Today’s wealthy are far more likely to have inherited their fortunes. Here’s why that’s going to doom our politics
Tim Donovan
Monday, Jul 21, 2014
Prevailing neoliberal ideology, which perverts capitalism as an economic system into capitalism as an unyielding political ideology, lurks in the shadows of almost every major issue in America, though nowhere is its influence more obvious or profound than in the spiraling rise of income and wealth inequality today.
When Thomas Piketty’s “Capital in the 21st Century” was first released in English, it followed the Culture War Playbook to perfection: First came the triumphant plaudits from like-minded thinkers, followed shortly by the hasty rebuttals of their ideological opponents, followed themselves by a torrent of commentary from pundits left and right who skimmed the book before adding their own two cents. Soon, there was the predictable “unskewing” by the right, after which came the fact-checking of the “unskewers” on the left… at which point the whole process had reached its inevitable conclusion. High-traffic angles fully juiced, our treadmill news cycle moved on to the next plank in our bitter, pointless culture clash, what author William Gibson has termed our “cold civil war.”
So it goes.
What’s so interesting about this Kabuki dance is just how few commentators at the time bothered to note that Piketty’s findings were never particularly controversial or groundbreaking. Piketty’s book became such a sensation on the left precisely because it gave weight to what anyone with a pair of eyes in the real world (i.e., not Lower Manhattan, the Washington Beltway, or Silicon Valley) can already plainly see: Wealth inequality grows each and every day, while the middle class keeps getting pummeled by this Glorious Free Enterprise System. What used to be good, stable jobs are converted into temp positions or contract work — automated, downsized or simply eliminated entirely, they’re replaced in the labor market by the worst-paying, most utterly dehumanizing low-wage gigs that our much ballyhooed “job creators” can imagine and implement.
The consequences for our democracy and our economy are perilous and unlikely to be easily remedied.
Whether or not one is generally convinced by Piketty’s thesis that r > g (or more plainly, that capital tends to grow at a faster rate than income without some form of outside intervention), it should be plain that in our system, the stage has been uniquely well-set for the unbridled expansion of wealth that his book describes. When the effective tax rates are lower for capital gains than for the incomes of the less affluent; when political processes are legally corrupted and circumvented for a price; when regulatory agencies are gutted, stalled, or simply staffed with careerists eager to make their way through the revolving door — this is not a political or economic system likely to become less unequal over time.
Will this trend toward inequality continue? According to “U.S. Trust Insights on Wealth and Worth,” a recent survey of wealthy Americans that aims to “[shed] light on the direction and purpose of the more than $15 trillion that will be passed across generations in high-net-worth families over the next two decades,” it seems increasingly likely.
The survey, which polled 680 Americans holding at least $3 million in investable assets, unearthed a troubling trend — the birth of a new American aristocracy. As the survey notes, “Nearly three-quarters of those over 69, and 61% of Baby Boomers, were the first generation to accumulate significant wealth. Among the younger Millennial generation, inherited wealth is more common. About two-thirds are from families in which they are the second, third or fourth generation to be wealthy.” Now, it should be noted briefly that this survey relies on self-reporting, which makes these figures somewhat suspect. (More on this in a bit.) But consider two charts: The first shows the highest marginal tax rates on income and capital gains throughout the last hundred years, while the second outlines the estate tax rate during the same period.
Continue reading at: http://www.salon.com/2014/07/21/clueless_rich_kids_on_the_rise_how_millennial_aristocrats_will_destroy_our_future/
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