Government Policy Produces Record Levels of Economic Inequality in U.S.

Posted Dec. 31, 2014

MP3 Interview with Steve Schnapp, senior education coordinator with United for a Fair Economy, conducted by Scott Harris

inequality

In September 2011, Occupy Wall Street activists pitched their tents in New York City’s Zuccotti Park, near lower Manhattan’s financial district, launching a nationwide protest movement focused on social and economic inequality. Occupy’s mantra, “We Are the 99%,” spoke to rising income inequality and the divide between the wealthiest one percent and the rest of the nation. After a coordinated move by government officials and police to evict protesters from dozens of encampments across the country, Occupy activists drifted away, many getting involved in other progressive causes. But among Occupy’s most important legacies was a new public awareness of inequality, which opened the door to an important societal debate on the issue that hasn’t been seen in many decades.

In 2013, French economist Thomas Piketty’s best-selling book, “Capital in the Twenty-First Century,” examined the economic policies that contribute to the concentration of wealth in industrial nations. He concluded that today’s increasing disparity in income and wealth threatens to generate extreme inequalities that stir discontent and undermine democratic values. Among other recommendations, Piketty proposed a redistribution of wealth through the imposition of a progressive global tax on capital.

Today, despite declining unemployment, record corporate profits and a booming stock market that’s breaking all records, many Americans see their own economic situation as moribund, where stagnating wages can’t keep up with the rising price of housing, education and other basics. Between The Lines’ Scott Harris spoke with Steve Schnapp, senior education coordinator with the group United for a Fair Economy. Here, he talks about the issues of economic inequality in the U.S., with the focus on a sobering recent study by professors Emmanuel Saez of the University of California at Berkeley and Gabriel Zucman of the London School of Economics.

STEVE SCHNAPP: The last time inequality was as dramatic as this was in the late 1920s. So if you look at the top 1 percent and what their share of the total wealth pie – all the privately held wealth in this country – their share was close to 50 percent in 1928. That was a peak for the top one percent since at least 1917, when(Gabriel) Zucman and (Emmanuel) Saez are looking at the data that dates as far back as 1917. It is not quite as high now, but it's moving in that direction. So about 42 percent of the wealth pie is now owned by the top 1 percent. That's in the year 2012, the year that Zucman and Saez's study stops. So we're approaching that all-time peak for the share of wealth owned by the top one percent.

At the same time, and I'm looking at a graph now, which is quite extraordinary based on their data. It compares the top one percent and the share of wealth that they own, with the bottom 90 percent. And in the 1920s, as I said, the top percent had close to 50 percent of the total wealth in the United States. The bottom 90 percent had less than 25 percent. It began to grow through the 1940s, 1950s and 1960s. It grew to its peak, which was a little bit more than 35 percent. I think around 1986, '87, '88 and since that high point, in the mid-1980s, the share of wealth of the bottom 90 percent has gone down. Now it's around 20 percent, while the share of the top 1 percent has dramatically increased.

BETWEEN THE LINES: Could you summarize some of the policies that our federal government implements that affect this wealth inequality, that exacerbate this wealth inequality, and what kinds of policies could be changed, reformed, to reverse these trends of inequality?

STEVE SCHNAPP: Thomas Piketty in his book, "Capital and the Twenty-First Century," said you can't fix these problems in one country. You have to look at the situation globally. We have a global economy and so it's all inter-related, and so we need what he called a "global wealth tax." Right? Put a tax on wealth ownership. Taxes are very important rules that really drive income and wealth in one direction or another, depending on the kind of taxes you impose.

And what we've been doing over the last 30-35 years has been continuing to tax work at a considerable rate, but tax wealth much less than it's been taxed in the past. So, for example, the capital gains tax has been reduced in half over this period of time, so that people who make investments and then cash in on those investments are not taxed at the same rate as you or I would be, or even as they would be for their wages. So the more wealthy folks and investors can accumulate these investment vehicles and make money from them, the more wealth they can acquire, the more wealth they can then use to affect the political system and in turn to get more favorable tax laws and increase their wealth.

This is a vicious cycle that's been going high speed for the last 30-35 years. Trade policies, budgetary decisions, all sorts of policies that enable some folks to get on that wealth train, while the doors are closed for others.

BETWEEN THE LINES: If you were advising a grassroots movement that was trying to tackle the issue of income and wealth inequality, what would be the top agenda items you would advise such a movement to focus on in terms of demands and direct action?

STEVE SCHNAPP: Well, I'll answer your question. I don't think I'm in a position to give advice to these organizations. I'd rather hear what they have to say, to be honest. But I think organizations now need to develop a position of intersectionality. They need to see that economic justice issues relate to environmental justice issues. They relate to racial justice issues. They relate to gender justice issues. The more we can connect our struggles on particular issue areas to others, the more powerful we become.

These are really political issues. There are ways to make the economy more fair than it is today. Even under the capitalist system, we can make reforms. They've done it in other countries. Scandinavian countries, for example. So it's possible, but there needs to be a powerful movement that sees their particular interests interlocked with others who are also fighting for a variety of justice issues.

For more information on United for a Fair Economy, visit faireconomy.org.

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