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Reich writes: "Many believe that poor people deserve to be poor because they're lazy."

Robert Reich. (photo: Richard Morgenstein)
Robert Reich. (photo: Richard Morgenstein)


The Rise of the Working Poor and the Non-Working Rich

By Robert Reich, Robert Reich's Blog

01 April 15

 

any believe that poor people deserve to be poor because they’re lazy. As Speaker John Boehner has said, the poor have a notion that “I really don’t have to work. I don’t really want to do this. I think I’d rather just sit around.”

In reality, a large and growing share of the nation’s poor work full time — sometimes sixty or more hours a week – yet still don’t earn enough to lift themselves and their families out of poverty. 

It’s also commonly believed, especially among Republicans, that the rich deserve their wealth because they work harder than others. 

In reality, a large and growing portion of the super-rich have never broken a sweat. Their wealth has been handed to them. 

The rise of these two groups — the working poor and non-working rich – is relatively new. Both are challenging the core American assumptions that people are paid what they’re worth, and work is justly rewarded.

Why are these two groups growing?

The ranks of the working poor are growing because wages at the bottom have  dropped, adjusted for inflation. With increasing numbers of Americans taking low-paying jobs in retail sales, restaurants, hotels, hospitals, childcare, elder care, and other personal services, the pay of the bottom fifth is falling closer to the minimum wage.

At the same time, the real value of the federal minimum wage is lower today than it was a quarter century ago. 

In addition, most recipients of public assistance must now work in order to qualify.

Bill Clinton’s welfare reform of 1996 pushed the poor off welfare and into work. Meanwhile, the Earned Income Tax Credit, a wage subsidy, has emerged as the nation’s largest anti-poverty program. Here, too, having a job is a prerequisite.

The new work requirements haven’t reduced the number or percentage of Americans in poverty. They’ve just moved poor people from being unemployed and impoverished to being employed and impoverished.

While poverty declined in the early years of welfare reform when the economy boomed and jobs were plentiful, it began growing in 2000. By 2012 it exceeded its level in 1996, when welfare ended.

At the same time, the ranks of the non-working rich have been swelling. America’s legendary “self-made” men and women are fast being replaced by wealthy heirs. 

Six of today’s ten wealthiest Americans are heirs to prominent fortunes. The Walmart heirs alone have more wealth than the bottom 40 percent of Americans combined.

Americans who became enormously wealthy over the last three decades are now busily transferring that wealth to their children and grand children.

The nation is on the cusp of the largest inter-generational transfer of wealth in history. A study from the Boston College Center on Wealth and Philanthropy projects a total of $59 trillion passed down to heirs between 2007 and 2061.

As the French economist Thomas Piketty reminds us, this is the kind of dynastic wealth that’s kept Europe’s aristocracy going for centuries. It’s about to become the major source of income for a new American aristocracy.

The tax code encourages all this by favoring unearned income over earned income. 

The top tax rate paid by America’s wealthy on their capital gains — the major source of income for the non-working rich – has dropped from 33 percent in the late 1980s to 20 percent today, putting it substantially below the top tax rate on ordinary income (36.9 percent).

If the owners of capital assets whose worth increases over their lifetime hold them until death, their heirs pay zero capital gains taxes on them. Such “unrealized” gains now account for more than half the value of assets held by estates worth more than $100 million.

At the same time, the estate tax has been slashed. Before George W. Bush was president, it applied to assets in excess of $2 million per couple at a rate of 55 percent. Now it kicks in at $10,680,000 per couple, at a 40 percent rate.

Last year only 1.4 out of every 1,000 estates owed any estate tax, and the effective rate they paid was only 17 percent.

Republicans now in control of Congress want to go even further. Last Friday the Senate voted 54-46 in favor of a non-binding resolution to repeal the estate tax altogether. Earlier in the week, the House Ways and Means Committee also voted for a repeal. The House is expected to vote in coming weeks.

Yet the specter of an entire generation doing nothing for their money other than speed-dialing their wealth management advisers is not particularly attractive.

It puts more and more responsibility for investing a substantial portion of the nation’s assets into the hands of people who have never worked.

It also endangers our democracy, as dynastic wealth inevitably and invariably accumulates political influence and power.

Consider the rise of both the working poor and the non-working rich, and the meritocratic ideal on which America’s growing inequality is often justified doesn’t hold up.

That widening inequality — combined with the increasing numbers of people who work full time but are still impoverished and of others who have never worked and are fabulously wealthy — is undermining the moral foundations of American capitalism.

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+40 # moniker 2015-04-01 15:45
This song and dance is now already at lest 10-20 years old and has its roots in Reaganomics. And we vilify Russian oligarchs for doing much the same thing. In the Sixties, my late Russian history professor --Dr. Dirk Jellema of Calvin College-- predicted that Communism and Capitalism, as two opposing theses, would ultimately yield a synthesis of sorts, as found in the Hegelian triad. Although he was unable to predict exactly what shape the synthesis would take, we now know.

What to do about it? Perhaps we could alter one of the mechanisms which has enabled the current spiraling wealth inequality. How about changing the electoral system by replacing current district representation by proportional representation? Easier said than done? Quite. But it would ensure a much larger measure of democracy for the nation and, with it, a more equitable sharing of the wealth. Too daunting? Well, crikey!
 
 
+9 # wantrealdemocracy 2015-04-02 09:15
Well, one thing we can do to "alter one of the mechanisms which has enabled the current spiraling wealth inequality" would be to STOP VOTING FOR THE CORRUPT CREATURES IN CONGRESS NOW. We must resolve NEVER to vote for any member of the two corrupt major political parties. THEY ARE THE SAME!! To change anything in our government we must change our pattern of voting. You can see that what we have is destroying our democracy and our standard of living as well as threatening all life on earth. What will it take for you to drop your thoughtless loyalty to these equally evil corporately funded political parties. Stop this party stuff. Look for good intelligent moral people in your district and urge them to run for Congress and give your time and some money to get them elected if they promise to vote as directed by their constituents and not by some political party or any 'major donor' (persons who pay bribes to buy our government). Stand up and break the two party system that is destroying our nation.
 
 
+1 # Granny Weatherwax 2015-04-04 10:52
This is only possible with a serious revamping of the electoral system, and I don't just mean removal of the electoral college.
I mean:
- Repealing Citizens united
- Instant run-off to remove the major party candidates' exorbitant advantage.
- Public funding of electoral campaigns with a mandated cap and no exception for personal wealth.
 
 
0 # bingers 2015-04-04 16:36
You're just repeating the same old false equivalency garbage. Granted the Democrats are not what they could be, but even the worst Democrats are better than the best Republicans. So get out and do what the right has done, kick the weak kneed ones to the curb in the primaries. Even dumb people (the Republican base) are certainly going to vote for the real Republican before the DINO.
 
 
+2 # HowardMH 2015-04-02 10:18
It is going to take a lot more than changing the electoral system. It is not because these people are lazy, they are just not educated. To be blunt about it they are stupid.
 
 
-4 # Justice Lady 2015-04-03 16:29
Yes Howard,
The blind are leading the blind. Read "Progress & Poverty" by Henry George for the real solution to our economic mess.
 
 
+33 # Cappucino 2015-04-01 23:13
John Boehner really isn't one to talk, considering how much time he clearly spends "sitting around" in tanning beds. :P
 
 
+16 # Paul Larudee 2015-04-02 00:57
There's always the guillotine. A nonviolent one, of course.
 
 
+27 # ericlipps 2015-04-02 04:57
It wasn't really "Bill Clinton's" welfare reform: it emerged from the Newt Gingrich (remember him?) Congress. Clinton signed it after coming to believe the Republicans had the votes to override any veto. Evidently he hoped that would placate the GOP, which was already trying to ruin him with anything it could make stick. He shouldn't have bothered.
 
 
+7 # RLF 2015-04-02 06:52
This is the excuse we get from Dems all of the time..."I couldn't help it"...it is funny how Clinton keeps coming up as one of the best Republican presidents ever!
 
 
+4 # lfeuille 2015-04-02 17:07
Quoting ericlipps:
It wasn't really "Bill Clinton's" welfare reform: it emerged from the Newt Gingrich (remember him?) Congress. Clinton signed it after coming to believe the Republicans had the votes to override any veto. Evidently he hoped that would placate the GOP, which was already trying to ruin him with anything it could make stick. He shouldn't have bothered.


As I recall, he spent quite a bit of time bragging about it. If it was forced on him, why did he do that? I know that his original proposal was mostly carrot and very little stick, but that is not how it emerged from congress. If he was against it, he should have vetoed it even if he got overridden to keep the historic record straight, but I doubt that his objections went that deep.

Moreover, he was responsible for introducing the topic to the national debate in the first. Their was no raging demand for welfare reform before he brought it up.
 
 
+3 # Jackpine 2015-04-02 18:03
He came in with the intention of putting it in place. This was part of Clinton's Third Way plan. In fact, he mostly stole the plan from Wisconsin, here Toxic Tommy Thompson had started it (Calling it W2, or Wisconsin Works).
 
 
+27 # Bruce Gruber 2015-04-02 06:36
Perhaps legislation mandating that 50% of inherited funds and capital gains be invested in 50 year on-shore government infrastructure bonds would put these 'job creators' to work rebuilding and improving the American standard of living.
 
 
+8 # moniker 2015-04-02 07:32
Perhaps, but with the current legislative drift towards abolishing capital gains- and estate taxes altogether, there's little chance of that. Fifty percent of zero is still zero.

The key is still in the legislative mechanism and process. Americans, like most Anglo-Saxon countries except New Zealand, need to start think outside the traditional electoral box.
 
 
+12 # fredboy 2015-04-02 07:38
It's history repeating itself, Robert. Always does. The poor will rise up and balance the books eventually, when they have had enough.
 
 
+8 # moniker 2015-04-02 08:25
Or, we can just piss and moan --for as long as the Matrix permits it.
 
 
+20 # elizabethblock 2015-04-02 07:51
Two comments:
1)I suggest we stop using the word "earned" when referring to people with unearned income, or people being paid inordinate amounts that no one could possibly "earn."
2) W.H. Auden, in the 1950s, said that it was harder to be poor in America than in Europe, even though they weren't actually as poor. Why? In Europe, if you are poor, it is assumed, by you and everyone else, that it is because your parents were poor, and their parents were poor, and so on. In America if you are poor it is assumed, by you and everyone else, that it is because you are stupid.
 
 
+9 # modernjacobin 2015-04-02 16:23
Low taxes on cap gains, dividends, and estates are the rich person's equivalent of the Earned income tax credit--just like the company Amex card for the CEO's meals function like a SNAP card.

When you think about it, it's the 1% that gets all the freebies: the bonuses, bailouts, tax deductions, pensions, and benefits. And then they whine about taxes being too high and how the poor can't economize: all while they're busy buying 10,000 sq. ft mansions, $500 snail cream, and $1000 shoes.
 
 
-13 # Seadog 2015-04-02 07:55
The poor never brought down Rome. The Barbarians ( non-Roman) tribes and cultures around Rome did. So, believing the poor will do anything is nonsense.
 
 
+12 # jouster 2015-04-02 14:41
We, the 99% are screwed unless we end unlimited and unregulated political contributions.

That money funds the right-wing political advertising/bra inwashing/FAUX- News system.

As a result we have low information voters - those who vote for the lies instead of the facts - continuing to elect Republicans.

I despair for my children and grandchildren.
 
 
+9 # lfeuille 2015-04-02 17:11
Quoting jouster:
We, the 99% are screwed unless we end unlimited and unregulated political contributions.

That money funds the right-wing political advertising/brainwashing/FAUX-News system.

As a result we have low information voters - those who vote for the lies instead of the facts - continuing to elect Republicans.

I despair for my children and grandchildren.


End all political contributions. Public campaign funding.
 
 
-2 # Justice Lady 2015-04-03 16:35
jouster,
Republicans, Democrats, they both have no solutions, & are controled by the powers that be who don't want real change.We need to have A Single Tax on land & natural resource values to end land speculation & so open up real oportunity, raise wages & end unemployment. Read "Progress & Poveryt" by Henry George.He's the only one who had the solution.
 
 
+5 # modernjacobin 2015-04-02 16:12
This is what the 1% are doing with their equivalent of the Earned income Tax credit--aka barely taxed capital gains:

http://www.nytimes.com/2015/04/02/style/dear-winter-coat-goodbye-and-good-riddance.html?ref=fashion&_r=0

Buying things like "a Brunello Cucinelli wool crepe vest with an ostrich feather fringe." [sounds hideous] We are told in the article that despite "a daunting $2,185 price tag, the elegantly flimsy vests had been 'flying out' of the store."

It's designed and made in Italy, not the US, mind you, so few Americans, except a few lucky salespersons, are making money from it: i.e., very little "trickle-down." Let's not forget that the upper classes, like the rest, buy imported stuff--albeit mostly from Europe rather than China.

When you think about it,the non-working rich are just 2-legged fatcats who chase stocks rather than laser lights. At least that's what I think when I see my fat, Fancy-feast-eat ing kitties going after the laser. (Just like stock traders, cats know that it's best to let the nonexistent, fictitious entity come to you--don't chase it.)

Now, dang, why can't my cats go after the rodents I KNOW are lurking in my kitchen? Although that's like wondering why the 1% don't work real jobs with real benefits to the public.

At least my kitties are cute and furry:) They don't need a wool crepe vest w/ an ostrich fringe costing $3000!
 
 
+3 # modernjacobin 2015-04-02 16:15
Oops, closer to $2000 than $3000 as i's "only" $2,185. (Which is why I don't trade stocks!:)) But still a big waste of $$.
 
 
+1 # bingers 2015-04-04 16:31
Is there anyone lazier than a House Republican? I doubt it. Even those who scour garbage cans for aluminum work much harder than them.
 

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