The System is Working as Intended
America isn’t broken. It’s working just fine for those in power.
Many suggest that America is broken, and in some ways, that is true. Inequality and inequity are incredibly high, and socioeconomic mobility is incredibly low. Put simply, the ZIP code you were born into is a bigger factor in how successful you’ll be than just about anything else.
Climbing the social ladder from the bottom is damn near impossible. It happens, and those cases get highlighted endlessly by the media, but it is the exception, not the rule. This is especially true if you aren’t a white guy. The American Dream is, if not dead, then on life support.
Yes, from my perspective and just about everyone else’s, the American system is broken. So many people are two missed paychecks away from homelessness that it’s incredibly worrying to quite a few people. Such is the crisis that Americans have decided that, when given a choice, they’d rather be poor and unemployed than working a crappy job but still poor. And yet, on a fundamental level, the system is working as intended.
To suggest that the American system is broken is a misunderstanding of who the system benefits. The assorted economic and power structures weren’t put in place to benefit people like you and me; they were designed to benefit people at the top of the ladder, cementing their place in society as our rulers, whether “elected” or de facto.
This is evident in a lot of places. Top of mind these days is gerrymandering — rigging districts to ensure that certain political parties stay in power with as many seats in legislatures as possible. The effects of this generally lead to candidates who are more extreme in one way or another, since their districts are considered “safe” and packed full of their supporters due to creative geometry.
Other systems aren’t so obvious or as talked about. We hear a lot about American corporate taxes being some of the lowest in the world. Because of this and a few other interesting tax code statutes, American companies are incentivized to spend their capital buying back stock rather than investing in the actual company, like worker raises.
This benefits both the company by making their stock more scarce and therefore more valuable, and shareholders, who are often rich white guys in leadership positions at the company or a hedge fund. Yes, mutual funds tend to own a lot of these stocks, and people like me own those funds in retirement accounts, but then, the managers of these funds make huge commissions for overseeing them.
There is an interesting secret that isn’t talked about much — people like Elon Musk and Jeff Bezos often don’t have a lot of liquid assets, they just own a bunch of valuable stock. Elon Musk doesn’t have a hundred billion dollars in a bank account somewhere, he just owns that much in Tesla (and other) stock.
And, thanks to the capital gains tax rates, he may not actually have to pay any taxes on those stocks unless he sells them, and even then the long-term capital gains tax rates cap out at 20%, which is a lower rate than many middle-class families pay. Even then, thanks to various loopholes available only to people with a high net worth (rich guys), he may not pay any taxes on those capital gains at all.
The tax code is designed explicitly to support the people at the top. Donald Trump, for all the terrible things he did, helped highlight just how broken the tax code is. Between his tax law that explicitly favored the 1% and how much he got away with in his businesses, people started to take notice. In particular, the way the law treats landlords is particularly egregious. People who own houses can deduct some of the upkeep and interest on their taxes. However, if you own a thousand houses, you can leverage yourself up to your eyeballs and owe, more or less, nothing in taxes.
Therein lies the rub: I own my house thanks to my mortgage, but I would be hard-pressed to own a thousand houses in any reasonable amount of time without an influx of both capital and credit. Those things are generally only available to people with clout and resources; if an average Joe walked into a bank and asked for a loan of $1 million to buy a bunch of property, they’d be laughed out of the building. Donald Trump just had to hit up dear old dad.
It’s (relatively) easy to become a billionaire when you have access to resources, like wealthy parents or good connections. When you have access to the top of the social and socioeconomic ladder, you’ve only got a few rungs to climb; when you’ve got $50,000 in student loans, you have a much longer way to go.
The American system is designed to keep this structure in place. Whether it’s the explicitly racist practices and laws of the past whole of American history, an anti-immigrant and anti-poor mentality, the encouragement of billionaire idolization culture, or trickle-down economics in general, the American system is working as intended. It’s just not working for any of us.
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