Wednesday, October 08, 2008

The Paradigm of the Progressive Pyramid

This is how government services, and for that matter, personal income, are currently skewed. The top 1% of income earners (including corporations) get the first drops of tax money to trickle down from government:

Those at the bottom, and this is in accordance with supply side economics, get the last drops of government tax policy. It is supposed to trickle down to those with the least, those who do the bulk of the grunt work that runs the economic engine of this nation and it's corporations.
In theory. And in a strictly capitalist society, this is precisely the way things are supposed to run: Those with investable capital put their wealth on the line, take the risk, and reap the rewards of that risk, mostly off the backs of those who do not have the wealth to strike out on their own. If the risk blows up, the ones who lose the most are the folks who funded the venture in the first place, who hired the people to run the business that failed.
In private enterprise, for the most part, this is a highly efficient system, weeding out the weaker companies while rewarding the stronger. There is a kind of savage logic to this. After all, no one is supposed to have emotional feelings about a corporation (nor should a corporation have human rights, but that's a different essay.)
A codicil: I am neither cheering or criticizing capitalism, per se, merely pointing out how it is supposed to work from a clean, clinical, theoretical point of view of how for-profit economics works.
Government is not a for-profit venture, and yet the benefits accruing to society from government seem to skew, indeed even reward, the top one percent to the detriment of every income group below it.
When the economy is in trouble, who is the first to get help inthe forms of tax breaks and incentives? Big corporations. The wealthy. When the economy is humming along, who is the first to reap the benefits of higher tax revenues? Big corporations. The wealthy.
Let's take the infamous "Bridge To Nowhere" in Alaska, which connected the town of Ketchikan to the seaport across a small. That seaport was a destination for tourists travelling by cruise ship, and would facilitate their travel into town (it would cut miles off the drive around the end of the inlet, and hours off ferry rides). Who benefitted? A handful of cruise operators, and the town of Ketchikan.
Now, I'm not arguing against tourism in Alaska, to be sure. Ketchikan is probably a lovely place if so many ships are willing to dock there. What I am arguing against is lining the pockets of greedy cruise operators when times are good with hundreds of millions of taxpayer dollars. If the bridge was so necessary, let them pool their money together and build it themselves. Let the state of Alaska and the town of Ketchikan kick some money in. It's a local matter, and should have been handled locally.
But that's not how government works, is it? This is how government should work:

You'll note that here, the people who need the most help are the ones most directly benefitting from the "rain" of government money. But notice something else: this graphic presentation hints at something that would be of great benefit economically to the wealthy.
The "funnel" effect: By distributing funds in this fashion, each level would end up "paying forward" whatever benefits they didn't directly use themselves. The rich would continue to aggregate wealth, just not as directly as they do now.
Let's take the recent spate of bailouts: despite running annual deficits alarmingly close to a half trillion dollars, we're suddenly informed that, somehow, the Fed managed to find almost a trillion dollars of government money to use to help bailout banks and investment banks.
Hmmmmmmmmmmmmm. So the question must be asked: if you could find that now, in a crisis, why couldn't you find it before the crisis to help people pay down their mortgages, or at least keep current on their payments?

A trillion dollars divvied up amongst 330 million Americans works out to around $3,000 per person. If you're late on your mortgage, that could go a long way to helping you catch up. If you don't have a mortgage or credit card bills, you'd probably end up spending it on something nice (yea, a percent or two of you would end up saving it, but even that's OK, since it would put money back into the capital markets). $3,000 would buy a couple of nice meals for a rich person. Indeed, they'd be the most likely to spend it outright.
What's standing in the way of this? It is how politics works. The fact that the poorest 20%, the poorest 60%, can't buy the influence that the richest one percent can.
Re-read that again: the poorest majority of this country is outspent in politics by the richest one percent. 180,000,000 people have a weaker voice in a democracy than 3,000,000!
(To my critics, I know I'm mixing apples and oranges a little here, talking about the richest one percent in terms of corporations and then citizenry and back again, but the numerical impact of a few tens of thousands of corporations on numbers of this magnitude is minimal, statistically speaking).
In terms of realpolitics, I have no trouble with money getting you some additional access to a candidate and/or officeholder, you know, maybe you need a stoplight on your corner, but when we start talking about trillions of dollars and we start talking about walking a tightrope that falling from might end the country, then I think we have to redraw the political map.

And flip the pyramid that's been in place for generations now. FDR had it right, and it seems to have toppled and flipped over as a succession of Republican presidents have weighted the money in the apex and pushed it over.