IS AMERICA BECOMING A BANANA REPUBLIC?
Throughout the years of my youth, I took pride in the fact that America was a nation with a thriving middle class. There were pockets of extreme wealth here, to be sure, but that could be said of just about any country. The difference is that in the so-called “third world,” the affluent represented a tiny minority, whereas the vast majority of the people were quite poor. I saw this for myself when I vacationed a couple of times in Jamaica or traveled to Mexico. It was so nice to return to America and not see such an unequal distribution of wealth.
Well … I am sure our wealth distribution is still more equitable than that of Mexico or Jamaica, but we seem to have turned the corner in a downward spiral. And if anyone had doubts about this point, they should have been dispelled earlier this past week, when the Pew Research Center released its report of the median wealth of American households in 2009.
The numbers are stark. From 2005 to 2009, the median household net worth dropped from $135K to $113K for white families, $167K to $78K for Asian-American families, $18K to $6,325 for Hispanic families, and $12K to $5,677 for African-American households.
The lead headline for these numbers was that the wealth disparity between white households and African American or Hispanic households grew tremendously to where white Americans now have, on average, 20 times the assets of blacks and 18 times the assets of Hispanics. But to me, the shocking numbers are the dollar figures themselves. If you are African-American or Hispanic family and your assets exceed liabilities by $6,400, you are now better off than most other Americans from your ethnic group. By contrast, partners from big law firms commonly bill more than that amount in a single day.
In total, as of 2009, there were about 4.7 million households in America with a net worth of at least a million dollars, representing roughly 4.1 percent of all the nation’s households. With the stock market rebound, that number has surely grown significantly in the past two years, and economists are expecting it to grow dramatically in the next decade. There is no question that while times are tough for the average African-American or Hispanic American, the wealthiest among us are doing just fine.
I think a lot about these figures these days when listening to the talking heads on TV angst about the debt ceiling negotiations. They want to turn those negotiations into a proverbial page turner. But who are they kidding? The people who run our government today are clearly beholden to the 4+ percent of the nation who are worth a million dollars (and who generate the lion’s share of political contributions), and the last thing they’re going to do is watch their stock portfolios go up in smoke. We’ll get a debt-ceiling deal, and it will be hailed as a great accomplishment by some of the yentas on Capitol Hill and 1600 Pennsylvania Avenue. But when all is said and done, the deal will be just one more sign that this nation is becoming a banana republic – albeit on a larger scale than our neighbors to the south.
Clearly, if anyone should be sacrificing in these negotiations, it would be the Americans who are best able to withstand the sacrifice. President Obama was first proposing to increase taxes on those Americans who earn at least $250,000 per year, but later, it was clear that he would have been happy to limit the tax increase to Americans who earn a cool million. No matter – the GOP guardians-of-great-wealth were unwilling to permit even the more restrictive tax increase. So if you earn at least $1 million a year – and if your family’s net worth is measured not in the seven figures but rather in the eight, nine or ten – have no fear. You and your assets will be just fine.
The “compromise” that will be hailed on Tuesday will be felt by a very different group of Americans – the ones who depend on programs like Medicare and Social Security. These include Americans on the south side of the 50th percentile in terms of family net worth. Democrats will tell you that they oppose this approach – that they would much prefer raising taxes on the rich to cutting benefits for the poor or middle class – but had no choice in the matter. The Republicans, they will say, drove a hard bargain. They were willing to drive our collective car off the cliff, Thelma and Louise-style, and the only sane option was to reach a “compromise” in which taxes would be left alone and the budget would be balanced on the backs of those who can afford it the least. This was the same reasoning they employed when, in early 2009, we saved our banks by spewing bazillions of dollars onto Wall Street with virtually no strings attached. It was either that, the Democrats will tell you, or suffer financial Armageddon.
Personally, I’m growing a little tired of all the rationalizations and euphemisms. We “have no choice” but to “reach a compromise.” I find it hard to believe that we have no choice, and I find it impossible to call any of this a “compromise.” In 2008, I joined most of my fellow Americans in voting for what appeared to be a progressive President and a progressive Congress. And what do we have? One party rule – and it’s not the progressive one.
To be sure, the Democrats are being given an extremely difficult hand of cards. But are they doing the most with those cards? Can they not at least try to drum into the heads of the American public the most relevant facts – including the numbers that tell the real tale here?
For me, the two most relevant numbers are $6,325 and $5,677. They are difficult to remember. But once you focus on them and realize what they represent, they’re very difficult to ignore altogether.
By the way, next time you call your local Congressperson, why don’t you ask for the price of a good house servant. They’ll probably tell you to wait a few years, for surely the price will go down. But I think you’re likely to get a pretty good deal right now. And if you live in Bethesda, Beverly Hills or Scarsdale, I don’t doubt for a second that you can afford it.