Monday, January 24, 2011

Why You Should Feel Cheated, Deceived and Sickened by America’s Stunning Inequality, Even If You’re Doing Well

If middle- and upper-middle-class families had the same share of the economic pie as in 1980, they’d be making an average of $12,500 more per year.

AlterNet / By Paul Buchheit

Why should a relatively prosperous upper-middle-class family care about inequality? There are lots of reasons, but here’s the most personal one: that’s our money the very rich are taking! Based on Internal Revenue Service figures, if middle- and upper-middle-class families had maintained the same share of American productivity that they held in 1980, they would be making an average of $12,500 more per year.

That bears repeating: $12,500 of my money every year to the richest 1 percent, and $600 more to pay my share of their tax cuts!

Inequality in the U.S. doesn’t get the attention it deserves. Many of us brush it off, thinking, “So the rich get richer — it’s always been that way.” Or we think: “I’m doing OK myself – and I want to be really rich someday, too.”

The lopsided distribution of wealth in the U.S. doesn’t get the blame it deserves for our budget problems, either. On the contrary, since our economic system is based on individual freedom, most of us believe in the inalienable right to make unlimited amounts of money. The thought of taking back a greater share from innovative and industrious business leaders is (shudder) “socialism.”

So instead we increase sales taxes and service fees. We cut police forces and educators. We remove funding for food pantries, homeless shelters and elder assistance.

The massive redistribution of income from the middle classes to the rich over the last 30 years is like a malignant tumor that doesn’t appear on the surface but eventually destroys the whole body. Every one of the 90 percent of Americans who makes less than $114,000 a year should be aware of this – and they should be angry.

U.S. GDP has quintupled since 1980, and we all contributed to that success. But our contributions have earned us nothing. While total income has also quintupled, percentage-wise almost all the gains went to the richest 1 percent.

So we’re being cheated. How are we being sickened?

In their book, The Spirit Level: Why Greater Equality Makes Societies Stronger (Bloomsbury Press, 2009), Richard Wilkinson and Kate Pickett have documented the numerous studies that correlate inequality with shorter life expectancies, increased disease and health problems, and even higher murder rates. These effects are attributed to the stress of “relative deprivation” — trying to survive in a community where economic, educational and health care disadvantages persist in an otherwise prosperous environment.

The statistics clearly indicate that rates of illness in an unequal society are higher at all levels of income, even for the very wealthy. Wilkinson and Pickett document numerous studies that liken inequality to a “pollutant” that impacts the health of society as a whole. Even the super-rich can’t escape.

So we’re being cheated and sickened. How are we being deceived?

That $12,500 per American family mentioned earlier translates into a trillion extra dollars of income every year for the richest 1 percent (not including their tax cuts). The very wealthy insist all of this money will stimulate the economy.

But it’s well known by economists that low-income earners spend a greater percentage of their overall income on consumption, while high-income earners save more. Middle-class America has been led to believe the growth at the top will eventually produce more jobs. But many of us have college-educated sons and daughters who can’t find suitable employment. Fortune magazine reported that the 500 largest U.S. companies cut a record 821,000 jobs in 2009 while their collective profits increased threefold to a record $391 billion.

The deception has persisted for 30 years. According to Forbes magazine, the top 20 private equity and hedge fund managers took an average of $657.5 million in 2006. The salaries of these 20 people could have paid for 25 police officers, 25 firefighters, and 50 teachers for every one of the 3,000 counties in the United States. Instead we see counties like Ashtabula in Ohio, which cut back its police force from 112 to 49, while a judge advises the residents to “get a gun” to defend themselves.

The Rich Get Richer

NCPA: John Goodman's Health Policy Blog

A CNN Money article lists the 25 richest towns, measured by median family incomes and median home prices. At the top is New Canaan, Connecticut with a median income of $231,138 and a median home value of $1,465,000! Even the town that ranks at the bottom of the list (# 25), Garden City, New York, with a median income of $147,804 and a median home price of $840,000, is not doing too shabby.

Besides abundant earnings and real estate wealth, what else do these towns have in common? Extraordinary Medicare spending. That's based on an NCPA study by Senior Fellow Andy Rettenmaier.

The study found that Medicare spending per beneficiary varies widely across the nation's 3100-plus counties. In 2005, average Medicare spending per beneficiary (weighted for the Medicare-enrolled population) was $7,208. Among the 15 counties in which the 25 richest towns are located:

* All of them, with the exception of two (Fairfax County, Virginia and Santa Clara, California) spent above the weighted average, per Medicare beneficiary.
* Half of them are in located in counties that are in the top 10 percent of all U.S. counties in terms of Medicare spending per beneficiary.
* Only one county (Fairfax County at $6,230 per beneficiary) was in the bottom 50 percent.

The largest spending county in the list of 25 towns is Nassau County, New York (home of Garden City), with Medicare spending per patient of $9,654 which is $2,446 above the average! Nassau county's Medicare spending per patient is $1,708 above what would be expected based on patient characteristics and the cost of health care inputs.

While Medicare spending is also above average in many low income counties, high Medicare spending in high income areas brings some questions to mind. Do retirees in high income counties use more Medicare services because they are rich? Or do the rich locate in areas where Medicare spends a lot of money?

See the article links for citations

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