Occupy Wall Street demonstrators are right to protest how the middle class is getting poorer while the rich get richer, but the location of their protests — in the world’s financial capital in New York — should be about 200 miles to the southwest, in Washington, D.C.
A grassroots movement is sprouting up all over, including on the steps of our county courthouse, where Occupy Santa Cruz holds demonstrations. The local group’s schedule is posted at www.occupysantacruz.org.
Protesters display signs proclaiming, “We are the 99 percent,” referring to the fact that the top 1 percent of U.S. households earns 20 percent of all income and owns 33.4 percent of all net worth. Wall Street is the target of these groups.
I agree that the salaries of paper pushers on Wall Street are too high. Financial firms used the system to get richer, but they didn’t create the system. That was done by politicians and lobbyists in Washington.
Here’s how Washington is to blame for shrinking the middle class:
From 1979 to 2007, the top 1 percent of income-earners saw their incomes rise by 275 percent to an average of $352,000 a year, according to PBS’s The McLaughlin Group. Meanwhile, the middle 60 percent saw their incomes rise only 40 percent to an average of less than $50,000.
During those three decades, the U.S. lost blue-collar jobs as it shifted from a manufacturing center to a financial capital. Manufacturers wanted to deliver bigger profits to their shareholders, so they gradually moved jobs to places like China and India, where labor costs were dirt cheap and environmental regulations didn’t exist.
Conservative commentator Patrick Buchanan of The McLaughlin Group blamed free-trade agreements negotiated by both Democrats and Republicans in Washington for enabling this change.
“The middle class was sold out by both parties,” Buchanan said, “especially the Republican free traders.”
Another blow to the middle class has been the crash in housing prices over the past five years. That, too, was caused primarily by Washington.
In her book “Reckless Endangerment,” New York Times columnist Gretchen Morgenson points to Fannie Mae, the quasi-government agency founded in the 1930s to promote homeownership that transformed in the 1990s under CEO James Johnson into a profit machine.
Under presidents Bill Clinton and George W. Bush, Fannie Mae was pushed to increase mortgage lending to lower-income Americans. To increase profits, Fannie Mae let people buy homes with no money down and insufficient income to pay their mortgages. At the same time, it gave money and favors to members of Congress to reduce government oversight.
That inflated a housing bubble. When it popped, it sent home prices into freefall, causing millions of homeowners to lose their nest eggs.
I’ve only scratched the surface of how Washington is to blame. I could also point to ultra-easy monetary policies by the Federal Reserve that fan inflation, causing pain to the poor and middle class while helping the wealthy, who can invest in assets that are rising in price. Or the 1998 repeal of the Glass-Steagall Act that gave banks a license to gamble with government-backed deposits, helping lead to the 2008 crisis that still burdens our economy.
Washington’s actions have hurt the housing market and killed jobs, motivating homeowners and the unemployed to raise picket signs. But wealthy Wall Street executives don’t care about the protesters’ plight. It’s our government leaders who are supposed to care about voters’ concerns.
If Occupy Wall Street wants to maximize its impact, put a million protesters on the Mall in Washington. Then Congress will listen.
Mark Rosenberg is an investment consultant for Financial West Group in Scotts Valley, a member of FINRA and SIPC. He can be reached at 439-9910 or [email protected].
