At the website Who Rules America?, Professor G. William Domhoff, Sociology Dept., University of California at Santa Cruz, writes in Wealth, Income, and Power, September 2005 (updated July 2011), that:
“In the United States, wealth is highly concentrated in a relatively few hands. As of 2007, the top 1% of households (the upper class) owned 34.6% of all privately held wealth, and the next 19% (the managerial, professional, and small business stratum) had 50.5%, which means that just 20% of the people owned a remarkable 85%, leaving only 15% of the wealth for the bottom 80% (wage and salary workers). In terms of financial wealth (total net worth minus the value of one’s home), the top 1% of households had an even greater share: 42.7%. [see the instructive tables here]”
We will use those figures down below in discussing a simple way to reduce federal government debt. [Note: 20% own 85% of the wealth, not 10%, as we mistakenly typed in an earlier version of this posting.]
In the first place, it is essential to determine TO WHOM do we owe that money?
Domestically, that money is owed by and large to the people who also own the most assets in the United States. The money is owed to the wealthy.
The traditional — completely illogical — argument is that the federal government debt is owed by everyone EQUALLY. The argument is that America has ca. 300 million people. The federal government owes about $15 trillion. That makes the debt around $50,000 for each man, woman and child in the United States.
So goes the argument, but that is totally wrong. That is not the way economics works.
If you have a $10 million home then you have to pay $10 million to get it. If you have $10 thousand dollar home then you pay only $10 thousand dollars for it (we ignore here the issue of interest payments on mortgages). In other words, people do not OWE equally if they acquire greater assets.
The same is true for the nation, where, in the United States, 20% of the population OWN 85% of the wealth of the country. But here, strangely enough, the rich do not care about EQUALITY at all. The debt, they argue, is owed equally by all inhabitants, but the great share of the spoils of debt belong UNEQUALLY to them. Obviously, that reasoning is totally false.
Pursuant to the above “house/home analogy”, we argue that if the upper 20% of the country own 85% of the country, then their federal government debt obligation is also for 85% of the federal government debt, because THEY are the long-term benefactors of what the country has done in the past. A newly born American, for example, can not be saddled with a share of that debt, unless by birth he immediately owns property or other wealth. The federal debt has to be paid by the people in America who are the benefactors.
The rich scream that this would be unfair, but it is precisely the reverse, because that federal government debt is largely owed domestically to THEM.
What has happened in America is that “the haves” have invested their money — for example — in U.S. treasury certificates, and then expect the rest of the country to pay the interest on those certificates that they disproportionately collect. At the same time, they resist increasing taxes to reduce that federal government debt, in this manner socializing both their investment risk AND profit. In this way, more and more of the burden of financing America is placed on the shoulders of the poor, who earn increasingly less and whose wealth is dropping.
The obvious method to reduce the government debt is therefore a kind of surcharge on wealth — a simple equity contribution. Those who benefit the most in the country should pay their fair share of the debt, a fair share which is calculated by the value of their assets.
As we note there, the actual equity contribution might be as low as only 4% if it turns out on the day of record that the asset valuation in America is actually substantially higher than $188 trillion, and that is very likely.
LawPundit WP 