If the
Occupy Wall Street (OWS) movement accomplished anything it was to focus public
anger on America’s extreme and growing wealth gap, portraying it as the product
of the greed and selfishness of the richest 1%.
This overly
simplistic view obscures the actual socioeconomic relationships that are
responsible for the transfer of wealth from the majority to the few, as well as
who comprises this “few.”
The wealth
gap is actually the by-product and goal of capitalism and the sociopolitical
institutions that bolster it. All bosses in private businesses, regardless of
how rich they may be, make their profits by paying their employees less than
the value of their labor and pocketing this surplus value as profits (i.e., exploitation).
The owner and employer classes transfer additional wealth to themselves through
a taxation system that allows them to pay a lower effective tax rate than their
employees pay, and through a legislative and legal system that facilitates
their acquisition of more capital, sometimes even if it injures, sickens or
kills others.
Exploitation
of workers is the primary source of the wealth gap, particularly between
employers and employees and the source of the so-called obscene wealth we see
among the “1%.” However, wealth is also transferred from the young to the old,
resulting in a growing wealth gap between older Americans and the young.
The wealth
gap between younger and older Americans is currently the widest
on record. In 1984
Americans who were sixty-five and over made ten times as much as those under the
age of thirty-five. By 2008, older Americans were earning nearly forty-seven
times as much as the younger age group. (For more, see the following articles in Esquire and Newsweek).
This wealth gap is not small, either. The median net worth of households
headed by someone 65 or older has increased 42% since 1984, to a comfortable
$170,494, while the median net worth for younger households has declined 68% to
a desperate $3,662, according to the Pew Research Center.
The Pew study attributes some of the wealth transfer to timing: The
older generation benefited from living and working in a strong economy and a
long rise in housing prices. Conversely, older Americans have suffered far less
under the current recession, with the median net worth of those under 35 falling
37% between 2005 and 2010, while falling only 13% for those over the age of 65.
The recession has also forced many older Americans to continue working longer
than they would have in the past, squeezing many younger workers out of jobs.
The percentage of the workforce under the age of 25 has declined 13.2% since
2008, while rising 7.6% for those over 55.
However, the trend began decades before the current recession and has
been facilitated by
changes in government policy, which have been promoted by an aging politician
class (today’s Congress is the oldest since World War II). For example, the
federal government now spends $480 billion on Medicare, but only $68 billion on
education, according to the Esquire article. As a whole, the U.S. government
spends 7 times as much on its seniors as it does on its children, per capita, according
to a 2009 Brookings Institution study. Mike Males
writes that younger workers are currently contributing 15% of their payroll income
to pay for Social Security and Medicare payments for seniors, since Congress gutted
the Social
Security Trust Fund (originally designed to cover future
generation’s benefits) to pay for current government needs.
The transfer of wealth from young to old has been a hallmark of the
Republican Party and would have been taken to new extremes under the Ryan tax plan.
According to Males, younger Americans would have suffered under this plan in
direct proportion to how young they are. Virtually every federal program
designed to benefit the young and the poor would have been gutted or
eliminated, including food stamps, Medicaid and job training. Federal spending
on education would have been slashed by one-third. But Social Security and
Medicare for today’s seniors would have been preserved. At the same time,
median-income households headed by people 55-65 would have received tax breaks of
roughly $1,200, while median-income households headed by people under 25 would
have lost hundreds of dollars.
However, the Democrats have also contributed to the generational wealth
transfer. Under Obama’s 2012 budget, for example, Medicare and Social Security
were left alone, while the Adolescent Family Life Program and the Career Pathways Innovation Fund
were ended. Likewise, the AmeriCorps program was slashed and had to turn away
75% of applicants last year, while recent changes to the Pell grant program
will cost students an estimated $100 billion over the next ten years, according
to the Esquire article. Similarly, Obama’s plan for
avoiding the “fiscal cliff” involves raising
the age of eligibility for Medicare benefits and cutting benefits for
future recipients of Medicare and Social Security. In other words, the benefits
of today’s seniors would be preserved and subsidized on the backs of today’s
youth.
So far I
have only discussed the tangible, present-day ways younger Americans have been
screwed. They have also been saddled with an enormous debt they will be paying
well into the future through higher taxes, reduced benefits and services, and
delayed retirement (or no retirement). The per capita debt in the U.S. is now
$50,000, with much of it going toward paying for the longest wars in U.S.
history (i.e., Iraq and Afghanistan) and huge tax breaks for the wealthy. Yet,
the average student also owes $12,700 to the credit card companies and will owe
$27,000 to college loans creditors, according to the Newsweek article. And despite incurring all this debt,
college graduates’ income has dropped 11% over the last decade for men and 7.6%
for women.
While some
of this wealth transfer has merely helped middle class baby boomers live comfortable
middle class retirements, much of it is really about helping banks, Wall Street
investors, and large businesses reap ever larger profits on the backs of
youths. Skyrocketing student debt, for example, contributes to the poverty of
younger Americans. Yet, Obama’s student debt repayment plan may actually
increase debt payments for many students, while his plan to cut
spending on higher education by $10 billion could increase student need for
loans, thus increasing profits for lenders and the hedge
funds that trade students loans.
