Republican Party do not wake up and stop obstructing every piece of legislation, if they do not cease with this endless rancor over nothing at all…we make become a Latin American oligarchy. We may end up with very little private property in the hands of 90% of the population.
At that point we will have a Socialist society. There will be almost no ownership of private property. But there will be none of the benefits of a Socialist society…no free education, healthcare, retirement income or unemployment assistance. This is what a large segment of that upper tier of income wants. They are paying their Right Wing commentators…and you saw it in the health care bill…to create as much chaos as possible, create doubts, fears, anxieties, to insure that the Democrats, working for the People, are made out to be the bad guys and the Republicans, obstructing everything that could cost the rich some additional taxes.
We had better tell these racists and these white supremacists and the tea party morons and the Right Wing voter who support the “Party of NO” that they will not be allowed to hand our country over to the rich. We are not Latin America and we will never allow that kind of income inequality to happen here in the United States.