Posted by: dstieglitz | December 31, 2011

THANKS FOR PROTESTING

     The Occupy Wall Street (OWS) and Tea Party (TP) protesters are sending a loud wake-up call to Washington – and I thank them. While the protests have been small, it would be dangerous to ignore their anger. OWSers and TPers have legitimate but different grievances – as do those of us in the silent majority. Nobody is happy with the direction we’re heading these days. The 20-somethings – and not just those in tent cities – face longer working lives, reduced benefits, and higher taxes than their parents. Plus jobs are scarce, housing is expensive, and credit is hard to get even with a degree. The middle-aged are being squeezed by declining real wages, underwater mortgages, and shrinking pensions. And the expanding community of retired folk watch helplessly as erratic financial markets and inflation erode their savings. Many people wonder if the U.S. brand of democracy and capitalism can work in today’s complex world.

Anger at Washington. Unfortunately, Washington seems deaf to the protesters and everyone else. Two bipartisan committees produced credible proposals – but even they were ignored. Who can blame workers, business owners, and investors for being angry with the President and Congress after they threatened to shut down the government several times, lost the country’s AAA credit rating in August, and had a “Super Committee” meltdown in November. The anger toward Washington over the country’s sorry state has been a topic at many seasonal celebrations. The president and Congress seem oblivious to the pain their partisan rhetoric and lack of action inflicts on the people who elected them.

The Gap Between Rich & Poor.  Economic inequality also fuels the street protests. The social contract isn’t working: prosperity hasn’t trickled down to Main Street. In 2008, the income of the top 10% of Americans increased to nearly 15 times that of the bottom 10%. According to the Washington Post, members of the U.S. House of Representatives have done pretty well too: their average net worth has risen to 36 times the average American’s net worth. The income gap continues to widen because skilled workers and companies are earning most of the wealth created by technological progress. To reverse the trend, Congress must implement social and tax policies that offer more opportunity and training for those at the bottom. According to the International Monetary Fund (IMF), countries with a narrow income gap enjoy longer economic expansions. Recoveries fizzle in countries with a wide gap because they fall into gridlock and can’t enact the tough policies required to spur growth. That description certainly fits the U.S. Congress.

Tax the Rich.  The shift toward inequality has been happening for 30 years. But when people are doing okay, the fact that some people are doing better doesn’t bother anyone. However, when people run into rough times, inequalities that were once tolerable become offensive. For the most part, Americans see the rich as deserving people who pioneer technologies, run companies, or excel as entertainers or sports heroes. Few resent Bill Gates, Warren Buffet, Oprah Winfey or Kobe Bryant because of their wealth. Moreover, the rich already pay most of the taxes. The Congressional Budget Office says the richest 10% earned 38% of the income and paid 55% of all federal taxes in 2007; while the poorest 40% paid only social security and Medicare taxes – if they worked at all. To balance the federal budget everyone must pay more – especially the rich.

The Tea Party & Occupy Wall Street Movements. Recently, Wall Street has had record profits while middle- and low-income people are left holding the unemployment bag. The result is TPers on the right and OWSers on the left, and a President whose Gallup approval rating is just over 40%. As the table shows, the two groups share a belief that our economic system is broken, and that Congress favors the special interests that get them elected. Although specifics differ, both sides want big changes.

 

Tea Party View

Occupy Wall Street View

Taxes & the Economy

With a weak economy, TPers resent paying so much in taxes for a bloated and ineffective federal government

OWSers feel squeezed – they continue to struggle to make ends meet while the millionaires on Wall Street are living big

Special Interests

TPers think the politicians cut back-room deals that hand out pork to the special interest groups that get them elected

OWSers think politicians are owned by the special interest groups and lobbyists who favor big businesses and the rich

Bailouts

TPers consider the bank bailouts, auto company rescues, and give-away welfare programs as a form of socialism

 OWSers are enraged that Wall Street and the auto companies got help while the middle class continues to suffer

 Debts

 TPers see the huge federal debt as a sign the that government is growing way faster than the country can afford

 OWSers are worried about personal debts like underwater mortgages and student loans more than growing federal debt

 Government Programs

TPers want to cut wasteful government programs and have the services delivered by free market companies

OWSers want the government to increase spending to create jobs and help the poor – and the rich should pay for it

 Politicizing the Protests.  Even worse than not hearing the TPers, OWSers, Main Street, and two bipartisan committees, Democrats and Republicans are using the protests for political gain. President Obama, who has bashed business and promoted class warfare since his election, is courting OWSers to revive his sagging re-election hopes. And Republicans are sympathizing with both TPers and OWSers in order to win votes. Several misguided regulations, written in anger by Congress, have handcuffed banks and companies in their ability to grow. To be sure, the banking industry messed up horribly. But people still need a place to safely park retirement savings; and companies – you know, the organizations that create jobs – need bankers to finance growth. Unfortunately, it’s unlikely that the president and Congress will stop posturing for the 2012 election long enough to do something meaningful this year.

The Solution.  Hopefully, we’ll elect a courageous President and Congress next November who put the American people ahead of reelection. First, they would take job-creating actions like approving the Keystone pipeline, funding new infrastructure projects, and reducing regulations. Second, they would boost growth through policies like less short-term austerity and more long-term fixes to entitlement programs (e.g., a higher Social Security retirement age). Third, they would make the rich pay their fair share, but in a way that makes economic sense like eliminating deductions and lowering marginal rates. Fourth, they would implement use-based taxes like a gasoline tax to pay for roads and bridges, and broaden the tax base with a reasonable value-added tax. Lastly – and most importantly – they would tell the truth about how the country got into such terrible shape. Today’s huge federal and state debts were caused less by the bailouts and recession; and more by politicians spending too much in the boom years, recklessly cutting taxes, and making unaffordable promises for retirement and health care. Weak growth and high unemployment – especially among the young – will continue to inspire the protesters. Since much of the unemployment is due to irreversible technology advances and globalization, economic growth isn’t a panacea: broad retraining of unemployed workers is needed. The bottom line: I am forever grateful to the TP and OWS protesters for making a bolder statement than I’m willing to do as a member of the silent majority – on the other hand, I vote every year and I hope you do too.

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Responses

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