The rise in inequality is widening at an alarming rate. Top 1 percent controlling 95 percent of the overall wealth is causing the rest of Americans to head to the poor house. America's financial elite has put a stranglehold on American citizens to the point of determining the quality of their life (or lack of it). They are effectively controlling the country's economic and political agenda through their powerful lobbies and monetary contributions to politicians and decision makers of their choice.
Millions of workers struggling to make a living by working on minimum wages are turning the country into something akin to a modern day slavery. There are 62% of citizens that have less than $1,000 in savings and are one paycheck away from the street; the American dream has come to an end; the progression of inequality is rapidly eroding America's middle-class into impoverished masses. It may not be long before the rise of discontent will give rise to social unrest potentially causing destabilization of the very foundation upon which the American society was conceived and built. A recent Gallup survey showing 47% of Americans would vote for a President who was a socialist. This should be seen as a wake up call.
A noted economist, Joseph E. Stiglitz, wrote recently: "America is becoming a more divided society - divided not only between whites and African Americans, but also between the 1% and the rest, and between the highly educated and the less educated, regardless of race."
It's high time to realize what may lie ahead. People with decision making power should realize, that necessary economic reforms must be implemented as soon as possible. Mitigating citizens' economic inequality should be top of the list.
Here are five suggestions to mitigate the challenges:
End Federal Reserve Monopoly
After 7 years of post-recession slow growth, numerous quantitative easing (QE) stimuli, and a doubling of U.S. federal debt, the economy is barely limping on at a stall speed. According to industry experts such as Lacy Hunt, "since the introduction of unconventional and untested monetary policy operations like QE, an impressive amount of empirical evidence has emerged that casts considerable doubt on their efficacy". Ex-voting member of the Federal Reserve, Richard Fisher went even further. He told a rare bit of truth-ness in a CNBC interview last year; "What the Fed did, and I was part of it, was front-loaded an enormous market rally in order to create a wealth effect...and an uncomfortable digestion period is likely now". The wealth effect did not benefit an average American. In fact, America's middle-class lost nearly 30% of its wealth.
Ever since its inception, privately controlled Fed's monetary policies have been benefiting mostly the rich elite enabling them to widen the gap of inequality to historical levels. The Fed's time has passed. By admitting their own mistakes, it is becoming clear that the present day economy is dictating the Feds' policies and not the other way around. The Fed should be abolished and the monetary policies of America put into hands of elected politicians who must find a way to lessen inequality amongst its citizens.
Income and Assets Taxation of Rich Americans
Introducing steep taxes on short-term stock market trading and/or outright prohibition on high frequency trading would be a good start, but a serious way to combat inequality is progressive taxation of the super-rich income and their assets, both at home and abroad. Two or three percent increase would bring hundreds of billions of dollars into the public purse, the money that could be used to rebuild or improve municipal infrastructures, create quality jobs, help young Americans get an affordable education, and lower the national debt.
Restrict Overseas Inversions
Tax avoidance by some of the richest and biggest corporations, which are using various loopholes to move their "headquarters" to various off-shore locations in order not to pay taxes, should be banned and declared illegal. Over the last decades, billions of dollars supposed to be paid on account of taxes, were successfully moved out of the country and pocketed by directors of such corporations. The theory that such untaxed money is used to start new enterprises and create jobs for Americans proved to be totally flawed. Rich are not starting new businesses that create more jobs. Instead, by-and-large, they end up hoarding their tax-avoided funds in their offshore accounts ... or ... buying out small start-ups to stifle the entrepreneurship that might compete with their hegemony. Morally and justly speaking, this money is tax payers' money that should be returned to the public purse for the benefit of the country.
Bring Jobs Back to America
Americans should no longer support overseas economies such as China and others by buying their products that can be made just as inexpensive and more efficient in America. For example, the advent of 3D copier and other robotic technology should be used to entice millions of unemployed Americans to start their own businesses by producing goods now imported from overseas. Days of mega-size ships, loaded with containers up to their chimneys, pulling into American ports should come to an end.
Tax Offshore Buyers of Residential Real Estate
Judging by the extraordinary appreciating values of some urban centers such as San Francisco, LA, San Diego, Denver, Miami and Atlanta, foreign nationals that are able to (in many cases illegally) smuggle monies out of their own countries, mostly from China, Russia, Malaysia and others, are now out-bidding Americans with ease, driving real estate prices to higher levels than the pre-crash prices of 2007. If America does not curtail the foreign buying of American residential real estate, which has tripled since 2005, there may not be another cyclical correction to provide Americans with a chance of purchasing their homes. Charging any non-American citizen duty stamp on the purchase of residential property, is the only way to put a damper to rich foreigners snatching homes away from Americans.