On Thursday, during a Bloomberg News interview with Tom Keene at CUNY in New York, Nobel Prize-winning economist Paul Krugman said there was nothing good about setting historic records in the gap between rich and poor, and that the country as a whole could not sustain the economy as a poverty-ridden oligarchy.
Krugman traced the problem back to the 1980’s, when President Ronald Reagan turned the US tax system into a wealth redistribution center for millionaires and billionaires. The Reagan policies, known as “trickle-down” or supply side economics, achieved at least part of their intended purpose. They did indeed shift more money to the rich. But the “trickle-down” part never happened.
“The fact of the matter is, since inequality began soaring, around 1980, the bottom half of America has pretty much been left behind. There has not been a rising tide that raised all boats,” Krugman said.
While the income inequality gap may have begun its growth under the Reagan administration, it accelerated after the Wall Street induced Great Recession of 2008.
Bankers, who knowingly bundled and sold high risk mortgages as “good” investments, saw their plans to parlay billions in profits backfire. The resulting meltdown destroyed the US housing market and set off an unprecedented string of foreclosures that the country still hasn’t completely recovered from six-years later.
But rather than live by the rules of free market capitalism, the bankers ran to Washington looking for a handout.
The American people flooded the Capitol with emails and phone calls demanding that congress refuse to bail them out. Their voices were heard, but it only lasted two days. After a backroom deal was struck, congress and President George W. Bush opened the vaults of the US Treasury and gave Wall Street all the taxpayer money they wanted.
When the dust from the financial crisis settled, Wall Street CEO’s handed themselves multibillion dollar bonuses and their wealth was restored, and then some. However, that was not the case for the millions of homeowners who found themselves on the losing end of illegal foreclosures. The bankers took the bailout money and the homes. There was no way for them to lose because the game was rigged.
Just two-years later, the Supreme Court handed the benefactors of income inequality another weapon to further rig the system by declaring corporations human beings with the right to spend all the secret money they wanted to influence the outcome of US elections in their favor.
It could be argued that no other decision has had as profound an effect on boosting income inequality policy than Citizens United v. Federal Election Commission. Perhaps that’s because the easiest way for the wealthy to obtain more wealth is to buy the politicians who write the laws that erase their obligations to the country that made them rich.
Just about everyone in America has been personally effected by the corporate coup d’état of 2008. The final act of the George W. Bush administration has brought consumers higher banking fees, unemployment, lower wages, and a sinking standard of living.
As the Christian Science Monitor noted in 2011, “The standard of living for Americans has fallen longer and more steeply over the past three years than at any time since the US government began recording it five decades ago.”
As for Krugman, his income inequality warnings simply state what more and more Americans are coming to realize by just waking up every day and finding that it’s no longer possible to get ahead by working hard and playing by the rules.
Wealth has become an inherited lock that propagates itself, while sucking the heart out of the poor, the middle class, and America as a whole. And the trend is not likely to end until even the wealthy are no longer able to control the consequences of absolute greed corrupting absolutely.
Author’s note: The opinions and commentary included in this report are based on the author’s original reporting and independent analysis of official documents and public information.
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Watch the entire Bloomberg/Krugman interview: Paul Krugman: Inequality Actually Bad for Growth