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 ("Mr. McCain and the Economy," Sep. 17) 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."