Monday, August 01, 2011

Redistribution of Wealth in America: Obama or Reagan?

There is large scale social injustice in the U.S. Addressing these injustices requires intervention and large expenditures by the government. Opposition to these programs has always existed but it has grown significantly during the current recession, when many of the people affected by the recession are easily convinced that such programs have overburdened employers resulting fewer jobs and lower pay, as well as, higher personal taxes. All such programs, especially when the head of the federal government is black, are labeled by those who oppose them as "wealth redistribution" schemes. Similarly, other uses of tax revenues, except those that enrich government contractors and big business, are also under attack: all local, state and federal employees, especially those that are unionized. Both public and private employee unions are being attacked. The opposition claim: all such programs and organizations are intended to take money from the workers and give it to the non-workers; to take jobs from the unorganized and give them to the organized.
South Africa, used as an example of how "redistribution of wealth" is destructive, has the second largest wealth inequality gap among all nations. Although South Africa has not succeeded in closing the gap, I don't think of any of it programs are unjust. Taking property from some white South Africans and giving it to some black South Africans after apartheid seems like blatant redistribution but in reality the only property transferred to the blacks had been confiscated from the blacks under apartheid. Although there are many successes that have come out of South Africa's efforts to correct the injustices of apartheid, many changes have yet to yield improvements in the lives of the black South African. Take for example, the transfer of lands back to the black South African. Giving a person the deed to land used for farming and herding, does not enable the poor, uneducated black South African to be a successful farmer/rancher. The land must be returned to its original and rightful owner but the government must also pay to train and equip the new landowner for farming/ranching. However, South Africa can not afford to adequately fund all the programs to support all the victims of apartheid.  Improvements are being realized but they are painfully slow.

Unified Germany experienced some of the same expensive problems that South Africa is struggling with. Many East Germans had their property confiscated by the communist government that came to power after WWII. The infrastructure of East Germany was decayed and many East Germans were poorly educated, untrained and unemployed or underemployed when East Germany was freed and united with West Germany. The only way to restore East Germany and the East Germans was through taxpayer funded government programs. Properties were restored to their original owners (in many cases the original owner was a Jew whose property was confiscated by the Nazis before it was confiscated by the communists). The decayed infrastructure was rebuilt. Programs were established to develop East German industry and the East German worker. Higher income Germans pay a "solidarity surcharge" on their income that is used exclusively to fund the Unification of Germany. After more than 20 years, the German taxpayer is still paying this special tax and great progress has been made. What would East Germany be like today if Germany had not imposed a "solidarity" surcharge. The surcharge applies to any person (or couple) making more than $10,000 ($20,000) up to a maximum of 5.5% at $1.8 million ($3.6 million).

South Africa has yet to succeed in correcting for the damage of apartheid and they have many, many more problems to deal with than did Unified Germany (high HIV/Aids infection rate, and communities without electricity, drinking water and sanitary sewers) but there is no other way than large government spending.

Income and wealth inequality in the U.S. increased during the last 40 years after having decreased in the 30 preceeding years. Prior to the rise of labor unions and banking and business regulations, the only opportunity that existed for a poor American was to "go West" beyond the interest and control of big business. Elsewhere, non-rich Americans had an opportunity to work 72 hours a week for room and board, no vacation, no medical benefits and, above all, no retirement. Americans often lived in multi-family homes (grandparents, parents, uncles, aunts and cousins) not because the family unit was so strong but because single-family homes were unaffordable for everybody but the rich.

Labor unions with the support of federal regulations brought significant improvements to the standard of living of the working class Americans. These changes and improvements were significant every where except the Southern states where local and state governments supported businesses who opposed unionization - sometimes with deadly force.

After WWII the federal government returned 100's of thousands of unemployed and largely unskilled soldiers and sailors to the private sector, which did not have the capacity to employ everybody. Government spending through veterans benefits programs provided vocational and professional training, and subsidized home mortgages. The Middle Class was born and income/wealth inequality was at an all-time low. The Civil Rights Movement and the resulting laws opened up the Middle Class to black Americans, albeit only slightly. Today intervention such as this by the government would be labeled "redistribution" of income and wealth. It would be attacked as anti-American: Socialism.

Americans elected Ronald Reagan in 1980 who promised to restore American values following our rebellious '60's and the political and military disasters of the '60's and '70's. The U.S. was struggling to recover from a recession and astronomical inflation. Conservatives and the Rich blamed government social programs. Reagan said that the best way to help the struggling Middle Class was to reduce the tax burden on the Rich and big business. Social programs for the Poor, the Elderly and the Disabled were cut. Spending to grow and maintain our national infrastructure was reduced. Safety and environmental regulators were eliminated or not enforced. Big Business was giving tax credits to subsidize expansion to offshore markets. These changes, "Reaganomics," are what I would call "redistribution" of income and wealth.

Reaganomics was enormously successful for the Rich and Big Business. The Poor got poorer and grew greater in number as the Middle Class shrank. Reaganomics, if it was intended to benefit all Americans was all but a complete failure; only the Rich benefitted from trickle-down Reaganomics.

Big Business was so unregulated and corrupt that it finally failed in 2008. Banks were broke. Businesses large and small closed or cut back significantly. Ten million American workers were suddenly out of work. To save Wall Street, the taxpayer bought the banks' bad debts. To save Main Street, a new Democratic president spent taxpayer money on the national infrastructure and the development of new industries. The Opposition said the money was wasted increasing the plight of the poor and middle class taxpayers, while supporters said too little was spent.

The Opposition labeled the effort a "redistribution of income and wealth" from the successful (the Rich) to the undeserving, i.e. those left jobless or underemployed after the distruction of the American Economy by the Rich.

The only unjust redistribution of wealth in the U.S. resulted from the changes that began with Ronald Reagan and continue today.

One would think that the abundance of evidence that Reaganomics does not work would cause Americans to demand that our governments reverse the changes enacted for Reaganomics. But, Conservative propaganda laced with hate and race-baiting directed at the poor, the minorities, the illegal aliens (rather than their employers) and President Obama have been very successful.

Unless President Obama retains the White House and the Democrats resume control of both Houses of Congress in 2012, and at least one conservative Supreme Court Justice retires and is replaced by a liberal, I fear the U.S. will become a country with a small and politically powerful super rich population served by an enslaved lower class.