“The Myth of the One Percent”

Sydney M. Williams

Thought of the Day

“The Myth of the One Percent”

December 29, 2011

Targeting the one percent is seen by Democrat’s as a surefire way of retaining the White House. Dividing the electorate is an age-old tactic, derived from the military. Divide and conquer has been used in warfare, since time immemorial. It is a means of overpowering an enemy larger than one’s own by driving a wedge between their forces. The term comes from the Latin, “divide et impera.” In his book, Travels with Charlie, John Steinbeck wrote that we all need someone to hate. It helps bind the rest of us. Class Warfare is a means to divide the nation. For the President it serves to cover-up his failed economic policies.

Like any organization, Occupiers of Wall Street (OWS) rely on slogans. “We are the ninety-nine percent’ implies that the vast majority of people have been set upon by the greedy and unscrupulous. It was a maneuver designed to attract political backing. What politician would prefer to be associated with the one percent?

Occupy Wall Street began with a few young people claiming that their suffering was due to the one percent who, over the past several years, had gathered all the wealth and most of the income. They determined that Wall Street greed brought our financial system to near collapse three years ago. Left wing politicians saw the movement as an antidote to the Tea Party, despite their obvious differences. The Tea Party was a spontaneous uprising of middle class people who felt increasingly alienated from a government that had become too big. They were older, responsible and respective. Not so the “Occupiers.” Their cause was assumed by unions and others for their own purpose. The “Occupiers” had the press behind them. Today, if you Google “Tea Party” 101,000,000 responses come up. However, if you Google “Occupy Wall Street”, 544,000,000 responses will appear! The Tea Party was responsible for electing almost 60 members to Congress. As of early December, 5,386 ‘Occupiers’ had been arrested for various causes, including drug possession and lewd behavior. At least one death has been attributed to the group. Yet they remain the darlings of the mainstream press.

The myth of the one percent is that, while they have done better in terms of income than the rest, they still, as a group, have not done well relative to overall inflation. The Congressional Budget Office reported in a recent study that the top one percent of the nation’s earners saw their real household income grow 275% between 1979 and 2007, while others in the top quintile saw their income grow 65% during those years. Income growth for those in the bottom quintile saw only an 18% increase. There is no question that during those twenty-eight years the differential widened and that the poor suffered.

But, it is instructional that inflation during the same period grew at 282%, suggesting that the top one percent only maintained their relative purchasing power. Like all statistics, one must be careful in drawing conclusions. A small number of people made extraordinary amounts of money. But, the composition of the approximate 1,500,000 households that comprise the top one percent, has changed many times. People have died. There are toddlers and preteens of the late 1970s that are now counted among the one percent. Some have ascended the ladder, while others have fallen. The fact that the income of the top one percent has failed to maintain pace with inflation should be disconcerting to all of us. The reason has been globalization.
In September, the President suggested the American people had gone soft – an observation he has not repeated. He is wrong, the people have not gone soft, but we have, with the notable exception of a few innovators, entrepreneurs and risk takers become uncompetitive in the global market place. Principal blame lies with our education system that has allowed other nations to wrest excellence from our grasp. However, a significant part of the blame lies with unions that negotiated wage and benefit plans that proved too expensive for domestic companies faced with global competition. When Toyota builds a non-union auto plant in Tennessee and manufactures better quality cars than General Motors does in Michigan with unionized workers, something is wrong. While unions served very real purposes sixty to eighty years ago, today they have become part of the problem. They are tied to the past; the future is passing them by. Public sector unions, which effectively did not exist fifty years ago, now include more members than their private sector cousins. Creating future problems, they have become the single largest factor behind the enormous debt obligations of state and local governments.

There is a tendency during difficult transitions to turn inward, to focus only on locally made products and services. The ‘Buy American’ aspect of the Stimulus Bill was such an example. But, just as money flows freely around the world, so does labor. What can be built in Stanford, Connecticut can generally be produced equally well and for less cost in Seoul, South Korea or in Fujian Province in China. We can erect trade barriers, as we did with disastrous consequences during the 1930s, or we can compete. We can compete either on a price or value-added basis. For obvious reasons we cannot compete on a price basis. So, we must be smarter and more efficient in what we produce. That takes education and training. However, the National Education Association (NEA) and the American Federation of Teachers (AFT) have long fought competition. As a result, graduates of our public schools are generally woefully unprepared for the competitive climate in which we live. In contrast, our universities are still considered among the world’s best, attracting thousands of foreign students every year. Unfortunately, after educating many of these students, we then ask them to leave – a failure of our immigration policies to adapt to a constantly changing world.

Fortunately the powerful teacher’s unions are gradually losing power, as competition in the form of charter schools, voucher programs and tax credits are increasingly ubiquitous. The Wall Street Journal recently termed 2011, “the year of school choice.” Twelve states and the District of Columbia have either enacted or expanded school choice options in 2011. This has been achieved despite powerful efforts on the part of the AFT and NEA to deny such progress. It is instructional to note that New Orleans, following its devastation from the 2005 Hurricane Katrina, opened their school system to choice. They created a system of competitive schools called autonomous charter schools. In the wake of the Hurricane, Governor Bobby Jindal had state officials take over the city’s school system. As of this month, more than 100 city schools had been turned over to charter organizations. The schools have seen rising scores on state exams and a recent poll by Tulane’s Cowen Institute shows an “overwhelming support for their right to choose.”

While the President seems determined to carry this populist message of divisiveness onto the campaign trail, the real cause of the widening income gap continues unaddressed by Washington. It has been a failure on their part to confront the competitive nature of a globally changing world. Markets will correct the situation, but recovery would come more quickly if politicians were more concerned about the needs of the people than with their own re-elections. It is a myth that Wall Street is the sole cause of income disparities. The real cause has been politics. The target of the Occupiers should be Washington.