The Slow, Miserable Death of the Middle Class in the USA

You and I come to a business agreement.  Ideally I will perform admirably at my tasks and you at yours.  Over time we will live well and prosper. The original agreement is that I will assume the financial risk:  Use my money, take loans, and sell Stock in our company.  You will provide your time, skill and labor.  So now we have a business and we break down the cost and benefit thus:

Sixty cents of every dollar raised via loans, stocks and revenue from selling our service and product goes to me.  Out of that sixty cents, I repay our creditors and give them a reasonable profit.  Also, I am paid a living wage and my expenses are compensated.  Forty cents of every dollar raised will pay you a living wage plus benefits and a bonus during good times. The cost of maintaining our business – buildings, vehicles, materials, etc. will also come out of that forty cents.

You make enough to pay your children’s college expenses, save for retirement, travel, give to charity and enjoy life.  I make twenty times what you do, but then my hours are longer and my decisions will make or break our company.  Airline pilots make more than the baggage crew or the stewards, because more responsibility and risk should equal more pay.  At the end of the day, you and I prosper.

Along comes 1977 – 2015

Our company’s creditors aren’t satisfied with the profit they are making off of us.  They want – no – they Demand More.  So now I enter into an agreement with our Creditors, but I don’t tell you.  If I give the Creditor more money from our company, they will make sure I am given a percentage of their take.

So how do I accomplish this?  First, I cut the budget for maintenance.  Our buildings start deteriorating; it becomes harder to get the tools and supplies critical to meeting the needs of our customers; machinery breaks down; employees start getting injured more often.  In some cases, people die.  Second, I cut your wages and benefits:  Pension – gone.  Bonus – gone.  Cost of living raise – gone.  Where does all this “reduced cost of doing business” go?  It goes to the Creditors, who then raise my salary to three hundred times what you earn.

We are now in the year 2015.

Remember the 60 cents / 40 cents split?  Now the split is 91 cents / 9 cents.

So now let’s apply this to companies of various sizes.

$1 Million dollar company:

  • $600,000 for me and $400,000 for you originally.
  • $910,000 for me and $89,000 for you
  • Your net loss:  $311,000

$100 Million dollar company

  • $60 Million and $40 Million
  • $91 Million and $9 Million
  • Your net loss:  $31 Million

Billion dollar company

  • $600 Million and $400 Million
  • $910 Million and $90 Million
  • Your net loss:  $310 Million

According to Fortune Magazine, “In total, the Fortune 500 companies account for $12.5 trillion in revenues (with) $945 billion in profits.”  The Fortune 500 are comprised of Walmart, AT&T, Target, McDonalds, etc. Applying the above Revenue Redistribution, we see startling results.

  • $7.5 Trillion and $5 Trillion
  • $11.375 Trillion and $1.125 Trillion
  • Your net loss:  $3.75 Trillion

Your wages, pensions, benefits have been cut in order to feed Wall Street.  The maintenance of your factory, workplace, equipment, etc. has deteriorated because the money that used to go to upkeep and growth has been redirected to wealthy investors.  Jobs have been eliminated or outsourced; now one person is doing the work of three.  Or a worker’s pay is substantially lower, and it’s not because these corporations are on the verge of bankruptcy.  America is a vastly wealthy nation.

Understand this:  America’s poor and middle class are being royally fucked.  Class Warfare does exist.  The wealthy have declared a scorched earth policy and they are winning.  Adding insult to injury, they are constantly complaining about taxes.  They pay a very low actual rate, and want that reduced to zero.  They want all the public services and protections afforded by the USA, but they don’t want to contribute toward them.

Adjusted for productivity growth and inflation, the minimum wage should be $22 per hour.  Average wages should be in the $35 per hour range.  Under the 60/40 split, they would be; under the 91/9 split, these wages are, (according to CEOs scamming tens of millions per year), just not in the budget.

Why does Costco pay average starting wages of $17 per hour to a cashier and provide healthcare and other benefits?  How can Costco avoid Chapter 11 when the conventional “wisdom” is that $15 an hour minimum wage will destroy a business?  Because under the 60/40 split, that wage is easily affordable.  Costco made the conscious, deliberate choice to invest in people, in it’s employees.  Other companies decided to rob the working class and give the money to Wall Street.  In return, Investors kick back a small portion to the Executives of those companies in the form of bloated compensation.

My Dad cut trees away from power lines for a large electrical company.  Today, that job is considered low skill with no college degree required to be employed in that industry.  Yet from 1957 until the youngest of five graduated high school in 19___, he alone worked outside of the home.  Mom stayed home and cared for the children and the house.  He did not need public aid, because his job paid enough to support seven people.  I don’t think I need to point out that a person performing that job to, with only a high school diploma, would not be able to do that today.

The stock market’s ‘big skim’

Harold Meyerson
WashingtonPost

Like the mobsters who used to run the Las Vegas casinos of old, said Harold Meyerson, America’s biggest investors have been skimming off the top of corporate revenues for the past four decades. Throughout the 1960s and ’70s, roughly 40 cents of every dollar that a U.S. corporation “borrowed or realized in net earnings” was reinvested in facilities, research, or new hires. But since the 1980s, “just 10 cents of those dollars have gone to investment,” while the rest has gone directly “into shareholders’ pockets.” This “shareholder revolution” has effectively undone the “broadly shared prosperity that Americans enjoyed” for much of the postwar era. Money that once went to expansion, new ventures, and employee compensation is now earmarked for payments to already wealthy investors. From 2003 to 2012, Fortune 500 companies devoted 91 percent of their net earnings to shareholder payouts. As a result, “finance is no longer an instrument for getting money into productive businesses” says City University of New York economist J.W. Mason, “but instead for getting money out of them.” In perpetrating this “perfectly legal skim,” American investors have done something not even the mob ever could: They have brought “America’s middle class to its knees.”

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