By Martin Bosworth
The other day at the gym, I was listening to the talking heads on CNBC yammer on about the usual, and I heard one classify the recent moves in Congress to tax private equity fund managers’ fees as income as “a war on wealth.” If you think I’m kidding, watch this video (the exact news clip I saw) and judge for yourself.
There is indeed a “war on wealth,” but the war is about making sure that only a select few have wealth while the rest of us slave away in the fading hope of ever generating any. The Post article about the “Blackstone Tax” is a perfect example of what I mean–how insane is it that Charles Grassley, one of the most ardently fiscally conservative Senators and the author of the draconian new bankruptcy laws, is fighting for the populist side, while Chuck Schumer is defending corporate welfare for Manhattan’s financial elite?
The vast majority of us will never have access to the kind of multibillion-dollar sums being tossed around in these private equity firms that supposedly generate jobs and investment, but seem chiefly designed to fatten the managers’ pockets. For most of us, owning a home or having a rich relative croak on us is the only way to generate significant assets beyond our income. Indeed, David Lereah, the former chief economist for the National Association of Realtors, once said that people who paid off their mortgages were “unsophisticated” and should have used the equity from their homes to invest, consume, etc. Lereah has been largely disgraced by the army of housing bubble bloggers who tracked his many contradictions and pronouncements, and he recently left the NAR.
The problem is though Lereah is a hack and a shill, he wasn’t wrong–home equity IS the only way many people will ever have wealth. And because of the failing housing market, which is pushing a record number of homes into foreclosure, and crushing the property values of neighborhoods all over the country, even that’s no longer a safe bet.
Ironically, because so many of those homes were purchased with now-delinquent subprime loans, the failures are causing many subprime lenders and mortgage holders to go belly-up, and if it hadn’t been for Bear Stearns providing some last-minute bailouts, we’d be a lot closer to market collapse–and we may still be on that path.
Americans’ personal savings rates are at miserable levels for a variety of reasons–massive credit card debt, high gas prices, soaring college tuition costs, increasing daily expenses, and wages that don’t rise fast enough to handle any of this (though they are improving of late). The reasons behind this have caused econbloggers such as Hale “Bonddad” Stewart
and Max Sawicky to spar and discuss what it will take to fortify the middle class and keep us from devolving into a new Gilded Age.
The basic problem to me is that we venerate conspicuous consumption and encourage debt in order to promote the illusion of wealth. When consumer spending accounts for 2/3 of our GDP, it’s no wonder we’re told to spend, spend, spend, and put it on credit. We don’t make anything in this country any more, and our economy has transited so completely into a service/retail/management paradigm that the only thing left to do is make ourselves into commodities, to be bought, sold, and traded by the whims of the job market.
There’s no excuse for why it took Congress almost thirty years to raise the minimum wage to the pitifully low level of $7.25–and that only by offering a sweetener of tax breaks for businesses to get it passed, AND attaching it to legislation to keep the Iraq debacle funded. Ridiculous. And yet, this is the framework we live in.
There is indeed a “war on wealth, ” but the war is being waged to ensure the “haves” get more and keep more, while the “have-nots” have even less. And right now, the “haves ” are very much winning.