What was the organizational foundation of the United States of America? I’m guessing most of us would say equality- for- all, or list certain specific and basic rights.
We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness*
Those famous words from our Declaration of Independence sound like they would make great founding principles for our government, in particular the unalienable rights to life, liberty (freedom) and the pursuit of happiness. These famous words also probably represent the only thing we remember in the document. A closer look reveals something especially interesting to me, however — hopelessness.
It’s true. Our Declaration of Independence includes, if we read further, a long list of grievances with the British Crown, a sampling of which are — He has made Judges dependent on his Will alone; cutting off our Trade with all parts of the world; imposing Taxes on us without our Consent; depriving us in many cases, of the benefits of Trial by Jury; taking away our Charters, abolishing our most valuable Laws, and altering fundamentally the Forms of our Governments; plundered our seas, ravaged our Coasts, burnt our towns, and destroyed the lives of our people; has dissolved Representative Houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.
The Declaration also details the extent to which the colonies had gone to secure fair resolution without getting a fair response, stated eloquently as follows:
In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.
The Declaration of Independence is, therefore, a statement which first expresses the hopelessness of the colonies to expect any better treatment in their futures. But genuine hope can pair with hopelessness, and hope for something better surely drove our forefathers to risk what followed in the American Revolution — give me liberty or give me death. And many were given death to free the seeds of our country from hopelessness in exchange for the eternal hopes of life, liberty and the pursuit of happiness.
I not a student of the Founding Fathers or U.S. History, so I have no idea if replacing hopelessness with eternal hope was explicit in their deliberations toward adopting our constitutional system of government. Nevertheless, establishing a system of government promising fairness and freedom from the hopelessness the colonies endured when governed by the Crown was surely the idea, explicit or not. I am convinced, therefore, that our system of government was established, at least in part, so that our citizens could be mostly free from hopelessness.
So, how have we done? Well, maintaining the human enslavement concept wasn’t exactly starting with off a bang and consigning women to their own caste wasn’t much better. And there’s a sorry history with Native Americans, Asians, Irish, Italians, Jews, LGBTQ and….. you get the point — in so many ways we have absolutely sucked. But the next few years, or decades, will suck even more if we don’t come to terms with a few things. Because for hope to prevail over hopelessness, hope must be based on some realistic possible outcome. And there’s a certain issue that is so hopelessness-inducing beyond all other things that still divide us as to influence everything else — wealth and income inequality.
We’re programed to equate the words wealth and wealthy, but in this case I’m not looking at yachts and private jets wealthy. Rather, wealth as net worth — the value of what I have minus what I owe, assets minus liabilities. I wrote a previous post that touched on this subject entitled Don’t Cut Your Nose Off to Spite Your Face. The statistic that should jump out at us all is this one — the group in the top 50% of household income possesses 97.5% of the country’s wealth. The group in the bottom half of household income clocks in at 2.5%. The chart below illustrates how this shocking reality has grown just since 1990. It’s not that our economy hasn’t boomed — total wealth has risen from approximately $25 trillion to approximately $150 trillion. It’s about who got $125 trillion difference. This is hopelessness colorfully charted.
It would be difficult to make the case that this distribution of income was ever overly fair. In 2022 median household income was estimated to be $74,580 and in 1990, adjusted by the Consumer Price Index, about $65,400. However, over the past 40 years the income multiple for the highest 90% over the lowest 10% has increased from about 7x to about 11x, and the percentage of total U.S. income earned by lowest 60% of households has fallen from 36% to 27% over the past 50 years. And there is really no way to quantify the increasing role of dual (or more) incomes per household over that 50- year period except to suggest that for all the extra work it did not result in a higher share going to lower income households.
The tiny sliver of wealth held by the “bottom” 50% of income households doesn’t mean that every household in that lower 50% income bracket is in dire straits. In fact, median household wealth, meaning 50% have more and 50% have less, “surged” in 2022 to about $193,000. But for many (or most) households in the lower 50% that figure likely represents equity in a home, and the dip to 0.4% in 2011 of wealth held by this lower income cohort illustrates just how unstable and inaccessible that “wealth” can be (remember the “great” housing collapse?). Besides, nothing can objectively justify this overall disparity in a society built to be free from hopelessness.
I stumbled across an article on CNBC from January of this year which shows this wealth disparity in a more practical way, but accidentally sheds light on something worse. The article referenced a survey from Bankrate which revealed that 44% of American households would be unable to resolve an unexpected $1,000 expense from savings. That would be consistent with the statistics (some could borrow or use a credit card, but that is by definition incurring more liabilities). Worse, by way of explanation, I noted this quote:
“We’re just not wired to save,” said Brad Klontz, a certified financial planner and expert in financial psychology and behavioral finance. “Our brains are instead programmed to focus on our immediate needs.”
We’re not wired to save? Who, exactly, is this “we?” I would be more inclined to suggest that too many of our brains, perhaps those falling in the wealthiest 50%, seem to be programmed to blame the victims of capitalism gone wild for failing to join this prosperity, with all due respect to Mr. Klontz’s expertise in financial psychology. His explanation hints at the old “pull yourself up by the bootstraps” fantasy, still hanging on long after bootstraps ceased being an essential wardrobe accessory. It’s worth pointing out that charting household income growth, particularly of the “bottom” 20% in household income — growing a measly 40% over 40 years for that cohort — only illustrates that wealth disparity on our current track will only get worse., and more hopeless.
So, who’s to blame, if not short circuits in brain wiring? It wouldn’t be too hard to make a list of business atrocities that slam lower income/ lower wealth households harder. Americans lost almost $10 trillion in wealth because too-big-to-fail banks played blackjack with mortgage-related investment shams in 2007-2009’s economic collapse with a near total absence of accountability — many households lost big. Credit card companies make the vast majority of their money from mafia-like interest rates, 25%+, charged to those unable to pay the full card balance each month. Manufacturing and production jobs have been transferred abroad for decades, and advanced technology has further eroded even highly skilled jobs. Corporations have routinely begun a practice of purchasing their own stocks with excess cash, raising the stock’s perceived value to enrich executives and shareholders rather than doling out some of the bounty to workers. Unrestricted capitalism can be heartless.
But I started this piece with my view that the government of the United States was established, in essence, to protect us from hopelessness and in that regard I contend it is failing most mightily. The charts tell the story best — where is the hope? The Congress, the Courts, the Presidency have all failed many of us, and as the world changes more they will fail us even worse. And like most things, unfortunately, it’s mostly about money — the money that buys political influence. But don’t underestimate the role that governmental incompetence has played, and will continue to play, as technologies like artificial intelligence (AI) move to replace even more jobs and alternative money- making schemes (remember credit default swaps) need competent and cautious government oversight.
Speaking of incompetence, that’s what you could label me if I tried to explain exactly what’s gone wrong and how to fix it. I’m not an economist, a historian, a policy analyst or an expert in financial psychology like Mr. Klontz. I am, however, a scientist-of-sorts who can recognize patterns in data, although this wealth disparity thing would be hard to miss. But the worst thing is that I’m almost certainly part of the problem.
You see, my household wealth would fall somewhere in the 50% - 90% cohort, above that median $193,000, and I could resolve an unexpected $1,000 expense from savings. So, I could refuse to be concerned about hopelessness — I could still claim bootstraps are a thing. I could ignore the hundreds of thousands of dollars costs of a bachelor’s degree, or the confiscatory nature of student loan debt. I don’t have to care about future job losses from 3-D printed houses or Waymo driverless taxies or A.I. legal researchers or self-checkout at Walmart. But someone probably should, and I would contend that the Declaration of Independence and the subsequent constitutional enactment of that grand vision stipulate that someone is supposed to — our elected and appointed officials.
A couple of loosely unrelated thoughts. First, economic prosperity in not a zero-sum game, meaning that gain for some isn’t automatically a loss for others. It’s easy to see on the wealth chart above that the extraordinary gains by the upper 50% over the past 20+ years did not, in fact could not have, come from the lower 50%. The converse, then, is equally true — stimulating income and wealth for the lower 50% does not mean those gains necessarily come from the pockets of the upper 50%. Increasing wealth (and income) for the lower 50% could stimulate economic growth that benefits all households — rising water floats all boats. Second, we’ve all heard the argument — “our constitution guarantees equal opportunity, not equal results.” I would argue that the intent of our constitution was to guarantee a certain level of “result” — freedom from hopelessness — but in either case any claim that all citizens currently enjoy “equal opportunity” is one more bullshit fantasy we choose to believe. Certainly, some individuals heroically rise from poverty and terrible schools and broken families to find success — those are the exceptions that prove the rule. Remember, wealth is security.
The bottom 50% income cohort in the U.S. includes more than 65,000,000 households, and there have been all kinds of theories and proposals to reduce wealth and income disparity which is an issue in other countries as well. In this, however, the U.S. excels.
Tax policies, such as the Child and Earned Income tax credits to shift financial benefits to lower income citizens and wealth taxes to provide resources for assistance programs, are needed. Education policies to improve early-childhood programs and childcare assistance, as well as improving access to higher education and job training programs are often discussed and rarely implemented here. This report from the Peterson Institute for International Economics provides an exhaustive picture of the problem and potential solutions including labor policies, healthcare assistance and a guaranteed minimum income.
It’s obvious when comparing U.S. wealth disparity to other countries that it only takes a society and a politics willing to address the issues. But when you have one political party labeling the worked-for and paid-for Social Security benefit as an “entitlement” and constantly extending tax cuts to the very wealthiest Americans, the will to enact systemic economic change is obviously missing.
I didn’t really want this piece to be too political, but it’s impossible to avoid today’s situation when addressing barriers, and there really can’t be much debate that it is the Republican Party most consistently opposing social assistance programs of any sort. Ironically, as I suggested in my Don’t Cut Your Nose Off to Spite Your Face post, it is their “working class” voters who would clearly benefit from these policy changes but seem most opposed to solutions that don’t include bootstraps. They’ve spent decades being blinded by misplaced rage piped directly into their amygdala by “conservative” media, worrying a “welfare mom” might scam a system that could give tens of millions of households, including theirs, room to breathe — socialism!
I’m drawn to another thought spelled out in the Declaration of Independence —
That whenever any Form of Government becomes destructive of these ends (life, liberty and the pursuit of happiness), it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness
Our government, now 248 years later, has a form and function that clearly becomes destructive of those ends. And we most definitely deserve a different approach to governing by organizing its powers in such form…. most likely to effect (sic) our citizens’ safety and happiness. I can’t imagine a greater opportunity for starting than the 2024 election where the “Dobb’s decision” revoking abortion rights and the Republican clown show in the House of Representatives (in particular) has given Republicans around the country a grand opportunity to showcase their extreme cruelty toward women, their perverse application of “Christian principles” and their complete disregard for the very foundations of the freedom they claim to embrace. I had some starting suggestions for the Democratic Party if the 2024 election finally clears the field near the end of my Republicans Practicing Gynecology Again post.
But winning in 2024 will not be enough. Resolving wealth and income disparity will require a long and sustained political housecleaning, and in the few years following 2024 it should be our mission to convince today’s younger generations that equal opportunity is achievable and that bootstraps were always bullshit. It should not require another 248 years to fix this issue.
I appreciate your shift to economics, my minor in college. And your data states the case without biased political overtones. But my favorite paragraph is one beginning with education, child care and distributions to families with children....we have proven with limited projects how these tools greatly enhance success over the long term! Well done my friend!