Watching three of Wall Street’s top-five investment banks —
Bear Sterns, Lehman Brothers and Merrill Lynch — vanishing as
independent entities, Financial Times columnist Martin
Wolf recently warned that “the brave new U.S. financial system is
melting away before our eyes.”
What went wrong? Pro-capitalist candidate John McCain, saying
that the American economy’s underlying fundamentals remained
strong, blamed “the greed by some based in Wall Street.” He could
have added that over-interference in the economy by Washington’s
liberal politicians and Obama-style community organizers had pushed
banks for decades to loosen their lending requirement in order to
expand mortgage loans to low-income borrowers.
Neo-socialist candidate Barack Obama, in contrast to McCain,
took a wider shot at the market system and conservative economic
principles. “I certainly don’t fault Senator McCain for these
problems,” said Obama, “but I do fault the economic philosophy he
subscribes to.”
The New York Times, unsurprisingly, wasn’t happy with
John McCain’s answer. Better that the economic fundamentals are
completely collapsing and a full-blown crisis elects Barack Obama
to pick up the pieces.
The American economy, editorialized the Times last week, is
“stressed to the breaking point by fundamental problems — in
housing, finance, credit, employment, health care and the federal
budget — that have been at best neglected, at worst exacerbated
during the Bush years.”
American workers have been taking the worst beating, said the
Times: “For decades typical Americans have not been
rewarded for their increasing productivity with comparably higher
pay or better benefits. The disconnect between work and reward has
been especially acute during the Bush years, as workers’ incomes
fell while corporate profits, which flow to investors and company
executives, ballooned. For workers, that is a fundamental flaw in
today’s economy. It is grounded in policies like the chronically
inadequate minimum wage and an increasingly unprogressive tax
system, for which Mr. McCain offers no alternatives.”
In fact, regarding the progressiveness of federal taxation, the
latest release of Internal Revenue Service data on individual
income taxes shows that the top 1 percent of taxpayers earned 22
percent of total adjusted gross income and paid 40 percent of all
federal income taxes.
“That means that the top 1 percent of taxpayers paid about the
same total amount of federal individual income taxes as the bottom
95 percent of taxpayers,” reports the Washington, D.C.-based Tax
Foundation.
Similarly in terms of the highly progressive impact of the
federal income tax system, the top-earning 25 percent of American
taxpayers earned 68 percent of the nation’s income in 2006 and paid
86 percent of all federal income taxes.
During 2006, Tax Foundation economists estimate that
approximately 43 million tax returns, representing 91 million
individuals, paid no federal income taxes. That’s 32 percent of the
total 136 million federal tax returns filed in 2006.
Adding non-filers, i.e., those who earn some income but not
enough to be required to file a tax return, to the aforementioned
non-payers, the Tax Foundation estimates that 40 percent of income
earners are outside of the federal income tax system.
Get the portion of the population not paying any federal income
taxes up to 51 percent and any candidate calling for higher income
taxes can have a built-in majority constituency of pick-pocketing
redistributionists.
With the minimum wage, the federal rate increased from $5.15 in
2006 to $5.85 and $6.55, respectively, in 2007 and 2008, and
increases next year to $7.25. In 25 states, the mandated minimum
wage this year is higher than the federal rate, topping out at
$8.07 in Washington state and $8.00 in California and
Massachusetts.
Additionally, the federal Earned Income Tax Credit program will
supplement these minimum wages and other low-end incomes by an
estimated $44.7 billion this year, reports the Center on Budget and
Policy Priorities.
Continuing its criticism of McCain’s statement, the
Times states that “the regulatory failure is rooted in a
markets-are-good-government-is-bad ideology that has been ascendant
as long as Mr. McCain has been in Washington and championed by his
own party.”
Does the Times think that a
government-is-good-markets-are-bad ideology is more likely to
deliver the goods, or that Obama’s advice in May to the graduates
of Wesleyan University to shun the “money culture” is the path to
widespread prosperity?
Instead, across the world, it’s the pro-business, pro-capitalist
ideology that’s been the most directly correlated with increasing
the freedom and prosperity of the average person. It’s the world’s
freest economies with the most limited governments that have many
times the per capita income than economies that are strangled by
overblown states.
“The greater dangers to liberty,” wrote Supreme Court Justice
Louis Brandeis, “lurk in insidious encroachment by men of zeal,
well-meaning but without understanding.”
