The Wealth Divide is Still Our Biggest Problem

If both the Voting Rights bill and the Build Back Better bill were to become laws today, very little would change for those who are trying to move up a little on the enormous American Wealth Divide. Put another way, the wealth gap between rich and poor will be 32 times worse in 50 years than it is today. What that means is that for every one person who does move up, 32 will stumble and fall back into the depths of that Great Divide. The net gain will be negative. The Land of Opportunity for the many will become the playing field for the wealthy few. By 2072 we will be an Aristocracy. We could then dismantle the Statue of Liberty and replace it with a giant sign reading Abandon Hope All Ye Who Enter Here. The two bills at issue today are mere band aids that will make very little difference in the long run. Here’s why:

90 percent of all wealth that our economy creates is being sucked up and deposited into the accounts of the wealthy. That happens because of our inheritance laws, our wealth distribution laws, and by the laws of compounding. Specifically, 98.2 percent of all wealth (stocks, bonds, and real estate) left at the death of one person is handed to his or her heirs--untaxed and unearned. Just 1.8 percent is bequeathed to churches, schools, and charities. Second, 90 percent of all new wealth (in the form of interest paid on bonds, dividends paid on stocks, rents paid on real estate, and capital gains on all three) flows to the same inheritors—still unearned and mostly untaxed. Third, the compounding rate of return on their total wealth holdings (now totaling $125 trillion) is 7.2 percent annually. Here is the formula that will convert that $125 trillion to $4,042 trillion, or 32 times its present value:

$125 X 10 ^12 X (1.072) ^50 = $4,042 trillion

and $4.042 trillion 32.34 times larger than $125 trillion

What barriers lie ahead that could possibly stop the Great American Wealth Inequality Divide from growing 32 times worse by 2072 than it is today? NOTHING. NADA. ZILCH. ZERO.

All that is necessary is for men and women of goodwill to stand silently by and watch it happen. Then it is automatic, on cruise control. And you thought those rich boys were all stupid. Think again. Now that new sign in New York harbor about “abandoning all hope” doesn’t sound so far-fetched, does it? Moreover, the $1.7 trillion Build Back Better bill starts to sound like “Chump Change.” Doing nothing therefore is not an option.

And, finally when the top 10 percent hold $4,032 trillion in wealth, then this land is their land, and you (not me.  I will be long gone.) will be the new Welfare beggars who are too lazy to work for a few crumbs.

BTW, the 7.2 percent compound annual wealth growth rate did not drop in from nowhere. It is the same rate that has been growing our wealth total for the past 50 years. So it is no exaggeration at all.

The Solution: 1. Reinstate the Inheritance Tax from 2016. 2. Overhaul the Income Tax Schedules with a new minimum income of 15 percent tax on everyone regardless of where or how it was acquired. Exceptions: retain exemptions for the poor and the disabled. 3. Demand that the Fed direct 10 percent of all newly printed money to Credit Unions where 70 percent of it must be lent to small businesses and to individuals. That’s where 70 percent of all jobs are created. 4. Pass universal health care for all. We need a healthy population. 4. Make community colleges and new skill-training a federally funded endeavor. We need smart workers.