Waiting in the Same Line
When my friend Tariq Majeed first came to America over 30 years ago he noticed something striking. When he went to the U.S. Post Office he often had to wait in line, but everyone else there had to wait with him in the same line. In his country of origin - Pakistan - and in the place where he spent most of youth, Dubai, there were always two lines at the Post Office. One line often stretched out the door and up the street as folks waited, often for hours, for service.
The other line at the Post Office was really no line at all, simply a separate door, guarded by a Policeman in splendid uniform, and available only to important people. When one of those important people arrived at the Post Office the Policeman would bow, open the special door, and escort that person in for expedited service.
Tariq has always told me that the Post Office was the perfect example of what made America special - we all had to wait in the same line. I wonder if that America is still with us.
Miss Butterfield
There are 157,800 kindergarten teachers in our America, and we entrust them with the hopes, dreams and nourishment of millions of our children. Do you remember your kindergarten teacher? Chances are you do.
My kindergarten teacher was named Miss Viola Butterfield. Miss Butterfield was quite wonderful, the magical guardian of the gate to that huge shiny world existing beyond the doors of my family home. She opened that gate wide, welcoming all of us into this exciting and sometimes scary new world. We got numbers, letters, amazing stories, a sense of personal responsibility, abundant joy, and huge amounts of sheer fun from Miss Butterfield.
How valuable was Miss Butterfield? As I think back over my 64 years of life she was one of a handful of people who truly helped shape the person I am today. And I know she had that same profound impact on literally thousands of kids that went through her class.
In today's America Miss Butterfield and teachers like her are tragically undervalued. How do I know that? Let's take a look through the rather crass, but oh-so-American lens of money to reach our conclusion.
American Values
A young fellow I know just finished his third year of study at American University in Washington DC. He is a business major, and dreams of someday becoming a Hedge Fund manager. And here's why:
Think of it: in America today a single Hedge Fund manager, David Tepper, is more valuable than 67,000 Miss Butterfields. Mr. Tepper's 2013 income averaged $9.6 million per day. The average wage of a Kindergarten teacher is $52,000 per year.
And here's the crazy thing: because the Hedge Fund manager's income - and that of most wealthy Americans - is considered by our government to be Capital Gains rather than Ordinary Income, it is taxed at a substantially lower rate than is the salary earned by a teacher.
That's right, our government considers money earned by working to be less worthy than money earned through investments. The rationale used by our billionaire friendly congress for this disparity is that low capital gains tax rates are a good thing because they promote investment and lead to job creation. It strikes me that a lower tax rate for the wealthy is merely a special door for important people disguised as public policy.
What in the World is a Hedge Fund Manager?
Now I know what a Kindergarten teacher does, and I know the extraordinary impact they can have on our lives. But what, precisely, does a Hedge Fund manager do? When I was a small boy in Miss Butterfield's class, back in the mid-1950s, there were no Hedge Fund managers in our America. How in the world did we get by without them?
Individuals wishing to invest in hedge funds must be quite rich. Since only the wealthy are allowed by law to invest in these largely unregulated investment instruments, 99% of Americans are not even permitted to participate. So what is a Hedge Fund manager's job? Simply put, they move money around for the richest people in our world to maximize their return on investments.
Hedge Fund managers don't actually make anything or provides any services that normal people need. They don't grow, serve or sell our food, teach our children, heal the sick, construct our homes or our automobiles, make our clothes, pickup our trash, build or maintain our roads, or create beauty in any way, shape or form. They simply make rich people richer, inevitably at the expense of the rest of us.
As of 2016, the 1% of America's richest individuals will own more than half of all American wealth. That leaves a bit less than half of all the available wealth for the other 99% of us to share.
More and more in our America income and wealth are divorced from traditional measures of productivity. For every Steve Jobs that makes something of true value, there are twenty David Teppers. Too often these days wealth is built using an economic model called Rent Seeking.
The Rent Seekers
The classic example of rent seeking comes to us from the Middle Ages: a feudal lord puts a strong chain across the river that flows through his land, blocking all passing boats, and hires a collector to extort a fee (rent) from anyone wishing to pass along the river. There is nothing productive about the chain or the collector. The lord has made no improvements to the river and is helping nobody in any way, directly or indirectly, except himself. All he is doing is finding a way to make money from something that used to be free.
The modern equivalent of those feudal rent seekers now run our America. The bankers and Wall Street moneymen simply insert themselves in between economic transactions, and take their little piece. When their disastrous behavior led to the recent dramatic economic recession, our government told us that the rent seekers were "too big to fail," and made them whole again while the rest of us were left to suffer the consequences.
And what were those consequences: millions of Americans actually lost their homes, tens of millions lost their jobs, the middle class shrunk while the ranks of the poor grew, and typical Americans are worth substantially less today than they were just 15 years ago.
And the already rich have gotten much, much richer.
Our America is the richest nation on earth, and there is plenty enough to go around. Increasingly, though, Americans of differing economic status are waiting in separate lines. The shell game of Rent Seeking is available to the wealthy exclusively, and saps vitality from the rest of society. The application of special capital gains tax privilege and other loopholes means that the burden of taxation falls increasingly on ordinary income of the middle class. Even driving to work now often entails special Express Lanes or Toll Roads for those who can afford to buy their way into faster transit.
Getting Back in the Same Line
The American Dream is predicated on building and maintaining a substantial middle class. Henry Ford was not a good man, but he was a good Capitalist. Though a famous racist and anti-semite, he understood that good wages for his employees translated into more productive and responsible workers. In 1915, exactly 100 years ago, he introduced a daily wage of $5 for workers in his Ford Motorcar factories, literally twice the prevailing wage in America for manufacturing workers.
Within two years Ford's profits had more than doubled. He attracted better workers, and in so doing helped create the American middle class. He also understood that those well-paid workers would become the market for the very cars they produced.
There are too many Rent Seekers and too few Henry Fords in America today. Shortsighted consolidation of both income and wealth in the hands of the few guarantees an unsustainable economy and a society that betrays the American Dream. Our government needs to understand this, and needs to enact policies that benefit the many rather than enhancing and protecting the privileges of the few. Let’s get us all back in the same line.
Paul Ogren