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“The Rise Of The Super Rich”: GOP Congress Really Does Make The Rich Richer

Are you rich and want to get richer? Vote Republican! The stronger the GOP is in Congress, the larger the share of wealth the top 1 percent controls, according to a new study in the October issue of American Sociological Review, which confirms what we figured all along — there’s a direct connection between the rightward shift of Congress and the upward advance of the richest Americans’ net worths.

From 1949 through 2008, the impact of a 1 percentage point increase in the share of seats held by Republicans in the House (a little over five seats) raised the top 1 percent’s income share by about .08 percentage points.

“At first glance, this might seem negligible,” said Thomas Volscho, a sociologist at CUNY-College of Staten Island who co-authored the study. But it’s not. “Given that the estimated national income in 2008 was more than $7.8 trillion, an increase of only 1 percent in Republican seat share would raise the income of the top 1 percent by nearly $6.6 billion. That equates to about $6,600 per family in the top 1 percent.”

The ASR study, “The Rise of the Super-Rich,” looks at the experience of the 1 percent from just after World War II to 2008 and identifies several other factors that have propelled the top tier’s rise. The fact that the uber wealthy have gotten richer much faster than lower-income brackets has been well documented and helped spark the Occupy movement, but this research looks at the role that policy and other variables have played.

Beyond politics, Volscho and Kelly found that the decline of private-sector union membership, and the increasing financializing of the economy — which has heightened the impact of financial-asset bubbles — were also key contributors to income inequality and the rise of the 1 percent. Over the 60 years the paper studied, a 1 percentage point decrease in union membership among private sector workers was linked to a more than 0.4 percentage point increase in the income share of the super-rich.

But the most surprising finding of the study may be the impact a GOP Congress has on income inequality. “Based on our analysis, Democrats appear to favor an economic system that produces more egalitarian outcomes even before any redistribution occurs,” the study concludes. “In essence, the market is not completely beyond the influence of politics and policy, and it is not just in the realm of explicit redistribution that political parties produce divergent distributional outcomes. Political decisions in part ‘make the market.”

Interestingly, the party affiliation of the president did not significantly impact the wealth share of the top 1 percent. Volscho told Salon he was surprised by that finding. Instead, it’s Congress that has the bigger impact. “It was surprising, but not. Because if you look at, in 1995, the Republican takeover over Congress, that’s when you started to see the spike in the top 1 percent,” he said. “They had been doing well since around 1980, but not as well as around 1995. And the stock market boom started in 1995 as well, but we took that into consideration and that had an independent effect.”

The study doesn’t get into specific policies that impact income inequality much, calling for further research on the subject, but it doesn’t take a Ph.D. to make some pretty good guesses. Republicans (with help from Democrats, no doubt) have pushed tax cuts that disproportionately impact the wealthy, opposed redistributive programs, decreased financial regulation, which allowed for the explosion of financial speculation, cut education funding, etc. “There are so many things, appointments, heads of agencies, mundane policies and regulations that filter down from Congress into government agencies that potentially can aid the very rich,” Volscho said.

But a Republican president like Mitt Romney could help in that they would “make that pro-1 percent legislation flow through so much quicker,” Volscho said. Of course, this isn’t too surprising — polls consistently show that Americans think Romney and the GOP would do more to help the wealthy. Now social science shows they’re right!

 

By: Alex Seitz-Wald, Salon, October 2, 2012

October 5, 2012 Posted by | Congress | , , , , , , , , | 1 Comment

“True Perversity”: Mitt Romney’s Obscene Posturing As A Wall Street Critic

Among the many obfuscations of Mitt Romney last night, this was perhaps the biggest laugher of them all:

ROMNEY: Dodd-Frank was passed, and it includes within it a number of provisions that I think have some unintended consequences that are harmful to the economy. One is it designates a number of banks as too big to fail, and they’re effectively guaranteed by the federal government. This is the biggest kiss that’s been given to—to New York banks I’ve ever seen. This is an enormous boon for them. There’s been—22 community and small banks have closed since Dodd-Frank. So there’s one example I wouldn’t designate five banks as too big to fail and give them a blank check. That’s one of the unintended consequences of Dodd-Frank. It wasn’t thought through properly.

Romney—the private equity veteran running a presidential campaign funded by Wall Street, on a platform that contains a full repeal of every financial regulation over the past four years—positioning himself as an opponent of those big “New York banks” was a historic moment in presidential debate cravenness. (And a real missed opportunity for Obama to wallop his opponent).

So what exactly was Romney talking about? It’s a complicated answer, but understanding it reveals the true perversity of Romney’s posturing.

Dodd-Frank has two provisions regarding too-big-to-fail that Romney is talking about here. The first is the ability of the Financial Stability Oversight Council, created by the legislation, to name financial institutions “systemically significant.” This means they are so big that their failure could threaten the health of the financial sector, and that designation subjects them to heightened regulation and higher capital requirements.

The big banks hate this requirement, for obvious reasons—they come under increased scrutiny and restrictions. So Republicans have been dutifully attacking it. (Romney’s running mate, Representative Paul Ryan, repeatedly blasted it before joining the ticket). The GOP argument, as you heard Romney deliver it, is that by giving them the “systemically significant label, the government is officially “designating” banks as too-big-to-fail—a very bad-sounding thing indeed!

But this is nonsense—these firms are too big to fail. The FSOC designation doesn’t make them so, and is in no way a “kiss” to the big banks—again, it subjects them to higher regulation. Romney and his party would prefer to repeal this provision, full stop, and thus effectively stick their heads in the sand about too-big-to-fail institutions. It’s like saying a doctor who diagnoses someone with cancer has given it to him.

Interestingly, a key feature of this provision is that FSOC can name non-banks as systemically significant, and just this week news broke that AIG is on the verge of receiving this label. Republicans on the House Financial Services Committee have been trying to amend Dodd-Frank to protect AIG from that designation, which to me raises an interesting question about Romney’s timing here.

In any case, when Romney spoke about “guaranteeing” a bailout, and of “blank checks,” he’s echoing another GOP complaint about the resolution authority provision of Dodd-Frank. That gives the federal government the power to wind-down big banks in the event of a failure. The idea is to dissolve the bank, without taxpayer money, not save it—Rep. Barney Frank has called this a “death panel” for big banks. (Pat Garofalo wrote on this issue for us here).

Banks also hate this provision, preferring instead the inevitable ad hoc, blank-check bailout that we saw in 2008. So Republicans have been going after resolution authority—the 2012 Ryan Budget would repeal it—by arguing that the provision somehow guarantees bailouts. This is the same flim-flam as before: the bailout is going to happen either way if the firm is too big to fail, and by repealing resolution authority, you take away the increased power of the government under Dodd-Frank to deal the problem. (Former Treasury Secretary Hank Paulson said he “would have loved to have had” resolution authority in 2008 instead if issuing straight-up bailouts).

Many progressive critics have legitimate complaints about the failure of Dodd-Frank to be tougher in dealing with too-big-to-fail firms, but to be absolutely clear, that’s not what Romney and the Republicans are trying to do. They’re trying to get rid of the limited reforms that have been made. To do it while preening as tough-on-Wall-Street politicians is deeply, deeply cynical.

By: George Zornick, The Nation, October 4, 2012

October 5, 2012 Posted by | Election 2012, Financial Reform | , , , , , , , | Leave a comment

Former Sen. Phil “Mental Recession” Phil Gramm Endorses His “Protege” Rick Perry

Texas Gov. Rick Perry (R) yesterday jumped in the 2012 GOP presidential primary, saying that “it is time to get America working again.” “I will work every day to make Washington, DC, as inconsequential in your lives as I can, and free our families, small businesses and states from a burdensome and costly federal government so they can create, innovate and succeed,” he said. And Perry quickly picked up the endorsementof former Sen. Phil Gramm (R-TX):

Former senator and current banker Phil Gramm of Texas — well-connected to big donors but controversial for his role in preventing tighter regulation of Wall Street — told The Huffington Post yesterday that he is endorsing his former student and political protege, Texas Gov. Rick Perry...”I’m for Rick and I will do what I can to help,” Gramm said in an interview in Detroit. “He has been an effective governor. He is a determined guy from a small town who knows how to get things done.”

In 2008, Gramm, who was advising Sen. John McCain’s (R-AZ) presidential campaign (and was floated as McCain’s choice for Treasury Secretary) gained notoriety for saying that the country was “a nation of whiners” that was only in a “mental recession.”

But Gramm’s legacy goes much deeper than that. In 2001, he tucked the Commodity Futures Modernization Act into an unrelated, 11,000 page appropriations bill. That act ensured that the huge market in over-the-counter derivatives stayed unregulated, laying the groundwork for the 2008 financial crisis (and the implosions of AIG and Lehman Brothers). He also believes there should be no minimum wage and has derided the working poor by saying, “we’re the only nation in the world where all our poor people are fat.”

Perry was a student of Gramm’s at Texas A&M, and when Perry became governor “Gramm and his bank pushed a controversial proposal to allow the company to take out insurance polices on teachers and other workers, even though the workers themselves would not benefit.” If Gramm’s support is any indication, Perry’s zeal for financial deregulation will know no bounds.

 

By: Pat Garofalo, Think Progress, August 14, 2011

August 15, 2011 Posted by | Banks, Class Warfare, Conservatives, Corporations, Economic Recovery, Economy, Elections, GOP, Government, Ideologues, Ideology, Income Gap, Jobs, Lobbyists, Middle Class, Politics, Regulations, Republicans, Right Wing, Teaparty, Unemployed, Voters, Wealthy | , , , , , , , , , , , , , | Leave a comment

   

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