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Reich writes: "2013 marked one of the biggest redistributions in recent American history. It was a redistribution upward, from average working people to the owners of America."

Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)
Portrait, Robert Reich, 08/16/09. (photo: Perian Flaherty)


The Year of the Great Redistribution

By Robert Reich, Robert Reich's Blog

05 January 14

 

ne of the worst epithets that can be leveled at a politician these days is to call him a "redistributionist." Yet 2013 marked one of the biggest redistributions in recent American history. It was a redistribution upward, from average working people to the owners of America.

The stock market ended 2013 at an all-time high - giving stockholders their biggest annual gain in almost two decades.Most Americans didn't share in those gains, however, because most people haven't been able to save enough to invest in the stock market. More than two-thirds of Americans live from paycheck to paycheck.

Even if you include the value of IRA's, most shares of stock are owned by the very wealthy. The richest 1 percent of Americans owns 35 percent of the value of American-owned shares. The richest 10 percent owns over 80 percent.So in the bull market of 2013, America's rich hit the jackpot.

What does this have to do with redistribution? Some might argue the stock market is just a giant casino. Since it's owned mostly by the wealthy, a rise in stock prices simply reflects a transfer of wealth from some of the rich (who cashed in their shares too early) to others of the rich (who bought shares early enough and held on to them long enough to reap the big gains).

But this neglects the fact that stock prices track corporate profits. The relationship isn't exact, and price-earnings ratios move up and down in the short term. Yet over the slightly longer term, share prices do correlate with profits. And 2013 was a banner year for profits.

Where did those profits come from? Here's where redistribution comes in. American corporations didn't make most of their money from increased sales (although their foreign sales did increase). They made their big bucks mostly by reducing their costs - especially their biggest single cost: wages.

They push wages down because most workers no longer have any bargaining power when it comes to determining pay. The continuing high rate of unemployment - including a record number of long-term jobless, and a large number who have given up looking for work altogether - has allowed employers to set the terms.

For years, the bargaining power of American workers has also been eroding due to ever-more efficient means of outsourcing abroad, new computer software that can replace almost any routine job, and an ongoing shift of full-time to part-time and contract work. And unions have been decimated. In the 1950s, over a third of private-sector workers were members of labor unions. Now, fewer than 7 percent are unionized.

All this helps explain why corporate profits have been increasing throughout this recovery (they grew over 18 percent in 2013 alone) while wages have been dropping. Corporate earnings now represent the largest share of the gross domestic product - and wages the smallest share of GDP - than at any time since records have been kept.

Hence, the Great Redistribution.

Some might say this doesn't really amount to a "redistribution" as we normally define that term, because government isn't redistributing anything. By this view, the declining wages, higher profits, and the surging bull market simply reflect the workings of the free market.

But this overlooks the fact that government sets the rules of the game. Federal and state budgets have been cut, for example - thereby reducing overall demand and keeping unemployment higher than otherwise. Congress has repeatedly rejected tax incentives designed to encourage more hiring. States have adopted "right-to-work" laws that undercut unions. And so on.

If all this weren't enough, the tax system is rigged in favor of the owners of wealth, and against people whose income comes from wages. Wealth is taxed at a lower rate than labor.

Capital gains, dividends, and debt all get favorable treatment in the tax code - which is why Mitt Romney, Warren Buffet, and other billionaires and multimillionaires continue to pay around 12 percent of their income in taxes each year, while most of the rest of us pay at least twice that rate.

Among the biggest winners are top executives and Wall Street traders whose year-end bonuses are tied to the stock market, and hedge-fund and private-equity managers whose special "carried interest" tax loophole allows their income to be treated as capital gains. The wild bull market of 2013 has given them all fabulous after-tax windfalls.

America has been redistributing upward for some time - after all, "trickle-down" economics turned out to be trickle up - but we outdid ourselves in 2013. At a time of record inequality and decreasing mobility, America conducted a Great Redistribution upward.


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+53 # treadlightly 2014-01-05 20:23
How can France impose a 75% tax rate and not have a massive revolution?
The best we can do is 12% on our top 10% and they squeal about that.
What gives?
 
 
+64 # PCPrincess 2014-01-05 23:20
Fox News, right-wing media, lots of propaganda and a windfall of profits to those media sources that preach to the ignorant. In short, there is a vast majority of people in this country who have not only allowed the tax cuts to happen, they allowed themselves to be brainwashed into thinking that allowing the very wealthy to keep more of profits made off the backs of the real profit-makers, the workers, is the 'American' thing to do. The money is so good in hate radio and TV that massive sums are spent on researching ways to manipulate the masses and they have become very good at persuading the ignorant to think that what is good for the majority is bad, e.g. taxes, socialized medicine, gun control, etc.
 
 
+43 # RLF 2014-01-06 06:48
Don't discount the destruction of the education system and the loss of average american's ability to critically think.
 
 
+14 # Jingze 2014-01-06 08:03
The top 10% owns you.
 
 
+1 # treadlightly 2014-01-07 13:07
Quoting gsemsel:
The top 10% owns you.

No they really don't. I am thoroughly disconnected from everything they represent. I don't owe a dime to anyone because I scaled back years ago.
 
 
+23 # davidh7426 2014-01-06 08:30
Maybe because the last time that France had the problems that America is having, they solved it by using Madame Guillotine.

The American rich have never had to face a mass uprising before, the French rich have, it didn't end well for them.
 
 
-86 # Eldon J. Bloedorn 2014-01-05 23:36
My questions is, how many times do we have to listen to missives about income inequality, botched health insurance coverage, bitching about Bush/Cheney? Sorry, too much negative news.
 
 
+33 # Cdesignpdx 2014-01-06 01:06
Eldon, You are not a wealthy person if you have no intellectual evaluation of an economical construct that, unless you are worth billions, can and will eat you alive. Your assets are fair game in the system you defend.
 
 
-41 # Eldon J. Bloedorn 2014-01-06 05:13
Sorry. Bitching day after day will not stop income inequality
 
 
+23 # RLF 2014-01-06 06:50
That is where it starts...wake up...put away your video games.
 
 
-30 # Eldon J. Bloedorn 2014-01-06 08:00
I've posted a lot on RSN looking for and suggesting solutions. I don't do video games. But, bitching for the sake of bitching does no good. RLF, you are a very negative person. Take some Ex-Lax, OK? Like a lot of it.
 
 
+6 # karenvista 2014-01-06 18:38
Quoting Eldon J. Bloedorn:
Sorry. Bitching day after day will not stop income inequality


What do you think changed peoples minds about the Iraq war? Bitching, telling our friends why we were bitching, protesting and widespread complaining until people changed their minds.

And then, when the war profiteers tried to send us into war in Syria, the people had already changed their minds (because of the previous bitching) and THEY started bitching.

The media and politicians actually remembered that we had already gone through this before and we were not going to stop bitching and would eventually run them out of office if they did that again.

So they didn't, because the people were already bitching!

Bitching is the only thing that DOES work in this country.
 
 
+6 # RLF 2014-01-06 06:49
How do you think we got here...with absolute message disapline within the republican party...so how do you think we will get out...and, incidently, what the hell looks so positive to you...your 15 children's 12 children each?
 
 
+11 # Jim Young 2014-01-06 08:14
Quoting Eldon J. Bloedorn:
My questions is, how many times do we have to listen to missives about income inequality, botched health insurance coverage, bitching about Bush/Cheney? Sorry, too much negative news.


Please don't give up. I hope you've just had a bad day, since I have appreciated many of your earlier posts.
 
 
+8 # Eldon J. Bloedorn 2014-01-06 08:47
Thank you. I do feel that we need to report more on how we are progressing. Even a small article such as teachers saying, "we were able to get parents support on how to better enable their kids to understand math and science and how that understanding will improve their lives."
I know something about adversity. My parents didn't make it. Lots of kids. Came from a broken home. I was awarded a scholarship to a major university. OK. athletic, my grades were good, not perfect. Thirty-four years ago, I started buying single family rentals. Except for the ones I traded, I still have them. I'm retired on ninty-five thousand a year. Life is good. I have spent several years teaching myself how to bcomea successful stock trader. It's working. I have a beautiful wife in China. My attorney and I are working on her Visa. So, you guys and gals, life is good. My health is, if not excellent, very good as I am 73 years old. My, early youth, before I "grew up," I was a "bitch factory." Now, I'm simply grateful and I quit bitching a long time ago.
 
 
+3 # Skippydelic 2014-01-06 11:09
Eldon: That should be, "We WERE able to get parents' support on how to better ENABLE THEIR kids to understand math and science, and how that understanding will improve their lives."

Spelling and grammar count, you know... ;-)
 
 
0 # Eldon J. Bloedorn 2014-01-06 15:52
A little humor. I take your advice. I never got beyond post grad work, finance, economics, estate planning, insurance @ a major university. My first two sentences, recognizing your post which I appreciate, that is a fact. My third sentence is also a fact.
 
 
+1 # BKnowswhitt 2014-01-06 17:19
These aren't missives he 's giving us a year end 2013 update .. hey go watch cnn fox the weather channel tabloid tv and hope you find something good there .. good luck .. i'd rather know i'm dying .. negative is a slant .. facts be negative be facts ....
 
 
0 # BKnowswhitt 2014-01-06 17:21
I wrote these aren't negatives but it mistakely posted the word 'Missives' however these are very well 'Missives' that will continue to be coming down the road ..
 
 
0 # Skippydelic 2014-01-06 11:06
Eldon: Until the problems are solved. Next question...
 
 
+1 # Eldon J. Bloedorn 2014-01-07 20:45
My understanding of "bitching" is this. Bitching is a negative emotional reaction to truth. Once the truth is accepted, bitching stops. Then what? Progressive action toward a common goal. That is the hard part. OK, I'm being too hard on some of the posters. Time to feed my dog and go to bed.
 
 
+27 # AuntieTom 2014-01-06 00:06
This upward distribution is entirely dysfunctional and is the result of unmanageable digital speed in stock market trading made possible by digitization along with the extravagant use of energy to transport goods willy-nilly from one country to another from source to consumers, allowing contracting out anywhere in the world. The "currency" distribution is unbalanced but, even more dysfunctional, the stockmarket money represents nothing but words, nothing of any value whatsoever. Perhaps this is somehow a twisted reflection of the Justices' idea that money is speech. Anyway, when it crashes I don't want to be under the falling debris.
 
 
+18 # WestWinds 2014-01-06 01:26
PCPrincess said it best:

"Fox News, right-wing media, lots of propaganda and a windfall of profits to those media sources that preach to the ignorant. In short, there is a vast majority of people in this country who have not only allowed the tax cuts to happen, they allowed themselves to be brainwashed into thinking that allowing the very wealthy to keep more of profits made off the backs of the real profit-makers, the workers, is the 'American' thing to do. The money is so good in hate radio and TV that massive sums are spent on researching ways to manipulate the masses and they have become very good at persuading the ignorant to think that what is good for the majority is bad, e.g. taxes, socialized medicine, gun control, etc."
 
 
+16 # CorporatistNation 2014-01-06 06:18
Quite simply, the nature of our political system is engineered to place those w/ CA$H in control of the entire apparatus. Money talks and everything else so to speak walks. What the professor is stating is that the results as noted are no accident.

The wealthy have purchased the policy from their representatives in congress and the state houses via the filthy sots who were "placed" by them in these positions with the predictable conclusion. WE live in a nation where the game is rigged, and since those in charge benefit from the current system how can we expect them to change it?

WE have ONE political party and it should be designated as The MONEY Party as the ordinary citizen no longer has any say in who is elected. The only difference between the major parties is the rhetoric. Watch tonight for a voice vote on restoration of unemployment benefits that will have hidden in it approval of Fast Track to enable the President to run free w/ The Trans Pacific Partnership. After all, this is a Corporatist Nation! JR Dade City, Fl.
 
 
+12 # Jim Young 2014-01-06 08:06
I'll be watching. The TPP and TAFTA are outrageously enabling a vast corporate power grab that transcends borders (with as much danger from outside the US as any would imagine our corporations would gain unfair advantage over outside the US).

While 60 Minutes criticized our clean energy rocky start (Solyndra bankruptcy), they also pointed out the Chinese buying up our failed (under subsidized compared to oil, for the stage of development) companies. The Chinese have the long view, while our corporations mangle the short view, though they may have longer term goals in private profits if they can get TPP and TAFTA past the American public. It won't be in the interest of any of our citizens (other than the corrupt corporatists).

I should add that I expect they will back off a few provisions, since they almost always try to scare us with the worst things they could do then back off a little bit to get what they really wanted but would never be able to sell without the scariest and most outrageous provisions (that they "might" back off from). I want none of it.
 
 
+1 # CorporatistNation 2014-01-06 21:06
Well put. The overkill w/ subsequent backoff is so accurate. JR
 
 
0 # BKnowswhitt 2014-01-06 17:16
Great handle .. i love it ... very in much with the times ...
 
 
+11 # handmjones 2014-01-06 07:27
Our problem is with the very rich. We motivate the rest with little raises in salary and rank. It works. Even in communist Russia they could motivate atomic scientists, architects and all with a salary scale that went only to 20 or so times basic. But once you are on the Board, in the Club, you sit around and award each other hundreds of times that which is necessary to motivate.
We have a graduated income tax. Escalate it to 100% on the marginal dollar at some ridiculous level, say $20,000,000. Stop up all the loopholes. Every dollar of profit to be taxed as income in someone's hands. Come January reassess the amount that should have been collected to cover what the pols spent and move the 100% point up or down to cover. Either get every country on Earth to join the move or put in strict currency controls. Eventually, institute a wealth tax to bring us all back closer to what we deserve. The concept of balancing the books, by law, might gain some support from the less well-off on the right.
 
 
+18 # Jingze 2014-01-06 08:06
The American people have been sold down the drain, and they have yet to notice.
 
 
+9 # Edwina 2014-01-06 10:06
We need to know the negative news, if it is not being reported by the mainstream media. MSM reporting on the economy amounts to reporting on the stock market, which is more and more irrelevant to ordinary people's economy. Unless your retirement fund is investing in the next (housing? student loan?) bubble. But we do need stories about people organizing to solve the problems that the governemnt and financial sector are not solving. We have co-op and worker-owned businesses developing, urban farmers' markets, credit unions, and customer-owned utilities that do not operate on the casino business model of Wall Street. Labor-community alliances are fighting back against government imposed austerity, and for raising the minimum wage. Time to get busy.
 
 
+11 # Kathymoi 2014-01-06 10:22
Interesting to see that some readers don't want RSN to report what is happening anymore. They say it is "negative thinking". Very interesting attitude. I would like, on the other hand, to encourage RSN to continue to provide the truth, a realistic picture, of what is going on in our country. There are still people who don't see the big picture, and one hopes that reading an article like this one will eventually wake up the remaining folks who haven't gotten it yet. We also need articles that point to potential solutions, but little "yahoo news" happy stories are no substitute for the truth of the big picture of what is happening. Wealth is gushing up to the 1% and the lower 90% are experiencing the squeeze. It's good, when attempting to find solutions, to know what the problem is.
 
 
+7 # jwb110 2014-01-06 13:47
I don't care that the rich are rich but it pisses me off that I am subsidizing them.
 
 
+1 # BKnowswhitt 2014-01-06 17:11
More correctly neither You or I redistribute anything. However the politicians who make it all possible do that. Only control we have is at the voting booth and that gets more rigged all the time. The Politicians in both parties are millionaire fat cats .. and if they arent' when the go in they will be eventually and often very shortly ..
 
 
+2 # Sweet Pea 2014-01-06 15:19
It is very uplifting to see that many readers see the huge problem of unemployment today in our country. However, as my father told me many years ago-people do not rebel untill a problem starts to hurt "them". We are getting close!
 
 
0 # BKnowswhitt 2014-01-06 17:15
The only 'hurt' came to the rich. the taxpayers saved them via Bush and then Obama. Where's the specualtive pay back to the government now that they are all doing so well? Shouldn't that have been part of the deal on the loans? Oh yeah. Those were'nt loans just 'corrections' to the big white collar corrupt american run and owned includes every 'elected' politician in american politics .. with only a very very small few exceptions to that ... so why should we be surprised ..
'Yea-Dum Mr Boss man ... an how is da Missus doin!!????
 
 
+1 # cfield76 2014-01-08 20:53
Fellow citizens, we can solve this problem the easy way or the hard way. Rest assured it will resolve, as it always has, since man has been on this earth. Some things we can do, vote, prepare, network,take care of each other, and shun the haters. Peace
 

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