More than forty years ago, economist John Kenneth Galbraith wrote that what we’ve come to know as trickle-down economics was around in the late eighteen hundreds and was known then as horse-and-sparrow economics. The horse-and-sparrow theory posits that if you feed a horse an abundance of oats, some of the oats will eventually pass through the horse and plop on the road for the sparrows to eat. In Galbraith’s apt but unappetizing metaphor, the ultra-wealthy and big corporations are the horse and the rest of us are the sparrows.
A headline on the front page of the print edition of Monday’s Asheville Citizen Times states, “Top 1% richer than the entire middle class.” According to the article, just thirty years ago, the middle class – defined as the middle sixty percent of American households based upon income – held twice as much wealth as the top one percent, but today the top one percent hold more wealth than the entire middle class. It seems the oats didn’t pass through the horse and plop on the road for the sparrows to eat.
The Citizen Times article is based on data compiled by the Federal Reserve and available to the public on its website. The data show that as of mid-year, the top one percent of Americans amassed $45.78 trillion in wealth. The ultra elite of that group, the upper one-tenth of one percent – think Bill Gates, Jeff Bezos, and Elon Musk – account for $18.63 trillion of wealth. The vast majority of Americans – those in the zero to ninety percent range based on income – hold $45.38 trillion. In other words, the top one percent of Americans are worth more than the bottom ninety percent. To make the disparity it even more stark, the combined wealth of the bottom half of Americans is $3.64 trillion, which is one-fifth the wealth of the top one-tenth of one percent. To try and put that into context, if a thousand people who are representative of the wealth distribution in America were assembled in a room, one person in that group would be worth five times more than five hundred other people combined.
According to the Economic Policy Institute, between 1979 and 2021, adjusted for inflation, wages for the bottom ninety percent of Americans grew by twenty-nine percent while wages for the top one percent soared by two-hundred-and-six percent. The top one percent controls nearly thirteen percent of all real estate wealth and owns nearly half of all the shares in stocks and mutual funds. And if the prevailing trend continues, the gulf between the uber rich and the rest of America will continue to expand.
No one factor alone accounts for the outsized accumulation of wealth by the richest one percent. Clearly, the Reagan-Bush-Trump tax cuts that saw most of the benefits go to those at the top exacerbated the spread of the wealth gap. Several years ago, billionaire investor Warren Buffett noted that it was patently unfair that his secretary is taxed at a higher rate than him and he advocated for tax reform to reduce the disproportionate burden the tax scheme places on working Americans. Rather than reform to achieve a higher degree of tax fairness, we got more tax cuts that fed more oats to the horse, expanded the national debt, and left the sparrows standing in the road picking at the dregs.
In 2021, Amazon had $35.1 billion in pre-tax earnings and paid $2.1 billion in income tax, for a tax rate of six percent. Had it not been for tax breaks, Amazon would have paid $7.3 billion in taxes for a tax rate of twenty-one percent. For some reason, breaks that benefit the wealthy are heralded as “incentives” while breaks that benefit others are derided as “welfare.” Recall that Congressman Chuck Edwards opposed what he called President Biden’s “student loan giveaway plan” that would have forgiven up to $20 thousand per person in student loan debts and benefited tens of millions of ordinary Americans while the multimillionaire congressman enjoyed $1.1 million in Paycheck Protection Program loan forgiveness that fattened his own wallet in true “good for me, but not for thee” fashion.
The economic elite have used their wealth effectively to manipulate many who aren’t rich to believe that it’s their patriotic or religious duty to vote against their own interests. They sold low wages and poor working conditions as the “right to work,” opposition to programs that help the disadvantaged as “socialism,” and tax cuts that make the rich richer and grow the national debt as brilliant trickle-down job creation engines. Facts don’t lie, people do, and the facts prove that Galbraith’s metaphorical horse has gotten fat and bloated while the sparrows remained lean. That’s not going to change until the sparrows wake up and realize that the horse played them.