Occupy Wall Street and the Democrats--How They Get It Wrong About the Rich

Thanks to Occupy Wall Street, President Obama, and his supporters, I have heard nonstop attacks on the richest in our society. So, it was interesting to read an article in a recent issue of Fortune magazine entitled "Stop Beating Up the Rich." I wish this was required reading across the country because it pokes holes in the hyperbole, half-truths and unnecessary pessimism about what it means to succeed in America. The author points out that it's wrong to lump the richest 1% into some sort of monolithic group of greedy, tax-avoiding, selfish capitalists because they're much different from this picture.

For one thing, there's a mistaken idea of where the wealth came from. Most of the 1.4 million taxpayers who make up the top 1% gained their wealth through their own efforts, not by inheritance. A recent survey found that nearly 70% of those with $500,000 or more earned most of their fortune through work, business ownership, or investments. Only 6% inherited their money. Who are these wealthy people? Many of them are doctors, lawyers, engineers, and small-time entrepreneurs – all working hard and many of them creating jobs.

Another misconception has to do with the impact of those who prosper on the middle class. Are the rich getting theirs at the expense of the middle class? It's not a zero-sum game where the ones who win do it at the expense of the ones who lose. For example, during the booming 1990s economic inequality did rise, but the middle class gained, along with the rich. Over the past 40 years as things have boomed around the world, the global economy has lifted tens of millions out of poverty. A recent study found that 60% of Americans say their standard of living is better than their parents’ at the same age.

But, say the Occupy Wall Street crowd and many Democrats, the middle class is shrinking. Again, this is a misconception. The Brookings Institution found that there is some shrinking going on, but the main reason is that people are moving up, not down. In fact, upper-middle-income ranks have grown. Since the early 1980s the percentage of upper-income Americans surged from 14% to 20% of the population, according to the Pew Research Center.

Here's another myth about the rich. They are not an exclusive club, an entrenched plutocracy that holds onto their fortunes generation after generation. The truth is the wealth of the top 1% is volatile and drops precipitously in recessions and depressions. Also, the membership rolls of the 1% club are always in flux.

What about taxes? Are the rich paying their fair share? When you look at the full picture, the average effective tax rate of the 1% club in 2007 was around 30%, nearly twice that of the middle class. And nearly half of all Americans don't pay federal income tax. So, our income tax code is progressive as it was intended to be.

The conclusion of the article says stirring resentment and pitting Americans against one another distracts from a harder and far more important question – how do we jump-start the escalator for 23 million people unemployed or underemployed today? Complaining about the 1% may vent some frustration, but it doesn't offer a path to prosperity for those left behind in the global economy. We need to stop the name-calling and get millions back to work. The magazine suggests concentrating on education, larger investment by corporations in training programs, and making sure we have equal opportunity in this land rather than equal outcomes.

May I add my own solution here? I think it starts in November when we elect Romney and get rid of Democrats who eagerly jumped on the Occupy Wall Street bandwagon.