OH, REALLY: U.S. Sen. Elizabeth Warren, D-Mass., is among those leading the ‘new populism’ charge. Think classier version of Occupy Wall Street.
By Kathryn Watson | Watchdog.org
WASHINGTON, D.C. — From the tea party movement to Occupy Wall Street, there’s no denying a general state of discontent with the way Washington is handling the economy.
That discontent was the fuel to the fire that drew scores of progressives to the New Populism Conference in Washington, D.C., on Thursday.
“This is not the land of economic opportunity,” U.S. Rep. Keith Ellison, a Democrat from Illinois, told the audience. “It’s growing to be the land of economic stagnation.”
Gallup suggests a majority of Americans agree with Ellison, but Americans are divided on how the country ended up here and how it can once again become an economically prosperous nation.
“When conservatives talk about opportunities, they’re talking about opportunities for the rich to get richer and the powerful to get more powerful,” U.S. Sen. Elizabeth Warren, D-Mass., told the audience.
While Ellison and Warren, among others, shared some moving messages and well-taken points about things such as income inequality and providing a “living wage,” their claims missed a few realities.
Here are some of them.
1. “For too long the conventional wisdom in Washington has been that we’re broke. Well, we’re not broke. We’ve been robbed.” — Frank Clemente, executive director of Americans for Tax Fairness
It only takes a quick Google search to know America is in debt — $17.5 trillion and counting. Of course, what Clemente meant is corporations and wealthy Americans could pay off that debt.
But, ethical arguments about forcing the wealthy and corporations to pay off the debt aside, they couldn’t cover it.
If the IRS took 100 percent of income over $1 million, that revenue would amount to just $616 billion, according to the Tax Foundation. That’s nowhere near the national debt.
Even if America put all of its GDP toward paying off the debt, if that was a plausible option, it would only roughly equal the national debt.
2. “The real problem of this economy is not debt. The real problem of this economy is that we don’t have jobs.” — Ellison.
The Illinois Democrat, Ellison, hit on a very important point — the top priority for Americans in nearly every opinion poll is job creation. Liberals and conservatives, alike, agree.
He, however, dismissed the very real economic dangers of the nation’s ever-growing national debt, which stands about $55,000 per person — more than the median income in the country.
For future generations who have to pay off that debt, on top of massive student loans for many, it’s a real economic issue. Plus, interest on debt alone accounts for 6 percent of federal receipts. That money can’t be used for other things — such as job-creation programs.
3. Warren and others emphasized that America isn’t broke — corporations just aren’t paying their fair share.
In a sense, that’s true. Politicians on both sides of the aisle dole out tax breaks to corporations, picking and choosing who wins and who loses. Economists agree — corporate welfare and all that comes with it is a huge problem.
“When cronyism becomes institutionalized, it threatens the overall economy,” reads a summary of a new study on government subsidies by economists at George Mason University’s Mercatus Center. “Private, productive entrepreneurship is increasingly replaced by unproductive entrepreneurship in the form of rent-seeking and political favoritism.”
Unfortunately, government fuels this bad behavior.
For example, Mercatus says Walmart has received at least 260 special benefits from the government worth $1.3 billion. Eliminating government subsidies would, some economists say, naturally diminish much cronyism.
Still, the United States already has the highest corporate tax rate in the industrialized world at 39 percent, and other countries’ economies are passing it by because of it.
“The U.S. shouldn’t be looking to increase the tax burden on corporations further,” said Kyle Pomerleau, an economist with the Tax Foundation.” The U.S. is already at a competitive disadvantage. High taxes on corporations drive investment overseas and slow the economy.”
4. America isn’t broke — the rich just aren’t paying their fair share.
Corporations aside, what about wealthy people? Well, they’re actually paying far more proportionally than the poorest in the America, who are getting back more in benefits than they pay in taxes.
The top 1 percent of earners pay more than two-thirds of all federal income tax revenue, according to IRS data analyzed by the National Taxpayers Union. The top 5 percent of earners in America account for far more than 50 percent of everything paid in taxes.
Or, to look at it a different way, the top 1 percent of taxpayers — with adjusted gross incomes of $388,905 or more — accounted for 18.7 percent of all income but paid 37 percent of all income taxes, according to the Tax Foundation.
The bottom 50 percent of earners, on the other hand, account for just 2.2 percent of all federal income tax revenue.
In fact, America’s lowest-income families receive $5.28 worth of government spending — federal, state and local — for every $1 they pay in taxes, according to an analysis by the Tax Foundation. America’s highest-income families, however, receive 25 cents in spending for every dollar of taxes paid.
5. “Policy research suggests raising the minimum wage,” said Valerie Ervin, executive director with the Center for Working Families, who went on to cite cities and states that have raised the minimum wage rather than what research suggests raising the minimum wage helps the economy.
Unfortunately, as Watchdog.org has reported, the economic indicators aren’t so persuasive.
While increasing the minimum wage could be good for good workers employed at minimum wage, economists say those wage increases tend to hurt the young and unskilled — people who most need the jobs.
“The correct statement is, ‘Everyone who is working benefits from a living wage,’” Antony Davies, an economist with George Mason University’s Mercatus Center in Virginia, told Watchdog.org. “Those who lose their jobs are worse off. For example, raising the minimum wage from $7.25 to $10 would put an extra $5,500 in a full-time minimum wage worker’s pocket — provided the worker kept his job. The worker who loses his job has $14,500 removed from his pocket.”
During the past 45 years, each 10 percentage-point increase in the minimum wage has led to 0.5 percentage point to 2-percentage point increases in unemployment among the high school educated adults, adults without a high school diploma and young people without a high school diploma, Davies’ research found.
Young people, those most negatively impacted by minimum wage hikes, make up the vast majority of minimum-wage earners.
Just 3.6 million Americans earn at or below minimum wage. Within that group, 31 percent are teenagers and 55 percent are 25 or younger. That means less than 1 percent of all Americans, according to Forbes, older than 25 are earning minimum wage. Plus, the average family income of a minimum-wage earner is $53,000 a year, meaning more than one person in the family is working.
“On average, a more educated, more skilled, more experienced worker can do everything a less educated, less skilled, less experienced worker can do – plus more,” Davies said.
So, as the minimum wage forces employers to cut back on labor, the least advantaged are the first to go.
“Sadly, those are exactly the workers who are most in need of our help,” Davies said.
Kathryn Watson is an investigative reporter for Watchdog.org’s Virginia Bureau and can be reached at email@example.com. Watchdog.org intern Kaitlyn Speer contributed to this report.