how powerful is your lobby? financial industry power 1. deregulate industry 2. make it harder for...
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How powerful is your lobby?Financial Industry Power
1. Deregulate Industry
2. Make it harder for middle class to file personal bankruptcy
3. Tax breaks http://www.youtube.com/watch?v=QLD0p1QpcI8&feature=fvwrel
Warren Buffett 1987 Forbes 400 $220 Million to get on
$220 Billion combined
wealth
Avg American Salary
$26,000
2011 $1.3 Billion $1.54 Trillion Paris Hilton?
Avg. American Salary 48,000 Exactly the same as
the CPI
Deregulation
Sen. Phil Gramm (R, Texas)
Rep. Jim Leach (R, Iowa)
Rep. Thomas J. Bliley, Jr. (R, Virginia)
Co-sponsors of the Gramm–Leach–Bliley Act
Signed into law by President Bill Clinton
Repealed part of the Glass–Steagall Act of 1933
Opened up the market among banking companies, securities companies and insurance companies
Glass–Steagall prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company
The Gramm–Leach–Bliley Act , a.k.a., the Financial Services Modernization Act of 1999
Japan
Germany
Canada
Hong Kong
Mexico
Venezuela
United States
0 50 100 150 200 250 300 350 400 450
11
13
20
42
46
50
415
Comparison of Average Worker to CEO pay by Country 2005
ratio
1970 1975 1980 1985 1990 1995 2000 20050
50
100
150
200
250
300
350
400
450
CEO Pay vs. Average Worker Pay 1970-2005
ratio
rati
o
BAPCPA
2010
Lobby for:
1. US Treasury and Federal Reserve bailouts 2. Tax Breaks
Bank of America Bailout $1 TrillionTaxes $1.9 Billion tax refund
Goldman Sachs Bailout $800 Million Taxes 1.1% on $2.3 Billion profit
Citigroup Bailout $2.5 TrillionTaxes $0 on $4 Billion profit
Era of the Wealthy Class One percent of households control 1/3 of the nation’s wealth.
The bottom 90% of households in the U.S. earned 57% of the nations income but only controlled 29% of the wealth
Statistics from 2004 Federal Reserve Board
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Food
Food
Families
Billionaires create jobs?
Sports? Cabella’s? Helps small business?
http://www.youtube.com/watch?v=LUNHwZVgLB8&feature=related
How much will your annual income be for the next 30 years?
$60,000
$80,000
$100,000?
2008 Individual ReturnsMedian AGI $33,048
Top 1-percent AGI $380,354
Top 10-percent AGI $113,799
Bottom 10-percent AGI $5,942
Cognitive Psychology
Departures from rational decision-making that are both systematic and predictable
Over-confident and above average bias unduly skews deterrence in connection with products liability and negligent conduct
Heuristics or Biases
My Job is to help you minimize risk!
Your Earnings
From 24 to 65 men earn $ 2,140,200 (Average income of an American with bachelor’s degree in 2009)
Your living expenses $1,080,000 Medical expenses $1,500,000 1 Child $600,000
Net on retirement $1,040,000
Car Loan Current Year ($ 19 B)
Arrearage ($ 120 B)
0
50
100
6
39
93
$ 100 B bailout
Default RatesCars and Children
A Tale of Two Countries
Broadland (1930-1970)Population 203 Million Poor 25 Million 13 %
Richistan (1970-2010)Population 307 MillionPoor 45 Million 14 %
http://www.census.gov/hhes/www/poverty/data/incpovhlth/2009/table4.pdf
Bottom Fifth Seconf Fifth Middle Fifth Fourth Fifth 80th-99th Percentile Top 1 Percent0
200000
400000
600000
800000
1000000
1200000
1400000
Income Growth 1979 & 2007
Ave
rag
e In
com
e
Lowest Fifth Second Fifth Middle Fifth Fourth Fifth Top Fifth Top 5%0
0.5
1
1.5
2
2.5
3
3.5
Annual Income Real Growth Rate
1947-1973
1973-2005
Quintile
Inc
om
e G
row
th R
ate
Income Distribution 1974
the top 1% earned 8% of all income 2009
the top 1% earned 25% of all income 2009
the top 0.1% earned 12% of all income the top 0.01% earned 6% of all income
The 400 richest Americans have more wealth than the bottom 155 million combined.
The Government invests:
Wealthy children
$ 665,000Poor children
$ 40,000
$450,000 Home Mtg $ 150,000 529 Svgs $ 18,000 child tax
credit $47,000 public school
$1million Home mortgage interest deduction lasts 30 yrs
529 and child tax credit last 18 years
TANF funds $ 3,000 Public school$25,000
TANF has a 5 year max
Let’s include capital gains and estate taxes
Annual income $385,000 60% from capital gains 15% tax rate Over 30 years $2,079,000
Eliminating estate taxes
$666,000,000,000
How much do we invest?
Wealthy children
$ 2,665,000
Poor children $ 40,000
The Racial Divide
1984 1989 1994 1999 2003 20070
50000
100000
150000
200000
250000
300000
Median Wealth Holdings by Race and Income Level (excluding residence)
Upper Income WhitesMiddle Income WhitesUpper Income African AmericansMiddle Income African-Americans
Wea
lth
in
Do
llar
s
Does Inequality Matter?
Inequality is positively correlated with:Homicide ratesInfant mortality ratesDisease and morbidityIlliteracyHigh school drop out ratesIllegal drug useMental illnessDistrust of others Social immobility
Inequality and Social Mobility
Inequality is Painful
Inequality is Expensive
Solution 1 Tax Structure
Austan Goolsbee
http://www.youtube.com/watch?v=ma5np8PcaY8
Unsustainable Investment
30 years in prison $504,690
Actual
Estimated
Ideal
Sweden
0 10 20 30 40 50 60 70 80 90 100
Distribution of Wealth by Quintile
Top 20%2nd 20&Middle 20%4th 20%Bottom 20%
Your Earnings
From 24 to 65 Duke Law School grads $ 3,000,000
Your living expenses $1,080,000 2 Children $2,200,000 Medical expenses $1,500,000
Net on retirement $1,780,000
Your Earnings
From 24 to 65 Duke Law School grads $ 3,000,000
Your living expenses $1,080,000 1 Child $1,100,000 Medical expenses $1,500,000
Net on retirement $680,000
Women in Retirement:
2006 43% or 13mill single women are entirely dependent on SS
Below poverty line
If she owns her own home <50% If she doesn’t <70%
If the top 10% strongly support a bill, it is 3 times as likely to pass as when they oppose it.
For the bottom 10%, 90% support is indistinguishable from 10% support for a measure in impact on representatives.
Strong support from middle income voters has no discernable impact on representatives.
Inequality is strongly correlated with lower voter participation, particularly by voters at the bottom of the income distribution.