The Elite Ruling Class Owns the Government and Funnels Taxpayer Money to Themselves

The Widening Gap in America’s Two Tiered Society

Emily Spence, Thomas Paine’s Corner
September 7, 2009

Americans, particularly ones from the middle class, need to realize that there are no core entitlements imparted by their government representatives, nor any other sources. They have none and should adjust their expectations accordingly.

There’s a rude awakening in store ahead if the U.S. populace somehow imagines its members are viewed any differently than any other populations across the world that are used to produce maximal profits for the top economic class. Further, most legislators simply do not care whether middle and lower class interests are or aren’t well served as long as they, themselves, can somehow make out well in the times ahead.

Besides, why should any Americans feel that they deserve to be treated more favorably by the transnational moneyed elites and their government backers than their counterparts across the rest of the world? As A. H. Bill reminds:

“The richest 225 people in the world today control more wealth than the poorest 2.5 billion people. And… the three richest people in the world control more wealth than the poorest 48 nations.”

Occasionally, someone making a staggering amount of money in a crooked sort of way might raise a few officials’ eyebrows or induce a mild reprimand. In addition, he might, occasionally, be singled out as the token fall guy so as to be made into a warning example as was Bernie Madoff. Most of the time, though, no action is usually undertaken to correct the situation when directors of major companies carry out activities that are, obviously, right on or over the edge of fraudulent practices.

As Barack Obama, perhaps hypocritically, chastened:

“Under Republican and Democratic administrations, we failed to guard against practices that all too often rewarded financial manipulation instead of productive and sound business practices. We let the special interests put their thumbs on the economic scales.”

Yet, he, himself, showed no hesitation during his election campaign over collecting $40,925 from the bailout fund recipient and nearly bankrupt investment house Bear Stearns, $161,850 from the bailout fund recipient and mortgage underwriter Morgan Stanley, as well as benefits from countless other institutions that have received government favors at taxpayers’ expense. As such, it’s hard in actuality to deliver more than just a mild verbal rebuke about these organizations’ modus operandi if one picks up a personal windfall from not meddling. Thus, the financial corruption continues at all levels of government.

A case in point is the self-serving oil trader Andrew Hall. His relationship with Citigroup’s Phibro energy-trading unit brought him approximately $100 million in 2008 despite that his parent company registered a net deficit of $18.7 billion for the same year and received $45 billion in TARP funds.

However, it’s been pointed out that he could moderately adjust his current level of gain and continue to maintain the same procurement pattern if he manages to stay out of the limelight. If he follows this plan in the near future, his earnings and bonuses won’t likely duplicate the $250 million personal compensation that he’d received in the past five years. Yet, he could still make out quite well all the same!

In any event, one has to question such lavish rewards considering that Citigroup suffered a 95% loss of its share value since 2007 in relation to which Phibro “occasionally accounts for a disproportionate chunk of Citigroup income.” At the same time, the U.S. government will shortly be the owner of 34% of this company. Put more bluntly, is Andrew Hall’s personal prosperity and propensity to add to his private art collection the best use of taxpayers’ funds?

As long as he’s a lavish beneficiary, would he care if they weren’t? As the economist John Kenneth Galbraith once suggested:

“The salary of the chief executive of a large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself.”

Naturally, Andrew Hall aims to keep such a cozy arrangement intact.

Besides, his personal take is relatively inconsequential. It’s a mere pittance contrasted to the almost two and a quarter billion dollars grand total — roughly $2,217,800,000 — that the top ten U.S. business moguls collectively grossed as their own recompense in 2008. [1]

At the same time, it cannot not be expected, in a market based economy, that political influence is not also a purchased commodity. Clearly, opinions are bought and sold just as easily as are any other products and services with payment being campaign funds, such as Obama’s, from big industry; offers of high paying future jobs and other lavish advantages dangled as bait.

On account of this kind of shady deal, tax subsidies connected to executive pay amounted to $20 billion in 2008 according to United for a Fair Economy (UFE) and Institute for Policy Studies. (Imagine if this money, instead, were allocated towards improvements in public education, provision of a universal heath-care plan or any number of other programs that could uplift the American public as a whole.)

During the same period, average CEO pay, at $10.54 million, was 344 times higher than typical worker pay. This disparity, also, is generally indicative of a trend that increasingly funnels wealth upward rather than having it more equitably distributed across class lines.

Another sign of this ascendant drift can be found in the change between the first Forbes 400 report (1982) and its 2008 version. In 1982, an entrepreneur only needed slightly more than $100 million dollars to get on the list. By 2008, he wouldn’t be in the top 400 unless he’d garnered at least $1.3 billion. In other words, so much more wealth shot upward in the last twenty years that $100 million now is almost viewed as chump change in comparison to the new top gains.

In addition, Congressional reports have indicated that widespread tax avoidance tricks, like use of overseas banks that do not report amounts to the IRS, have cost taxpayers more than $2 billion annually. Certainly, these lost moneys could well be used to help people less fortunate. For example, the hidden $2 billion could be used to create job training programs for any of the one in nine Americans currently forced to rely on food stamps as an alternative to starvation.

To be eligible for such aid, a family of four, for example, has to have no more than $2,389 as its gross monthly income or 130% of the official poverty level and no more than $1,838 net monthly income or 100% of the poverty level. (There are few deductions and exceptions to the requirements allowed, along with limits for owned property value imposed, that further determine whether one meets qualifications.)

In other words, a typical household of four cannot receive this help if the gross income for the foursome exceeds $28,668 annually and, for an individual, the gross not to be surpassed is $14,088. Additionally, recipients cannot have a great deal of assets with a clearly defined, too high level of worth.

As such, they have to be nearly broke across the board. Meanwhile, it’s clearly disgraceful that more than 27,651,388 Americans are so extremely poor they require food assistance to try to make ends meet.

Even that help, though, is often not enough to prevent further poverty, and many folks are unable to avoid outright destitution across the so-called wealthy U.S.A. So next, they lose their homes… and they lose them in droves. The huge portion of Americans who do so are staggering:

While the number of U.S. foreclosure filings climbed by more than 81% in 2008, the total is still sharply rising in 2009. In relation, 300,000 homes foreclosed per month from March to May in 2009 and 1.8 million homes represented the anticipated total for the first half of the year. With such a backdrop, one out of every 398 homes received a filing in April and a whopping 6.4 million homes are anticipated to be in foreclosure by mid-2011. Simultaneously, a record number of individuals, also, applied for bankruptcy.

In a similar vein, the jobless rate, despite some minor dips downward, is still seemingly on the rise. Therefore, the current number of out of work adults could well exceed 20% if all of the hopeless ones, who are no longer collecting unemployment benefits and who gave up looking for opportunities, are added into the mix.

Moreover, they will not be able to jumpstart the economy so long as they cannot find work, and especially work at a living wage. After all, how can anyone make lots of purchases or take out bank loans if he has no reasonable income? So it follows that even more retail and wholesale stores, along with banks, will go belly up. At the same time, the supply side of the market, itself, has created labor troubles. This is because goods have been overproduced. Consequently, there is overstock piled high in warehouses and shipping containers across the world ready to resume its path to the market once the spending reinitializes. However, spending cannot resume as long as the money has largely flowed to the top economic tier and away from average former and low wage workers, who can not expect to have decent paying jobs to create more goods until the current product glut diminishes.

In other words, consumers can’t buy much when money’s tight and work won’t be provided because there’s an oversupply of merchandise, which was largely produced in second world sweatshops whose workers are paid so little that they hardly can put food on their own tables, let alone make many more extravagant purchases (ones like toothpaste, soap and shampoo). Besides, they, too, face employment opportunities diminishing because worldwide sales are down for many of the products that, previously, their companies too copiously produced.

Concurrently, the bailouts, oriented towards fixing the credit side of the equation, are not addressing these sorts of supply side problems. Therefore, they will not keep the financial collapse from worsening.

Alternately put, TARP and other payoffs to the self-serving, unconscionable banksters and Wall Street high rollers largely responsible for the downturn will not produce an abundance of jobs. So the reasonable salaries, ultimately needed to buy the wares to cause industrial output to resume, won’t materialize any time soon.

It’s rather simple to understand, really. So why don’t Ben Bernanke and his colleagues seem to notice that massive job loss, itself, needs to be addressed posthaste? Why hasn’t a public works program been initiated? Why don’t they grasp that the act of offshoring all kinds of American jobs to maximize profits at the top tier does not ensure that products will be avidly snapped up by a greatly unemployed and underemployed public?

Since they, apparently, don’t understand, the downturn, with a few small upward twists, will remain in its plunging slide, which in turn will create further layoffs. All the while, the über-wealthy and their corporate supporters, such as most members of Congress, will continue to pamper themselves with capital largely derived from struggling taxpayers and massive loans that raise the federal deficit.

More to the point, how could the slump not last when the affluent elites gamble away huge fortunes comprising of their own and others’ money while manufacturing bubbles and Ponzi schemes in the process? How could anything change when they keep amassing more and more assets for themselves while indifferent to their impact on society as a whole?

Such practices as theirs obviously cannot sustain the American middle and under classes, and it cannot buoy up the utmost bottom rung either. On account, scores of individuals of all ages continue to wind up in tent cities or ensconced on public park benches. (Supposedly, families with children represent the fastest growing subset of the homeless population in the U.S.A. at present and the average age of a homeless person is nine years old.)

When the upper-crust keeps getting richer by taking an ever greater portion of the overall wealth, and government schemes assure that the process continues, nearly everyone else becomes increasingly cash poor. When every now and then big investors suffer hefty losses, the government steps in to shore them up again and again. However, this practice, clearly, does not help the populace in general. The evidence that it does not can be seen everywhere across the American landscape and the entire world.

It follows, then, that:

“In the United States, wealth is highly concentrated in a relatively few hands. As of 2004, the top 1% of households (the upper class) owned 34.3% of all privately-held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.3%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one’s home), the top 1% of households had an even greater share: 42.2%…,” according to G. William Domhoff, a sociology professor at University of California at Santa Cruz. [2]

Another way to measure the shift in wealth is by noting some of the corporate trends, themselves. As Sarah Anderson and John Cavanagh, at the Institute for Policy Studies, point out:

Of the 100 largest economies in the world, 51 are corporations; only 49 are countries (based on a comparison of corporate sales and country GDPs).

The Top 200 corporations’ sales are growing at a faster rate than overall global economic activity. Between 1983 and 1999, their combined sales grew from the equivalent of 25.0 percent to 27.5 percent of World GDP.

The Top 200 corporations’ combined sales are bigger than the combined economies of all countries minus the biggest 10.

The Top 200s’ combined sales are 18 times the size of the combined annual income of the 1.2 billion people (24 percent of the total world population) living in ‘’severe” poverty.

While the sales of the Top 200 are the equivalent of 27.5 percent of world economic activity, they employ only 0.78 percent of the world’s workforce. [3]

Especially exemplifying this type of corporate immensity is the Walmart company.

For example, the Walton heirs have a collective worth of around $65 billion and over 1.7 billion shares, or 43%, of Walmart stock in addition to earning $29 billion off the stock price rise alone from November 2007 to June 2008.

Meanwhile, the Waltons pay their jean laborers in Nicaragua approximately $1.50/ day. Simultaneously, their average U.S. workers are given wages of about $12,000/ annum, causing a full one half of Walmart’s 720,000 employees to qualify for food stamps.

At the same time, the clearly exploitive Walmart business model is considered an unqualified success — one that should be more often duplicated across the board. After all, it shows the capitalistic free market with its best possible outcome — profits beyond imagination and the American Dream come true (for the few who manage to take unfair advantage of the actual wealth producers)!

Perhaps, though, the best way to look at the new arrangement between citizens, State, and the rising corporate structures is through this superlative summation by Benito Mussolini:

The corporate State considers that private enterprise in the sphere of production is the most effective and useful instrument in the interest of the nation. In view of the fact that private organisation of production is a function of national concern, the organiser of the enterprise is responsible to the State for the direction given to production.

State intervention in economic production arises only when private initiative is lacking or insufficient, or when the political interests of the State are involved. This intervention may take the form of control, assistance or direct management. [4]

Even if Benito Mussolini’s position has an alarmingly familiar ring to it, no one still should expect U.S. legislators to create laws any time soon that would enact tax code changes in order to remove subsidies that encourage overpayment to executives and that cost taxpayers $20 billion a year. Indeed, nobody should expect any major changes at all that would level the financial playing field, remove a sense of economic injustice, or bring back jobs and reasonable wages to the American people.

As Joel H. Rassman, Toll Bros. CFO in 2006, explained about CEO Robert I. Toll’s $20 million compensation while shareholders were suffering a 22% loss:

“I have yet to meet the person who has enough money.”

Like Toll, a majority of Congressional representatives, of whom many are multi-millionaires, apparently imagine that they never have quite enough for themselves and justify their dodgy choices accordingly. They, also, know who butters their bread, and it surely is not the increasingly impoverished average U.S. citizens, who continue to be the indirect victims of corporate rapacity and pathetic corporate oversight by executives and Congressmen alike.

In relation, one wonders when a significant number of Americans will, finally, recognize that they’ve been had. Put another way by Andrew Greeley:

“It should be no surprise that when rich men take control of the government, they pass laws that are favorable to themselves. The surprise is that those who are not rich vote for such people, even though they should know from bitter experience that the rich will continue to rip off the rest of us. Perhaps the reason is that rich men are very clever at covering up what they do.”

This explanation in mind, we need not worry as much about the terrorists from abroad as the terrorists from above and the duped voters who repeatedly fall for political candidates pandering to this broadly malignant upper class. The latter bunch and their sycophantic legislative admirers, more than any foreign guerrillas, are leading the world’s wealthiest nation into ever deeper ruin.

REFERENCES:

[1] Top CEO collected $702 mln in 2008: U.S. survey – Yahoo! News

[2] Who Rules America: Wealth, Income, and Power

[3] CorpWatch : Top 200: The Rise of Corporate Global Power

[4] Benito Mussolini, 1935, Fascism: Doctrine and Institutions, Rome, ‘Ardita’ Publishers. pp. 133-135.

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