No, but the System Really IS Rigged.
Career Politicians and Crony Capitalists
It’s official, Joe Biden is the last candidate standing and will likely be running against Donald Trump in 2020. This leaves me with a bad taste in my mouth. In November, American voters will get to choose between two elderly white male candidates who have benefited tremendously from the status quo for decades. Both have helped to build the modern version of American democracy that we have today. Biden has been in Federal government since 1973 and his “flexible” political ideology has repeatedly shifted to suit the current political landscape. Trump, the privileged son of a wealthy real estate magnate, learned early on that politics and money are inseparable and the political system can be used for personal gain.
I am not a Bernie Sanders supporter, but his populist message (reminiscent of Trump’s “drain the swamp” chants in 2016) is right in many respects. The American economy, the American tax code, and indeed the whole American system of government now benefits the wealthy while leaving the vast majority of Americans behind. Wealth disparities are increasing. Artificial barriers are being erected to perpetuate privilege. In good times, and in bad times (as we are seeing now), it is the wealthy who disproportionately benefit.
Money in Elections
It was hard to watch the Democratic candidates crucify each other during the debates, particularly focusing on who had taken campaign contributions from the most billionaires. This is a false narrative. Individuals can only donate $2800 to a political campaign. There are only a few hundred billionaires in the US, not enough to cover a month of operations for a major campaign. True influence lies with Political Action Committees or PACs. Unlimited contributions can be donated to so-called “Super PACs” and, as long as candidates promise not to coordinate with PACs, they can run candid parallel campaign efforts. Most PACs include major corporate donors. Biden, Sanders, Warren…all were supported by at least one Super PAC. Wealthy individuals and corporations behind the scenes are playing a huge role in who holds elected office.
A Regressive Tax Code
In 1913, the first federal income tax code was adopted, which allowed for loan interest to be deducted from taxes owed. This tax code DID NOT intend for personal housing loans to be included in the deduction, as very few Americans had a non-farm mortgage. After the rise of the personal mortgage in the 1940s and 1950s, this deduction was left in place and a new narrative emerged. Home interest loan deduction would put home ownership into reach for the middle class; home ownership boomed. Economists have long agreed that this deduction increases inequality, as it disproportionately benefits wealthy homeowners with mega-mortgages and large incomes. Yet the mortgage interest deduction, enacted by accident, has been left in place for 100 years longer than it should have.
Capital gains, from selling assets like stocks or bonds, make up a substantial income fraction for the wealthy Americans. Assets held for more than a year are viewed as “long term capital gains”; rather than being taxed like regular income (around 35%), these increases in personal wealth are taxed at a fraction of that, around 15% today. This disturbing tax policy further enables the wealthy to hide income through clever strategic losses. Over the past 25 years, lawmakers have systematically reduced taxes on investment income, disproportionately benefiting those with the highest ability to pay.
The past decade has been marked by the longest bull run in history. The wealthy have benefited tremendously, as public markets have returned an average of almost 10% per year. Wage growth over the same decade has been closer to 2.5%. A period of unprecedented prosperity has padded the fortunes of the already-prosperous.
Further large tax loopholes have been put in place, such as the exemption for up to $500,000 for income made from selling your primary residence. These loopholes, exemptions, and deductions have been put in place BY wealthy Americans FOR wealthy Americans. Donald Trump’s tax returns, which we will never see, will show that he has legally paid near-zero income tax for years, possibly decades. These policies were put in place by Joe Biden and his contemporaries. Career politicians like Biden, under pressure from wealthy capitalists like Trump, have given us decades of government-legislated growth in income inequality and wealth disparity.
Bailouts and Relief Packages
COVID-19 is driving the US economy into a depression. There are now 22 million unemployed Americans, true unemployment figures might be close to 18%. Consumption has effectively frozen. The CARES Act recently injected $2 trillion in stimulus into the US economy, and the Federal Reserve is making trillions more available in near-zero interest loans. Those lined up to receive handouts include poorly run airlines, loss-making venture backed companies, and investment firms who have made risky bets that didn’t work out. These large poorly-run companies will receive government funding long before relief packages make it to America’s 30 million small businesses.
But there’s something for the average American too! $1200 checks started going out this week, only slight delayed by the addition of Trump branding in the “Memo” line. In an election year, this is a blatant gambit to buy votes. Business owners, investors, and equity-holders will receive the lions’ share of bailout support, and use this cheap capital to get rid of expensive debt or to buy new assets. Unemployed workers will need to navigate complex unemployment bureaucracies with months-long backlogs to get the benefits they are entitled to.
This stimulus will result in a national debt obligation that millennials will be paying back for the rest of their lives. The wealthy, who own assets, will see their fortunes stabilize and then increase. Working-class Americans will see entire sectors of the economy disappear for good. Some of the jobs that have been lost will never reappear.
Presidents, not Kings
America’s founding fathers were wealthy elite landowners who had lived under the rule of an Empire. The system of government they envisioned was meant to be something different: a meritocracy. The political order of the past 50 years has failed the majority of Americans, as those drawn to public service are increasingly concerned with enriching themselves and their family members.
Donald Trump, himself heir to a real estate empire, has shown repeatedly that he has no problem with nepotism. His daughter and son-in-law wield tremendous influence within the administration and around the world despite a complete lack of experience or competence. This is one of the areas where he and Joe Biden see eye to eye. Biden has repeatedly set up his immediate family members, like his son Hunter and brother Frank, with plum international assignments.
The status quo is not working for the average American, and yet we are now stuck choosing between two status quo candidates. Joe Biden has spent 45 years building the current political order to benefit the nation’s Donald Trumps.
In 2024, we can demand something new, something better. There are now more millenials than Boomers and, sadly, when this pandemic is through that ratio will have shifted even further towards the younger generation. Americans need to be united by a common vision and a common purpose. If our elected officials fail to inspire us to action, it is because we are putting forward the wrong candidates.