The Changing Face of America:

Deceived & Impoverished

Chapter 7

 

Americans are a trusting bunch.  We want to believe the best of our country, government and leaders.  If I could show you that you have been systematically robbed, would you still feel that way?  (From both parties – Republican and Democrat)  We are living under the magical illusion that our leaders want the best for us.  By the slight of hand we are better off today than we were thirty years ago.  But are we?  What is the price of our prosperity?  What if I could prove to you that there has been a systematic governmental conspiracy to steal from you and give it to the wealthiest top one percent?

It is hard to imagine that Christians could become so entangled in the world system but the Bible tells us that many will be deceived.  Deception is the nature of Satan’s game plan and we would be underestimating him if we think it will be easy to detect.  But it goes way beyond merely being fooled.  We are also being trapped in a system that will enslave us if we aren’t very careful and take precautions now to prevent it.

Just as we showed in previous sections, the nations of the earth have been trapped in a cycle of poverty and debt because of U.S. policies.  The “have nots” owe their souls and their tomorrows to the “haves.”  In the same way, all men, including American Christians are being enslaved and dragged deeper into a morass of debt and dependence on the “system.”

I don’t like to be an alarmist.  I don’t like conspiracy theories.  I don’t like bad news any more than you.  But we need to open our eyes and see clearly what has been happening to us.  The prophetic clock started ticking again with the birth of the nation of Israel and Jerusalem as the capital which set a number of things in motion: Israel and the rise of a great nation – Babylon the Great, a nation would subdue and pollute the world.  At the same time, a demonic system would be set in motion to make the entire world dependent upon the Antichrist, beginning with the third horseman of the apocalypse as we saw previously (Revelation 6:5) which brings economic chaos to the earth resulting in a wide gap between the rich and the poor, culminating in the “mark of the beast”  where all commerce is so controlled that no one can buy or sell without it.  (Revelation 13:17)

You may have hardly noticed but this process is well under way, even here in the United States (but not necessarily limited to just here).  In this section, we are going to look at what happened to those of us in the most prosperous nation on earth with the largest middle class and highest standard of living the world has ever seen.  As a child of the ‘50s and a college student of the ‘60s we witnessed the greatest period of prosperity the world has ever seen; but that is coming to an end, and I will prove it with facts and figures.  A quantum shift has been taking place and like the frog in the heating pot of water, we didn’t even notice the rising temperature. 

In the past 30 years, especially, life for the typical American has become more and more difficult.  The stay at home mom is a thing of the past and couples struggle more each day just to keep their heads above water, only to find themselves sinking deeper in debt, debt they will never get out from under.  Four out of five households have more income because they worked more hours – mainly women so that now the average family works 20 more weeks per year compared to 1975.  Inflation, working longer and harder, results in bigger pay checks, housing bubbles and the illusion of making more money.

Our government has deliberately set in motion policies that are designed to make the rich richer and the rest of us poorer.  The result of this is that we work harder for less.  We are consumed with just surviving even as the government (including our “evangelical Christian” President) and his administration would try and convince us otherwise.   “Another day older and deeper in debt,” says the old Tennessee Ernie Ford song followed by, “I owe my soul to….”

There is not only a conspiracy to rob from you, but there is a conspiracy to hide the truth from you.  The rules that the government establishes with regard to income tax, investment and inheritance taxes determine who wins and who loses.  As we shall see, the way they interpret and enforce the laws shows their true colors.  Finally, the way the statistics on employment, inflation and economic growth are computed are purposefully designed to conceal the truth from you.

A Little History Lesson

With the passage of the 16^th Amendment in 1913, the original income tax applied only to the economic elite, to what they called “surplus incomes.”  There was virtually no tax for the middle class and lower.  The elites receive most of their income from capital gains (investments) which was taxed more than income.  By World War I, people were taxed according to their ability to pay.  Even during World War II, only a small minority of people was taxed but politicians had a taste of the huge revenues they could get from a large base.  After the war, income taxes began to take off.

During the Eisenhower era, the wealthy were taxed at 90 percent.  This was a graduated tax according to the “ability to pay.”  Even when Reagan became President, the tax on the wealthy was still at 70 percent.  From that time forward, things began to change – for the better if you were wealthy and for the worse, for the rest of us.

This is a complicated subject but I will try and present the information in as simple and straight forward way as possible.  I would just like to say that this is all public information and can be easily verified.  My hope is that you will be able to see clearly what has been happening to us little froggies as the heat has been turned up on us.

Let’s go back to about 1972; a little over 30 years ago.   That was the year when Americans had the highest disposable income.  The average car was $5,000.  The average home in the low $20,000 range.  Today, the average car is over $30,000 and the average home around $300,000 (depending on location).  I bought a home for $20,000 in 1972 and it just sold for $399,000!  Is the plumbing, electrical, roof, walls any better or any newer to be worth 20 times more than when it was built?  No, in fact, it is in far worse condition – what we used to call a fixer upper!  A dollar in 1972 was the same as $4 in 2002.  We have an illusion of wealth because our incomes seem to increase and home prices are soaring, but does that mean we are really making more?

 

The Disparity of Wealth

 

The government likes to deal with averages.  What happens to the average income of all of the patrons when Bill Gates walks into a McDonalds to buy a hamburger?  It could jump from $50,000 to $50 million just like that, right?  That is exactly what happens when you look at average incomes.  The average inflation adjusted income in America was $31,912 in 1970 compared to $42,700 in 2000 – an $11,000 or 35 percent increase!   But if you look at the bottom 90 percent and the top 10 percent, here is what happens.  The bottom 90 percent had an average income of $27,060 in 1970 and $27,035 in 2000 and the top 10 percent went from $119,249 to $224,877 – flat for the bottom and nearly double for the top!  The top .1 percent shows an increase from $722,480 in 1970 to $3,049,226 in 2000, an increase of 400 percent!  For detailed information, please see.  Looked at another way, in 1970, the top one percent made more than the bottom 40 million; and in 2000, they made more than the bottom 100 million!   Put another way, the top 13,400 make more than the bottom 100 million.  So are you better off today than you were 35 years ago?  You may “think” you are but today four out of five Americans are making less than they were in 1970. 

 

So, is the gap getting any less?  After all, Bush just put through several tax cuts that were supposed to help.  The typical taxpayer received $287 return from the Bush tax cut.  The person making a $1 million return received $30,000.  The adjacent chart shows the growing income gap.   Please see the January 24, 2005 article.

 

Let’s look at it another way.  From 1970 to 2000, the average worker’s pay increased by 5 cents an hour per year.  The average CEO’s pay increased by $660 per hour/per year.  My daughter works for a U.S. multinational in Mexico.  They are constantly downsizing, closing plants, changing worker classification and piling in more work on those left.  Meanwhile, the CEO of this company had total compensation of $145 million last year.  The average pay of the top 100 CEOs is $37 million.  True CEO compensation is almost impossible to discover from an annual report, resolutions or proxy statements but shareholders are beginning to complain.  The salary and bonuses for CEOs such as Jack Welch (General Electric), Michael Eisner (Disney) and the executives of Enron and Fannie Mae are legendary.

 

The pie has changed.  The poor and the middle have lost significant ground to the wealthy.  Since 1970, the share of the wealth of the bottom 90 percent has gone from 67.1% to 52.0% in 2000.  In contrast, the share of the top one percent has more than doubled from 9.1% to 21.7% and the top .1 percent from 1% to 5%!  The fear that America is becoming like a third world country in terms of the gap between rich and poor is becoming a reality and is continuing unabated with the Bush tax cuts. 

 

From 1996 to 2000, 38 percent of America’s largest corporations paid no tax.  The Government Accounting Office found that corporations paid 5 percent or less in tax.  About a third have moved “off shore” to locations such as Bermuda (consisting of a secretary, telephone and address) to avoid taxes.  In Bermuda they pay 1% instead of 35% taxes.   But try this “trick” as an individual and you’ll go to jail! 

 

There is also a “political donor class” of elites.   In 2000, 625 Americans or American entities donated 80 percent of the money and in 2002, the number was 833.  The price demanded is access to law makers.  The number of big donors is on the rise.

 

Tax Policy and Social Security

 

More than half of the first $1.3 trillion Bush tax cut in June, 2001 went to the wealthiest one percent!  It should also be pointed out that two thirds of the income of the wealthy come from investments.  Capital gains was cut from 28 percent in 1987 to 15 percent in 2003.  The most recent tax cut, resulted in further massive savings for the elites.  Noted economists write: “Here is the part that is troubling. The magic tax reform machine that grinds and grinds over the next two years will net billions for the political class, as every lobbyist, special interest, and pressure group ponies up to make sure that their point of view gets a hearing and their special benefit is either preserved or created. In the end, however, the average taxpayer will have nothing to show for it. This is my prediction, based on experience, and based on the logic of the political situation.”  This is a concerted, planned effort to shift wealth to the wealthiest Americans!  The figures cited above show the changes in policy.

 

Meanwhile increased state, local, property and sales taxes are eating away at middle class income even as the national government cuts assistance to state and local governments to pay for wars.  The Federal government decreased assistance across the board to state and local governments forcing them to increase.  Other decreases in Medicare, Medicaid and Medical have put even more pressure on those who least can afford it – the working poor and the retired.

 

The Alternative Minimum Tax

 

The Alternative Minimum Tax, an oxymoron if there ever was one, operates parallel to the regular tax system, and only goes into effect if certain criteria are met.  It essentially takes back all of the Bush cuts.  Studies by the Brookings-Urban Institute estimate that by 2010, 97 percent of families with 2 or more children in the $75 to $100,000 tax bracket will be forced to use it.  Noted financial columnist, Jane Bryant Quinn explains how it works.  He calls the AMT “a contemptible piece of consumer fraud.”  In 1995, it applied to only 414,000 and in 2000 to 1.3 million but it will apply to 17.9 million in 2010.  There was already “tax creep” where workers moved into higher tax brackets as their salary increased (more with inflation rather than true increases).  “The massive increase in the alternative tax, and the shift in burden, is a stealth tax increase in 2010 alone of $131 billion for those making less than $1 million annually.”  (“Perfectly Legal” by David Cay Johnston, 2004, p. 101)

 

Enforcement

 

In 2001, the IRS audited eight times more working poor than people making $100,000 or more.  For those making less than $25,000, audit rates increased by one third while falling by 90 percent for the top tier.  The government became concerned with possible fraud by the working poor so the audit rate was also eight times higher than for partnerships even though losses were four times as large.  The IRS has been demonized and their budget’s been cut.  Yet the chances of a multinational corporation or a top tier tax payer of being audited is small.  The IRS has also been known to fire agents who got too close to the elites.

 

Social Security and Pensions

 

We are told Social Security will soon be broke and needs to be privatized.  Well, whose fault is that?  Social Security began modestly.  In 1970, the maximum tax was only $327.  By 2004, it had grown to $5,450, an amount matched by the employer.  Social Security is one of the most regressive taxes.  A couple earning $87,000 pays out $10,788 in social security.  A person earning a million dollars pays the same amount.  Up until 1983, it was a pay-as-you go system. 

 

Beginning in 1984, they began to take out more than they needed in order to build up the trust fund for future retirees.  Of course we know they spent it, even though it was supposed to be set aside.  This amounted to $1.7 trillion more than it paid out.  This is another story of the trillions of dollars in “unfunded liabilities” our government recklessly spent.  They were taking out 50 percent more than they needed and spent your money.  If you understand the concept of “future value,” a dollar taxed today to be spent in 20 to 30 years in the future is extremely costly if not invested and growing.  That is just one of the reasons the system will be broke – not because the system wasn’t sound.  The so-called “national debt” is only $7.5 trillion, but the total unfunded government liability (e.g., Social Security, Medicare, federal pensions, etc.) is $53 trillion – five times the Gross Domestic Product!

 

Now they are talking about letting the people handle their own investments which is very attractive on the surface, but where does it go?  A few years ago, large corporations were only allowed to place them in secure long term instruments such as bonds.  Then they saw that they could make a lot more in the equity (stock) markets so they changed the rules.  As a result the corporations such as General Motors and Enron took the money out of safe investments and into the company stock – a great cash infusion for the company, but not good for the worker if something were to happen.  This is exactly what happened to the “unfunded pension liability” and the concern grows as the numbers get bigger and bigger.  Fewer companies offer pensions to workers and it is questionable if those that do will have the money when it is needed.  General Motors is just one example of a company with a $13 billion pension debt.  Pension funds were raided, taken out of secure investments and put into stock.  When the stock fell… well, just look at what is happening to the airline industry.  If a huge company bankrupts, so does the hope of a pension.

 

Once individuals were allowed to put their individual retirement in 401k’s tied to the stock market, money flowed in every pay day.  This led to the bursting of the stock bubble where $3 trillion of citizen money was lost.  It doesn’t matter that the Dow has rallied.  Arthur Anderson, Global Crossing and Enron are gone and so is the money.  So are the retirements of little people.  Already private retirement funds are keeping stock valuations at “bubble ratios” of 40 to 1.  These ratios would be even greater if executive stock options and unfunded pension liability were counted in the company balance sheets.  If wager earners are allowed to invest privately in the “equities” such as the stock market, it would be extremely risky going up against the pros.  That is why it was not allowed until recently, but the greed of the Wall Street elites is insatiable!  Their need for more money knows no bounds.

 

Partial privatization of Social Security sounds like a good idea on the surface but there are a number of factors to consider:

         

·        Record Federal Deficits and record balance of payment deficits (current account) of over a trillion dollars a year will result in a bust eventually.

·        Record low interest rates and record credit card and mortgage debt followed by “bubble” housing prices will bring down the financial and housing markets.

·        Lower profits, a decrease in manufacturing, lower rates of consumer spending will lead to lower company valuations (a stock market crash)

·        The Dow doesn’t always go up (because failed companies are continually dropped and new ones come in) and money lost is often lost for good.

·        Inflation continues to whittle away at the value of any income, investment or retirement fund. 

 

The government is correct in saying that Social Security retirement will not be adequate for little people depending upon it, but not for the reasons they give, but because of their overall abominable mismanagement of the government and economy.

 

Analysis

 

As Americans we find this hard to accept, but this series “In Search of Babylon” is showing step by step how America is changing.  No, this isn’t the America we were born into, but in the past 50 or so years, it’s been morphing into something else – a superpower with tentacles throughout the earth, a commercial power that has tied itself in with all the nations of the earth, an unequaled military power that has the will to use it and finally, a government that works against its own citizens.  As we mentioned at the beginning of this article, prophetically we know that there will be a growing gap between the rich and poor but I don’t think American Christians ever thought it would affect them this way or that the government would deliberately set out to impoverish them.  The Biblical jingle rings more true today than ever:

 

5When He opened the third seal, I heard the third living creature say,

‘Come and see.’ So I looked, and behold, a black horse,

and he who sat on it had a pair of scales in his hand.

6And I heard a voice in the midst of the four living creatures saying,

‘A quart of wheat for a denarius, and three quarts of barley for a denarius;

and do not harm the oil and the wine.’

 

But one thing we do know (especially since Bush’s inaugural speech talking about bringing freedom to the world) is that America stands for freedom and liberty.  Oh really?  Are you sure?  Stay tuned for the next installment.

 

 

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