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Via Paul Krugman’s blog, via Frank Rich’s column, I came upon a study of income gaps titled Striking it Richer.  The report includes several graphs of income disparity, including this one that shows what percentage of total income the top o.o1% took from 1913 through 2007:

The top .01% (top 14,988 US families, making at least $11.5m in 2007) share increased from 5.46% in 2006 to 6.04% in 2007 leaving well behind the 1928 peak of 5.04 percent (Figure 3). This shows that 2007 was an incredibly good year for the super rich.

2007 wasn’t too bad for the rest of us either, but not near as good as it was for our overlords.

Everything changed in 2008, but the data is not available yet, so no graphs.  The report does make a prediction though.

The economic landscape has obviously changed dramatically since 2007 which marks the peak of Bush expansion. We know from National Account statistics that real incomes per family will fall in 2008 and 2009. Evidence from past recessions suggests that, in general, the top percentile income share falls during recessions, as business profits, realized capital gains, and stock option exercises fall faster than average income. Therefore, the most likely outcome is that income concentration will fall in 2008 and 2009. 

Based on the US historical record, falls in income concentration due to recessions are temporary unless drastic policy changes, such as financial regulation or significantly more progressive taxation, are implemented and prevent income concentration from bouncing back. Such policy changes took place after the Great Depression during the New Deal and permanently reduced income concentration till the 1970s (Figures 2, 3).

Last week the House passed a financial regulation bill that not one Republican supported.  Apparently everything is okay with the Repugnicans.  They think we don’t need to do anything prevent another financial catastrophe that will require the bottom 90% of us to bail out the billionaires who gamble with our money and lose.

Krugman explains:

Talk to conservatives about the financial crisis and you enter an alternative, bizarro universe in which government bureaucrats, not greedy bankers, caused the meltdown. It’s a universe in which government-sponsored lending agencies triggered the crisis, even though private lenders actually made the vast majority of subprime loans. It’s a universe in which regulators coerced bankers into making loans to unqualified borrowers, even though only one of the top 25 subprime lenders was subject to the regulations in question.

Oh, and conservatives simply ignore the catastrophe in commercial real estate: in their universe the only bad loans were those made to poor people and members of minority groups, because bad loans to developers of shopping malls and office towers don’t fit the narrative.

In part, the prevalence of this narrative reflects the principle enunciated by Upton Sinclair: “It is difficult to get a man to understand something when his salary depends on his not understanding it.” As Democrats have pointed out, three days before the House vote on banking reform Republican leaders met with more than 100 financial-industry lobbyists to coordinate strategies. But it also reflects the extent to which the modern Republican Party is committed to a bankrupt ideology, one that won’t let it face up to the reality of what happened to the U.S. economy.

Come on Democrats!  That includes you Blue Dogs in the Senate.  Start acting like you won something last November.  We voted for change, and we want it.

I understand the theory of The Republican Road to Recovery (see below) and I know how it “works” in practice, because it’s been the economic doctrine of choice for most of the last thirty years.  The theory, also known as “supply side” and “trickle down,” is supposed to provide extra cash and capital to entrepreneurs who will in turn use their wealth to create jobs.  The people who get those jobs spend the money they earn on goods and services.  Their spending creates more demand for those goods and services, which in turn creates even more jobs.  The theory works great… on paper.  Kind of like last year’s Mariner team looked good… on paper.

The problem with the theory is that the very wealthy people at the top don’t practice what their party preaches.  They don’t “trickle” their new found wealth down onto the rest of us.  The rich have kept almost all of their tax savings for themselves.  And the jobs they have created over the past six to eight years have not raised the average American’s standard of living.  Average workers lost ground while those at the top saw their incomes nearly double.  The jobs that have been created are generating more and more wealth for owners of the companies, but most of the people they employ aren’t getting paid enough to keep up with the increased cost of living.

So the Republicans’ plan to give the super rich hundreds of billions of dollars in more tax cuts every year is about the worst thing we could do right now.  Historical data shows that their plan does not stimulate the economy.  All their recovery plan would do is provide billions of dollars to the already super-rich people who would use their tax savings to replenish their depleted investment portfolios.  Very little of “stimulus dollars” from tax cuts would go back into the economy. 

To reiterate what is in the post below, the average CEOs of Americas largest 800 companies would see a tax cut of $1,500,000 every year if the tax cuts outlined in The Republican Road to Recovery were implemented and Paul Ryan’s plan to eliminate the capital gains tax was enacted.  Now that’s what I call “redistribution of wealth,” but the redistributed dollars would be going to people who are already obscenely rich.

Here’s a chart I found a couple days ago on Open Left that shows how much bang for the buck different types of stimulus plans provide:

You can see from the chart that tax rebates work on about a one-to-one ratio.  People spend their lump sum payments, and it provides the economy with a quick shot in the arm.

The chart shows that permanent tax cuts are very ineffective at stimulating the economy and creating jobs.

You can see that government spending is very effective at stimulating the economy.  Why?  Because it creates both jobs and demand for things that people going through rough times, like many Americans are right now, would otherwise choose not to spend their money on.  It’s no surprise that the biggest bang for the buck comes from extending income support to people who lost their jobs for the obvious reason that they will spend every penny they get.  Infrastructure spending is also very effective because it creates employment and it improves productivity by rebuilding roads, bridges, schools, dams, water systems, electrical systems, etc. that must operate efficiently for our economy to prosper.

So my solution for stimulating the economy would be to extend unemployment benefits, and provide tax rebates for single payers making under $80,000 and joint filers making under $160,000.  To help pay for the government spending, I would immediately raise the top tax rate to 50% and then increase it again later if needed.  (That’s still a pretty good deal when you compare it to what the top rates were between 1932 and 1980.)   I would leave other tax rates as they are for now, but in two years I would raise the 28% bracket to 30% and the 33% bracket to 35%.

I would then dole out some money to the states for the next two years to help them with the demand for health and human services due to recession-caused unemployment.  I would also let them know they can’t rely on federal funds once things turn around in two years, so they better find a solution to their revenue problems between now and then. 

I would spend heavily on infrastructure repair, and I’d start right here Seattle!  I’d order up a construction crew to start boring the tunnel to replace the viaduct right away and another crew to reinforce weak points on the viaduct that will have to remain in place for the five or more years that it will take to complete the tunnel.  Then I’d hire a demo crew to tear the viaduct down.  And then I’d throw a huge party for the people of Seattle to celebrate the destruction of their city’s ugliest and noisiest road ever built.

There are projects like this all over the country.  There are old levees, old bridges, flooded roads, dilapidated schools…  We should spend the money to fix these things now.  The spending will create jobs and it will improve our productivity in the long run.

And that’s the HariKari stimulus recovery plan – Guaranteed to work.

Today the wealthiest among us are complaining about Obama’s plan to let the Bush tax cuts expire in 2011, putting the top tax rate back where it was under Clinton at 39.6%.  The rich and all their blowhard mouthpieces are screaming about how Obama’s plans to use the increased revenue to pay for much needed infrastructure rebuilding, school buildings, education, and the expansion of healthcare coverage is “socialism” and a “war on the wealthy.” 

What they’re not saying or admitting to is that there hasn’t been a better time to be rich in this country than since just prior to the Great Depression when the top marginal income tax rate was 25%.  Since then the top rate has been as high as 94% and as low as 28% for a three-year stretch during the Reagan era.  It was above the current rate of 35% for seventy-two of the previous seventy-seven years.  Remember that “Socialist” Eisenhower era of the fifties?  The top marginal rate during his presidency was 91%. 

The rich are now entering their tenth year of Bush’s Low-Tax Party for his “base.”  They’ve been given hundreds of billions of dollars in the form of a 4.6% tax reduction on their earned income and a 5% tax reduction on their income from capital gains.  The money the rich received from these enormous tax breaks was supposed to somehow trickle down to the other 95% of us.  Wealthy entrepreneurs were ideally supposed to use those tax savings to provide increased benefits for the working class in the form of salaries and other benefits like healthcare and retirement plans. 

Well let’s take a look at how that “trickle down” action worked.  Here’s a bar chart from The American Progress Report publication titled Understanding Bushonomics – How We Got Into this Mess in the First Place.  The dark bars indicate 2002 levels of income and the light bars indicate 2006 levels of income.

The text on the chart reads:  “Between 2002 and 2006, real household income in the U.S. grew by 836 billion.  Fewer than 15,000 families got 25% of that Growth. … The 133 million households that make up the bottom 90% of American families divided only 4% of the nation’s income growth raising their average income from $30,354 to $30,659.”

Want another view of “trickle down” economics?   Take a look at this pie chart from the same publication.

The top 1% decided to keep 73% of our increased income for themselves.  The top 10% kept 95% of the income.  The bottom 90% got to share the remaining 5% of the increase. 

This is how Reagan’s economic model, embraced by Bush, works.  Now might be a good time to point out that Reagan at least showed some restraint.  When he lowered the top rate to 28% he raised the capital gains rate from 20% to 28%.  His thinking was that because the rich were getting such a huge cut in income taxes – from 50% to 28% – their capital gains should no longer be taxed at a lower rate than their earned income.  Bush, on the other hand, was so beholden to his base that he cut their income taxes and lowered the capital gains tax to 15%.  And the rich got way richer and the rest of us fell behind.  This system combined with the rapacious greed exhibited by “the haves” has led to our nation’s greatest gap of income inequality since before the crash of 1929. 

So when you hear some extremely wealthy person or one of their gasbag media mouthpieces whining about paying 4.6% more of their grossly inflated incomes to the U.S. government, remember these charts.  The rich took nearly all of the income.  They should be paying way more income taxes. 

Froma Harrop pointed out in her latest column that Republicans often remind us that even John F. Kennedy cut taxes.  But they fail to mention that he lowered the rate to 70%, which is 30 points higher than where it will be when the Bush tax cuts expire.  You think your hearing cries of socialism now?  What would you hear if Obama raised the top marginal rate to 70% again?  Or 91% as it was during Eisenhower’s time?

I’ll tell you what you’d hear.  Socialism!  Job killer! Communist!  War on the Wealthy!  Class War! 

Well screw them.  Even with those extremely high top-tier tax rates, the American economy prospered, and everybody’s incomes went up dramatically, not just for the top 1%.

Did I mention that all that economic growth and leveling of incomes took place during times of war?  That’s right…  During WWII the top tax rate was within the range of 81% to 94%.  During the Vietnam War the top rate ranged from 70% to 77%.  Over the entire Cold War, the rate started at 86.45%, went up to 92% and down to 28% right before it ended.  Presidents used to ask Congress to collect money to pay for the costs of waging wars.  Each generation was taxed to pay for the wars so that the next generation wouldn’t be overburdened with a previous generation’s war debt.

And what did our last “War President” do with tax rates while he waged his “War on Terror?”  His administration gave us the biggest tax cut in our nation’s history.  The tax cuts resulted in somewhere around 1.9 trillion dollars in lost tax revenue, and the lion’s share of those tax savings went to the wealthiest among us.

So you see, it has been an extremely good time in our history to be very wealthy.  If you were a wealthy person during the last decade, you saw your income double and your taxes go down.  What a deal!

Well all parties have to come to an end, and now it’s time for the greedy people at the top to start giving back some of what they kept from the rest of us.  Don’t feel sorry for them.   They don’t need your pity. 

We need their money.  We need it to repair our crumbling infrastructure.  We need it for new schools and better education systems.  We need it to build new energy-efficient transit systems.  We need it to make our population healthier.  We need it to invest in research to develop clean energy sources.  We need it for our country’s future. 

Investing this money now will help us recover from the current financial crisis, and spending it in ways that leads to lower energy use, and in ways that make all of us healthier and smarter will grow our economy and make us competitive again.  That’s how everybody wins.

Hey everybody!  Are you all feeling good about your investment portfolio today?  I’ll bet you might be thinking about how you’ll be able to retire early.  Like in your early eighties maybe…

But that’s only a problem for us working stiffs.  If you are one of the big cats in the corporate financial arena, then you’ve gotta love this free-market financial system that the Republicans and a few craven Democrats have been pushing through congress since the Reagan years.

I mean really, what better way to make a killing than to run a financial institution in these times?  If you do well, you get rewarded with a multi-million dollar salary and millions more in stock options.

If you make bad decisions while you are earning that salary and the firm goes bankrupt or gets bought out, no big deal!  You still have your millions even if all the people that worked so hard for you to realize your dreams are now unemployed.  But that’s not your problem.  They knew the risk when they took the job at a globally respected 100+ year old firm, right?  No reason to feel sorry for them!

And if the decisions you made turned out to be really stupid and the company starts to sink, well you might as well mess it up as much as you possibly can, because then the government will step in and rescue it so that the fallout from your failed company doesn’t totally destroy the economy.

You walk away a wealthy man, keep your mansions, fancy cars, and boats, and the taxpayers pick up the tab!

BRILLIANT!

He’s so rich that he can’t even keep track of how many houses he and his wife Cindy own.  When asked about it by Poltico.com yesterday, he said:

“I think — I’ll have my staff get to you.  It’s condominiums where — I’ll have them get to you.”

He later told Politico that they have at least four in three states – Arizona, California and Virginia.

The AP reports that:

McCain and his family appear to own at least eight homes: A ranch and two condos in Arizona; three condos in Coronado, Calif.; a condo in La Jolla, Calif.; and another in Arlington, Va. The number of houses is a bit trickier to determine since the ranch has at least four houses and a two-story cabin on it.

This story – this gift to Obama – is what is finally getting people to take a good look at the wealth of the two candidates.  When they read the papers today, they might actually pay attention to this:

McCain earned a Senate salary of $161,708 and royalties of $176,508 last year from his books. His wife earned about $6 million in income from salary, dividends, capital gains and payments from trusts on her 2006 federal tax return.

Cindy McCain’s worth is estimated at as much as $100 million. She is the chairwoman of Hensley & Co., a privately held Phoenix-based distributor of Anheuser-Busch beer that she inherited from her father.

And they might recall that just last weekend when asked by Rick Warren what level of income he would define as “rich,” McCain replied:

“I think if you’re just talking about income, how about $5 million?”

The Arizona Republican quickly added that he was “sure that comment will be distorted,” and his campaign said Sunday that he was joking.

But he didn’t elaborate any further by offering a more reasonable number, whereas Obama’s answer was much more realistic and more direct:

“I would argue that if you are making more than $250,000, then you are in the top 3, 4 percent of this country,” he said. “You are doing well.”

So what’s the point?  Well it has a lot to do with how in touch politicians are with the middle class.  McCain’s wealth puts him far above all but the very few super rich.  Obama isn’t poor by any means.  He’s made a few million from sales of his books, but he’s not so wealthy or so old that he’s lost track of how many houses he owns.

So which one of these guys do you trust to come up with a tax policy to clean up the huge mess that Bush will leave behind?  Paul Krugman has the answer:

Mr. McCain wants to preserve almost all the Bush tax cuts, and add to them by cutting taxes on corporations. Mr. Obama wants to roll back the high-end Bush tax cuts — the cuts in tax rates on the top two income brackets and the cuts in tax rates on income from dividends and capital gains — and use some of that money to reduce taxes lower down the scale.

According to estimates prepared by the nonpartisan Tax Policy Center, those Obama tax increases would fall overwhelmingly on people with incomes of more than $200,000 a year. Are such people rich? Well, maybe not: some of those Mr. Obama proposes taxing are only denizens of lower Richistan, although the really big tax increases would fall on upper Richistan. But one thing’s for sure: Mr. Obama isn’t planning to raise taxes on the middle class, by any reasonable definition — even that of the Bush administration.

Karma has a strange way of working itself out.

Today’s installment comes from Thinkprogess.com which is reporting that global warming looks to submerge the Bush family compound in Kennebunkport.

One “treasured place” in extreme risk is the Bush family compound in Kennebunkport (noted by the yellow arrow below). The area in orange shows land that will be submerged by a sea level rise of 6 feet; the area in red will be underwater after a rise of just 3 feet.

Last Saturday, I came across this article about enormous yachts owned by today’s billionaires. Yes, those billionaires… the ones that Bush thinks are in need of huge tax cuts and whose heirs should not pay any inheritance tax.

The article starts off with the brief history and defining characteristics of yachts, superyachts, megayachts, and then:

Frank Herhold, executive director of the Marine Industries Association of South Florida, is ecstatic. Still, the expansion of yachts over the past six years has created something of a quandary.

“It would be appropriate to coin a new name for these boats,” Herhold says. “We’re going to have to do something soon. If you own a yacht that’s 400 feet long – well, that’s in a class by itself.”

On the docks, in the shipyards, a new name is already surfacing. The gigayacht.

(Snip)

Americans, the world leaders in the purchase and chartering of big yachts, are largely driving that demand, says Jim Eden, who has been brokering yachts for 35 years.

“The bread-and-butter boats used to be 30, 35 feet long,” Eden says. “Now, it’s hard to get my bosses interested in brokering a yacht under 70.”

He attributes the boom to the growing numbers of dot-com and telecom billionaires, and to the Bush administration’s tax breaks for America’s wealthiest. Equally important, he says, is a sea change in attitude among America’s superrich in the wake of Sept. 11.

“The thinking among wealthy people now is, you can die anytime. Nobody can protect you. So you might as well spend your money now and enjoy it.”

(Snip)

[Lurssen of Bremen, Germany] builds boats like Octopus – the $250 million aqua-palace of Paul Allen, co-founder of Microsoft.

At 414 feet, with a crew of 60, which includes former Navy Seals, Octopus became on its maiden voyage in 2003 the world’s largest, priciest, privately owned yacht.

Octopus has seven decks. It has two helicopter-landing pads. It has a swimming pool, basketball court, infirmary, a garage for Land Rovers, a movie theater, a concert space for 260 and a recording studio.

Octopus also features an underwater-viewing salon – with a glass bottom and stadium-strength lighting – to allow passengers to gaze for hours at sea creatures. (The engineer also suggested adding torpedo launchers, for added security, but Allen considered that excessive.)

I was trying to put the size of Allen’s yacht into perspective, and the first thing I thought of was a football field which is 360 feet long, back-of-endzone to back-of-endzone. Paul Allen owns the Seattle Seahawks who play football at the $430,000,000 football stadium in Seattle. Paul Allen paid $130,000,000 of the total cost and the remaining $300,000,000 will be mostly paid for by the public through a hotel/motel/rental-car tax. Allen’s yacht is 54 feet longer than a football field, so if you could pick it up and set it down in the stadium, its stern and bow would extend into the stands. That put “gigayacht” into perspective for me.

Then I got to thinking about articles I’ve read over the past fifteen years or so that describe how the incomes of big-time CEOs and company presidents have escalated from about twenty times the average pay of their lowest paid, full-time employees to what is now 400+ times the pay of their low paid employees. Since they are paid 20 times more in relative terms than what they were back in the sixties, I guess it makes sense that their yachts are 20+ times larger. (Okay the length is 10 -15 times longer, but if you consider the overall size, 20+ times is probably pretty accurate.)

I’m not trying to say that Paul Allen is a bad guy because he owns a $250,000,000 “aqua palace” I’m just saying he sure has a load of money. And I have no idea what he pays his employees.

The article closes with:

“I say thank God for people who can afford to do this,” says Mike Kelsey, president and CEO of Palmer Johnson, a Fort Lauderdale yacht company. In his opinion, the giga-buyer is doing everyone a great service.

“These boats are absolutely stunning. They’re monuments. And they really, really create a better life for anyone who comes in contact with them.”

Have you ever had the conversation with someone in the previous generation like say your parents or your uncle or whomever that inevitably includes the statements like: “Well when I was your age things were different… Back then mothers stayed home with their kids… We didn’t need any daycare… We made no attempt to ‘have it all’ from the get-go… We could afford what we needed on one salary, blah blah blah…”

Well things certainly were different back then. Housing prices were much lower, working men and women used to make sustainable incomes, and employers used to pay for employee benefits. Now housing prices are in the stratosphere, the salaries of working men and women have decreased in terms of real dollars, and employers make their employees pay for their own retirement benefits and ask them to pay for large portions of their health insurance.

Paul Krugman has a few things to say about this in his column today. Here’s an excerpt:

In 1968, when General Motors was a widely emulated icon of American business, many of its workers were lifetime employees. On average, they earned about $29,000 a year in today’s dollars, a solidly middle-class income at the time. They also had generous health and retirement benefits.

Since then, America has grown much richer, but American workers have become far less secure.

Today, Wal-Mart is America’s largest corporation. Like G.M. in its prime, it has become a widely emulated business icon. But there the resemblance ends.

The average full-time Wal-Mart employee is paid only about $17,000 a year. The company’s health care plan covers fewer than half of its workers.

True, not everyone is badly paid. In 1968, the head of General Motors received about $4 million in today’s dollars – and that was considered extravagant. But last year Scott Lee Jr., Wal-Mart’s chief executive, was paid $17.5 million. That is, every two weeks Mr. Lee was paid about as much as his average employee will earn in a lifetime.

Read the whole column here. (If you aren’t already a registered user of the New York Times, a short registration procedure is required to access the articles on the web.)

And while you’re there, check out the recent column by Robert Rubin titled Attention: Deficit Disorder. It’s full of information about the economic dangers this country faces if it continues to run huge deficits.