Rising Tide Sinks Small Ships

Despite the hype, the business of America is still business. If you listened to all the political hoopla, you would think that legislators are doing their utmost to improve the general quality of life in our fair nation. Every Presidential hopeful has their own plan on how to reform health care, social security and/or public education. Political parties are falling over themselves to provide tax cuts. Politicians everywhere raise outcries over the massacre in Littleton and propose gun-control, tougher crime laws and/or censorship of the overly-violent media as solutions.

Sadly, all this talk is just that--talk. It is hype created by politicians for the benefit of next year's presidential election. While they may talk about increasing the funding for public education or devoting all of the budget surplus to social security, their actions, like the recent decision to revoke the Glass-Steagall Act, demonstrate that their biggest interest is increasing our country's wealth, or more specifically, the wealth of the nation's top 10 percent.

For those of you who haven't taken American History in a while, Glass-Steagall was a law made after the Depression that mandated the separation of commercial, investment and insurance banking. In short, it meant that Joe Public had to go to three separate places to get a loan, invest in the stock market and buy insurance, rather than do all of his banking under the same roof. Visiting three different financial institutions is not an inconvenience to your run-of-the-mill investor. The vast majority of people use banks for modest loans, mortgages and various kinds of insurance. They don't need mega-banks with gross incomes larger than that of most countries.

Clearly, when revoking Glass-Steagall, the government wasn't thinking about the little man. The people who benefit from larger-than-life banks are those in perhaps the top 0.1 percent income range. The reforms enacted by Glass-Steagall hit the deep-pocketed very hard by diminishing the amount of money they could amass at a time. The Act's intent was to redistribute the balance of financial clout in the American economy and thereby prevent another financial crisis like the Depression.

Isn't it ironic that when the United States is in a financial state reminiscent of that of the pre-Depression era, the government ends a restriction designed to prevent an economic crash? The fact that our economy is increasingly volatile, yet our government has decided to regulate the economy less is ominous.

There is however, a rational behind revoking Glass-Steagall. The Act weakened American banks vis vis foreign financial institutions, which, unrestricted by Glass-Steagall, were often able to out-muscle American banks. This explanation holds little water. Considering the fact that our economy is currently the motor powering the world's finances, America's financial status while Glass-Steagall was active was hardly in jeopardy. The real reason behind the end of Glass-Steagall is the government's current emphasis on a strong national economy.

Certainly, a strong economy is in the entire nation's interest, from the poorest member of society to Bill Gates. However, the desire to maintain the current economic boom should not supersede concern for the welfare of the less fortunate members of society. During the ongoing seven-year bull market, our nation's rich have gotten richer at the expense of the poorer half of the population. When yearly income is adjusted for inflation, the bottom half of wage-earners earn less than they did in the '70s. While the country's wealth has risen dramatically, the working class is actually worse off, disproving the theory that the rising tide lifts all boats. The yachts are cruising along quite well; the rowboats are steadily taking in water. While we boast the world's richest man, our national literacy rate is one of the worst among developed nations.

The responsibility for this increasing gap in wealth lies with the government. While it is not the government's place, nor within its means, to completely regulate the economy, it can and should try to equalize the distribution of wealth.

I realize that whenever someone mentions the words "equal distribution of wealth," communism inevitably comes to mind. There are many ways, however, that the country could seek to level the playing field without resorting to heavy-handed, interventionist behavior. Capitalism does not imply an unregulated economy. A simple raise of the federal income-tax on the highest tax bracket would take money from those who can spare it and funnel it into public programs that desperately need money. Instead, both Republicans and Democrats are advocating spending much of the budget surplus on tax cuts that largely benefit the country's wealthier half.

Returning money to people who are already middle-class or higher through a tax cut merely increases the demand for luxury goods, without resolving any of the serious issues that face our country. The past seven years have produced tremendous financial gains. It is now time to use that money on those who need it. The bull market has placed the United States at the top of the financial ladder. Perhaps now, we can turn our attention to those who were left behind.

Christina S. Lewis '02 is a history and literature concentrator in Leverett House. Her column appears on alternate Mondays.