Why Passing the Torch Won’t Fix our Rigged Broken Economy

Why Passing the Torch Won’t Fix our Rigged Broken Economy

January 20, 2017- Millions of women and men throughout the nation and all over the world went out to protest against the presidency of Donald Trump. I understood why - Trump has made lewd remarks about women. He has made threats against Muslims. He said he would torture people. Among many other things, he has also put together a corporate cabinet composed mainly of his billionaire friends.

I also understand the real threat many women face if Trump appoints anti-choice judges to the Supreme Court. I didn't vote for Donald Trump. However, Trump isn't the ultimate problem. To understand the real problem, we need to look at went on before Trump – including the actions of Presidents Obama, Bush, Clinton and Reagan. These real problems include a broken and rigged economy, globalism, a huge military industrial complex, a crisis in civil liberties and a group of ed-reformers hell-bent on privatizing our public schools. At this time in history, we should not be silent on these real issues. We cannot afford to focus solely on hating Trump or blaming Trump for problems that were already devastating our nation long before Trump took office. In this article, we will look at one of our most devastating problems - our collective economic oppression.


It's my hope that with greater understanding, all Americans, regardless of who they voted for, or what they party they relate to, can come together and fight for real change with real solutions to our real problems.


The National Debt
One of the first announcements of the new Trump administration was that they plan to reduce federal spending by $10.5 trillion over 10 years. His proposed cuts include $900 million in 2017 achieved by cutting these four programs:

  • the Minority Business Development Agency

  • the Economic Development Administration

  • the International Trade Administration

  • the Manufacturing Extension Partnership.


Trump faces a national debt, which has about doubled under Obama from about $10 trillion to $20 trillion:



This debt will only continue to grow with more people retiring, increasing numbers of people living in poverty and with the increases in U.S. military spending. Besides those increases, we are increasing our debt by roughly $450 billion / year in interest payments to Wall Street banks and foreign governments. If and when interest rates rise, these debt payments will explode. https://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm

This debt can't be paid off no matter what cuts to government spending (austerity), Trump tries.

There is no belt tightening to cure $20 trillion of debt (and growing). All of the areas of government he is hoping to eliminate, any cuts to social services including social security and Medicare / Medicaid will mean more people living in hardship. Famed economist William Black writes in relation to government cuts, “Austerity’s primary victims are the working class and government social programs for the poor and working class.”

But using the national debt as an excuse for cuts is nothing new. Obama, like Trump, also embraced austerity. In a 2010 speech he said: “Starting in 2011, we are prepared to freeze government spending for three years.  (Applause.)  Spending related to our national security, Medicare, Medicaid, and Social Security will not be affected.  But all other discretionary government programs will.  Like any cash-strapped family, we will work within a budget to invest in what we need and sacrifice what we don’t.  And if I have to enforce this discipline by veto, I will.  (Applause.)”

Social Security in the cross hairs
Executive director of Bush's Commission to Strengthen Social Security in 2001-2002 was Charles Blahous. Blahous had argued that social security benefits should be reduced. Despite the title of the commission (Commission to Strengthen Social Security), its aim was to privatize and gut Social Security, opposite of what you'd think. In 2016, Obama nominated this guy to another 4 year term. “Reappointing Blahous places "a fox in the hen house," said Nancy Altman, chairwoman of the Strengthen Social Security Coalition. "To me, this is emblematic of the last eight years, when the administration hasn't paid much attention to Social Security."



The point of this article is to show that while it's good so many Americans are now awake under Trump, bad stuff has been going on for decades under both parties and will likely continue. As the slogan goes, “The system wasn't broken, it was built this way.” Policies have been enacted under both parties that ultimately hurt the people while enriching the already rich. We have to collectively wake up, educate ourselves and develop a shared vision for a better future.

Income Inequality
Let's turn to income inequality which has been increasing steadily ever since the Reagan era in the U.S. in the 1980's regardless of which party has been in power. What did Ronald Reagan promote?- Trickle down economics. The theory of trickle down economics is that if the rich get richer, the money will trickle down to the middle class and the poor. Trickle down economics meant that the rich don't have to pay as much in taxes as they had prior to the 1980's. However, when the rich get richer, they save their money and it doesn't trickle down to anyone. Find out more about the theory of trickle down economics here. http://money.howstuffworks.com/trickle-down-economics.htm

How do we know trickle down doesn't work? Notice how the average income of the top 10% of income earners and the bottom 90% of income earners changed between 1949 and 2012 since trickle became the norm in the 1980's:

Another chart below shows the distribution of wealth in the U.S. between the top .1 % and the bottom 90% of people since 1917. Notice the rise in income inequality that has been occurring since the 1980's when trickle down economics started. Today, in 2017, 1 person in 1,000 has 22% of all of the weath while the bottom 900 people share 23% of the wealth. Thanks to trickle down (among other things) I wonder if one day we will approach the same level of wealth inequality as we had during the Great Depression when 1 person in 1,000 had 25% of the wealth while the bottom 90% shared 16% of the wealth. It's absolutely astonishing to allow a form of taxation in our country that we can easily see only helps the rich.



Here's another look at the rise in income inequality since the 1980's with the top 1% seeing a 138% increase in wages while the bottom 90% has seen just a 15% increase in wages during that same time period. Many of these job losses were in the rust belt, Michigan, Wisconsin, Pennsylvania and Iowa, which Trump won in the election.


Income Inequality and The Plight of Young People
How does the tax system (and the lack of unions and the off-shoring of jobs ect.) affect young people? Sadly, in the U.S. today the average wage for a young college graduate with a bachelors degree is only $17 an hour – while they carry an average debt load of over $35,000. Add to that, nearly half of all college grads work in jobs not requiring a college degree or are unemployed. (As a point of reference, when I was in college I earned a graduate degree and graduated in 1987 with only $2,500 of debt.) http://www.epi.org/publication/the-top-10-charts-of-2014/


Also, because of not earning enough money, more young people are forced to live with their parents. Roughly 40% of young adults age 18-34 are living with their parents or other relatives. We haven't seen rates this bad since the great Depression 75 years ago. This is not OK. The system is so corrupt that many young people find it impossible to launch their own independent lives. http://www.cbsnews.com/news/percentage-of-young-americans-living-with-their-parents-is-40-percent-a-75-year-high/

Surely, however, as along as kids get a STEM degree they will be OK, right? Wrong. According to a 2013 PBS article The Bogus High-Tech Worker Shortage: How Guest Workers Lower US Wages, “… U.S. colleges graduate far more scientists and engineers than find employment in those fields every year — about 200,000 more — while the IT industry fills about two-thirds of its entry-level positions with guest workers.” In other words, high tech is hiring guest workers while American workers, 200,000 go unemployed. So much for American kids.

To learn about income inequality in the U.S. see here- http://www.epi.org/publication/charting-wage-stagnation/

Trickle down and what else has caused this devastating rise in income inequality?
People in power have, by their actions and laws, created income inequality and poverty for millions of people in the U.S. It stands to reason that when people in power make decisions that hurt the average American, we need to change those people. One of the first steps in changing policies is electing good leaders. To do that, we need to first understand the issues ourselves.


Over the years I have gone to numerous political party meetings and have worked on various issues and have determined that, more often not, our elected leaders become corrupted by money interests. As a result of getting close to lobbyists, power and money, they often end up promoting policies that help the lobbyist and do not help the regular people. Thus, we have ended up creating an economy governed by the mega rich and multi-national corporate interests. It was really surprising and disappointing for me to come to this understanding. I've also come to see that human beings are mostly herd animals when it comes to politics. Once they are wed to a particular political party identity or to a particular politician, they tend to become blind to the bad policies being enacted and hesitate to speak out.


Let’s briefly look at four causes of income inequality- Lower union membership, job off-shoring/ outsourcing, corporate tax breaks (part of trickle down) and deregulation of the banks.

1) Lower labor union membership
A labor union is a group of workers of the same trade or at the same workplace who join together to advance members' interests in respect to wages, benefits, and working conditions. Labor unions brought us the 40 hour work week, higher wages and helped end child labor. Union membership was 1 in 3 workers in the 1950's ; it is only 1 in 20 workers today. Union jobs tend to have higher wages than non-union jobs.

2) Off-shoring / outsourcing jobs
Note the number of jobs added in the U.S. vs the number of jobs added overseas during the decade of the 2000's. This is part of what “globalization” means. And via the media, we are sold globalism as a trendy thing linked to tolerance and multiculturalism. The fact is, however, that we are losing jobs because of globalism.



Bill Clinton signed the NAFTA free trade agreements in December 1993 creating a free trade zone between the U.S., Canada and Mexico. As a result of NAFTA, eventually, more than 700,000 jobs left the U.S. and went to Mexico. http://www.epi.org/blog/naftas-impact-workers/

The WTO was another free trade agreement signed by Bill Clinton which allowed free trade with China (in 2000) and since then the U.S. has lost over 5.5 million jobs to China. http://www.manufacturingnews.com/news/10/0615/WTO.html

It's good to know the person responsible for so much job loss in the U.S: Bill Clinton.

Here's another view job losses from 1980 – 2014. Off-shoring accounted for roughly 7 million job losses. And many of these job losses occurred in the rust belt: Michigan, Wisconsin, Pennsylvania and Iowa which voted for Trump. In short, when you offshore living wage jobs, and replace them with service jobs, there is an increase in income disparity.



3) Rise in corporate tax breaks
Another cause of income inequality is tax breaks. Our state and federal governments are funded in large part by the taxes we pay. The other funding largely comes from fees and bond sales. What we see now in our states and in our federal government are largely regressive tax systems. Regressive taxation means that lower income people pay a higher percentage of their income in taxes while the rich and corporations pay a much lower percentage of their income in taxes. Note the changes that have occurred since 1944. Now 46.5 % of our federal revenue comes from individual people while in 2014 only approximately 11% were came from corporations. Couple that with trickle down and who is left to pay taxes?


Note the regressive tax structure in my state of Washington, one of the richest states in the nation, yet, according to Time magazine, we have the #1 most regressive tax system in the nation with the poorest 20% of Washington's population paying almost 17% of their income in taxes, while the richest 1% pay just 2.4% of their income. Doesn't seem fair, right? And now in Washington State we are trying to figure out how to pay for schools. Uh… Why is it hard to figure out where the money is? In short, when people are paying more in taxes than the rich or corporations, which get to keep their money, there is an increase in income inequality.



4) Deregulated banks – Blowing Bubbles and Derivative Busts
This cause of income inequality is more difficult to explain in one or two sentences. I'll leave it to you to do some research after I give you a brief and simple explanation. I'll put in some links too.


In 1999 Bill Clinton together with the corrupt corporate Democrats and Republicans deregulated the banks which means that they were able to use customer deposits for speculation- gambling. It's hard to believe. I know. Here's a quote with some links to find out more:

He (Clinton) didn’t just push the Democrats controlling the House to pass a bill (Gramm-Leach-Bliley Act) that dissolved the Depression-era Glass-Steagall law, which barred investment banks from commercial banking activities. He deregulated the risky derivatives market (Commodity Futures Modernization Act)… (this led to the)… global financial crisis of 2008 and the too-big-to-fail ethos, with the federal government obligated to bail out multinational banks while doing little for individual account holders.”

The banks were deregulated under Bill Clinton. Then in 2002 George Bush started pushing people to buy homes. The banks were more than happy to lend money to people at low interest rates and got people to take out mortgages even if they hardly had barely enough money to make the payments. These shaky loans became known as sub-prime loans. Here is a speech by Bush in 2002- His dream of home ownership for 5.5 million new minority homeowners didn't work as we can see in hindsight. But it sure helped the banks!

We buy homes and then…
The banks that held the sub-prime mortgages did two things: First, they took out insurance policies to get paid for the mortgages when the borrowers defaulted on their loans. These insurance policies were called credit default swaps (CDS). One of the biggest insurance companies that sold CDS was AIG, which when the mortgages were defaulted on, couldn't pay the money they owed to the banks on the credit default swaps. We ended up bailing out AIG to the tune of $180 + billion. Yes, it was pretty sickening.

Also, along with the CDS deals with AIG, the banks created investments called collatorized debt obligations (CDO), which tied together these crappy mortgages promising a high yield to investors. These CDOs were mostly issued by big banks, like J.P. Morgan, which issued $128 billion of them, and Citigroup, which issued $110 billion. And the rating agencies, which had become corrupt, had signed off on them as good investments. Pensions invested in these, cities invested in these and these bonds went bad. Now the pensions didn't have money to pay the pensioners, cities were broke and a cascading of hardship commenced.

At first all of this money sloshing around made us think we were in a growing economy yet what we were in was an illusionary bubble, so when it popped… gone were the jobs, gone was the money and this, in a nutshell, was the 2008 crash. Dan Wang explains all of this here -


More information here:



Matt Taibbi wonders in 2011 why Wall Street, which bet against the housing bubble and made tons of money and the banks aren't in jail.

Nobody goes to jail. This is the mantra of the financial-crisis era, one that saw virtually every major bank and financial company on Wall Street embroiled in obscene criminal scandals that impoverished millions and collectively destroyed hundreds of billions, in fact, trillions of dollars of the world's wealth — and nobody went to jail. Nobody, that is, except Bernie Madoff, a flamboyant and pathological celebrity con artist, whose victims happened to be other rich and famous people.”


I don't know why I feel ashamed to talk about this 2008 financial collapse situation, but I do. I feel ashamed as an American to know that our countries leaders have conned us so badly in recent history. My dad went to Germany to clean up after WW II and my uncle fought in Korea. I travelled to corrupt developing countries when I was young, and remember thinking, “I'm glad the U.S. isn't corrupt.” (Clearly, I was naive.) In my mind, we are supposed to be the good guys. I used to trust our government. Now I don't. I see the corruption that has gone on in the economy and in other areas in our country.

The result of income inequality is obviously a decrease in money velocity – Another downward trend building for many years
Money velocity means the speed at which money is changing hands in an economy. The Saint Louis Fed explains, If the velocity of money is increasing, then more transactions are occurring between individuals in an economy...”


In other words, money changing hands means the rate at which Americans are spending money. Note how money velocity has fallen since the year 2000. Tax breaks, globalization and deregulation have siphoned money out of our economy. Today, Americans aren't spending money because they don't have any to spend, as I outlined earlier. In fact, according to a recent report, 63% of people can't cover an unexpected expense of $500. http://www.cbsnews.com/news/most-americans-cant-handle-a-500-surprise-bill/

As a result of having a low income, when state leaders talk about raising taxes or fees, many people don't want to vote for leaders who call for raising taxes. They either then don't vote or vote for Republicans. But this doesn't ultimately solve the problem of funding services such as schools and roads. Sure, Republicans don't believe in high taxes on the people. What's more they typically also believe in deregulation and tax breaks. And Republicans often have differing views on social issues than Democrats. What we need are leaders in both parties who name the issues and seek bold solutions. We are tired of the income inequality. I think more and more Americans are sick of being conned and lied to.

Employment - Labor Participation
We can see the result of the con jobs we've been putting up with for decades by looking at the labor participation rate. It shows the number of people working in the U.S. Clearly, a lot of people aren't working when you go from about 67% in the year 2000 to below 63% in 2016. The labor participation rate is unlike the unemployment rate which only counts people who are looking for a job. We have a lot of people who have given up working.


A sad quote from a June 2016 Atlantic magazine article entitled, “The Missing Men” explains- “Something is rotten in the U.S. economy. Poor men without a college degree are disappearing from the labor force. The share of prime-age men (ages 25-54) who are neither working nor looking for work has doubled since the 1970s.. Today, one in six prime-age men in America are either unemployed or out of the workforce altogether—about 10 million men.”

Employment - Available Jobs
The majority of jobs created under Obama between 2009 and 2014 were low wage jobs in health care and hospitality. Here's a chart from Pew research that shows the jobs created and the jobs lost. Notice how many government, construction and manufacturing jobs were lost, most of which paid a living wage.



Here's information from the Census Bureau on the jobs that are projected to have the most openings between 2014 and 2024. A full 2/3rd of these jobs with the most openings don't pay a living wage for a person to afford an apartment, food, a phone, a car and health insurance. I can't demonize any American for voting for or supporting a candidate who they thought would improve their living conditions.


Finally, in terms of jobs for Americans, let's turn to the “alternative work” economy, which means you don't have a permanent job and often times no insurance. According to a joint Harvard and Princeton University study entitled: The Rise and Nature of Alternative Work Arrangements in the United States, 1995-2015: the proportion of Americans workers engaged in what they refer to as “alternative work” defined as "temporary help agency workers, on-call workers, contract company workers, independent contractors or freelancers", and is generally unsteady, without a fixed paycheck and with virtually no benefits soared during the Obama era, from 10.7% in 2005 to 15.8% in 2015” (an increase of over 50%).

In closing, I get why people voted for Trump. He got a lot of votes from frustrated low-income people. When people have run out of options, they turn to someone like Bernie Sanders or Donald Trump, someone who gives them hope of a job, someone who talks about jobs and wealth disparity and the riggedness of the economic system.

I won't attack Trump voters and I won't attack Bernie supporters because I know what it's like to not have money and wonder where it's coming from next. Growing up, there were times I'd look in the fridge and I'd see a jar of mayonnaise and a jar of pickles and call out, “What am I supposed to eat?” Do I think Trump will bring back jobs or solve income inequality. Not likely, because our political system has been taken over by billionaires who seek to consolidate money and power. And even if he wants to, the trend lines are steep. And again, I do support the people who went on the streets to oppose his rhetoric. It was ugly.

However, what we need to remember is that both Trump and Bernie talked endlessly about the issue that is keeping up most Americans at night: jobs. And now that people are awake and in the streets, I'm hoping that this article helps them to realize the truly dire situation many people are facing in the U.S. today and that they will champion the cause of a just economy along with the social justice causes. My hope is that people can memorize a few facts to bring up when they talk and that they will have compassion for the less fortunate and open up dialog with people despite who they voted for. This isn't as much about R's vs D's anymore. It's about billionaires and con artists vs people.

Three solutions

1) Public banking http://www.publicbankinginstitute.org/intro_to_public_banking

2) A fair tax structure

3) Unions and manufacturing at home

We will review these three solutions more in a future article. Thank you for reading this. I do believe a better world is possible. We can see the light.


Feel free to email me with your comments and questions.


Elizabeth Hanson M. Ed.

Turning Point News

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