Inequality is Weakening Social Security. Here’s How We Fix That.
When Congress set the cap on Social Security contributions in 1983, they didn’t anticipate forty years of rising inequality. And it’s cost us — a lot.
European austerity policies — cutting minimum government jobs and services, reducing pension payments and minimum wages, transferring the tax burden from the rich to the middle and poor — have deeply damaged most European economies, including especially Greece and Spain.
Most other European countries are suffering, even if they’re not facing debt crises. France has just kicked out its austerity president, and other countries look to follow. The popularity of Britain’s austerity government is at an all-time low, and even in Germany Chancellor Angela Merkel is not immune from criticism.
If Germany has avoided the worst of the European downturn, it’s only because Germany has been in austerity mode for the past 12 years. That’s how long it’s been since the average German worker has gotten a raise. If Greek and Irish workers are being forced to give up a decade’s gains, German workers never had the gains in the first place.
It’s a sad and strange world that makes a virtue of austerity-chic terms like “government cutbacks” and “wage moderation.” In a healthy world, government services expand. In a healthy world, wages go up. Government cutbacks and wage moderation are only virtues for the rich, not for the rest.
[pullquote]It’s a sad and strange world that makes a virtue of austerity-chic.[/pullquote]
Take HSBC, Europe’s richest bank. For the first quarter of 2012 HSBC reported a profit of almost $7 billion. Its executives stand to benefit enormously from the UK government’s proposed reduction in the top individual tax rate from 50% to 45% (with an eventual target of 40%). Do HSBC bankers care much about cuts in low-income housing allowances, student tuition assistance, and social services? Probably not.
On the other hand, by cutting 14,000 jobs in 2011 HSBC has contributed mightily to the very social problems that government exists to solve — and that the current British government shrinks from solving.
Banks like HSBC can only make profits when their debtors repay their loans — and that means governments. Europe’s austerity budgets have clearly set national priorities to put debt repayment first, low taxes for the wealthy second, and the good of everyone else last. That recipe serves the rich very well, but it doesn’t serve anyone else.
These policies are certainly driving levels of inequality in Europe up toward American levels. Statistics are only released with a time lag of several years, but the impacts of austerity are obvious. Europe’s austerity policies are making the rich richer and everyone else poorer. The European Union, the European Central Bank, and Europe’s establishment political parties seem to be doing everything they can to turn Europe into a new United States.
[pullquote]The United States has been in permanent austerity for so long that we have forgotten what normal once looked like.[/pullquote]
Lest Americans cheer that outcome, Americans should understand that American wages have been stagnant for almost forty years. The United States has been in permanent austerity for so long that we have forgotten what normal once looked like. Germany has been following in America’s footsteps for 12 years, the rest of Europe for two or three. But American workers have been treading Austerity water for decades.
America’s political system has become so dysfunctional that Americans may no longer have a choice. It’s austerity or emigration. As France’s voters have shown, Europeans at least have a choice. Europe hasn’t yet passed the point of no return. Europe can follow America down the river to a premiumized world for the few and perdition for the many, or Europe can return to sanity.
European austerity is a transparent ploy for profitability being made by wealthy banks, bankers, and investors at the expense of European populations. European voters can still reject this future for their continent. Europeans must have the courage to take a stand for themselves, and for the future of the world.
Someone somewhere must decide whether our societies are to be governed by the people, for the people or by the market, for the market. Many Americans are heartbroken that it’s not America taking this stand. But if America won’t, someone else must. Liberté, égalité, fraternité? Bonne chance.