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How powerful is your lobby? Financial Industry Power 1. Deregulate Industry 2. Make it harder for middle class to file personal bankruptcy 3. Tax breaks.

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Presentation on theme: "How powerful is your lobby? Financial Industry Power 1. Deregulate Industry 2. Make it harder for middle class to file personal bankruptcy 3. Tax breaks."— Presentation transcript:

1 How powerful is your lobby? Financial Industry Power 1. Deregulate Industry 2. Make it harder for middle class to file personal bankruptcy 3. Tax breaks

2 Warren Buffett  1987  Forbes 400  $220 Million to get on  $220 Billion combined wealth  Avg American Salary  $26,000  2011  $1.3 Billion  $1.54 Trillion  Paris Hilton?  Avg. American Salary  48,000  Exactly the same as the CPI

3 Deregulation Sen. Phil Gramm (R, Texas) Rep. Jim Leach (R, Iowa) Rep. Thomas J. Bliley, Jr. (R, Virginia) Co-sponsors of the Gramm–Leach–Bliley Act Signed into law by President Bill Clinton Repealed part of the Glass– Steagall Act of 1933 Opened up the market among banking companies, securities companies and insurance companies Glass–Steagall prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company The Gramm–Leach–Bliley Act, a.k.a., the Financial Services Modernization Act of 1999

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7 BAPCPA  2010

8 Lobby for: 1. US Treasury and Federal Reserve bailouts 2. Tax Breaks  Bank of America Bailout$1 Trillion Taxes $1.9 Billion tax refund  Goldman Sachs Bailout $800 Million Taxes1.1% on $2.3 Billion profit  Citigroup Bailout$2.5 Trillion Taxes $0 on $4 Billion profit

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11 Era of the Wealthy Class  One percent of households control 1/3 of the nation’s wealth.  The bottom 90% of households in the U.S. earned 57% of the nations income but only controlled 29% of the wealth  Statistics from 2004 Federal Reserve Board

12 Billionaires create jobs?  Sports? Cabella’s? Helps small business?  wZVgLB8&feature=related wZVgLB8&feature=related

13 How much will your annual income be for the next 30 years?  $60,000  $80,000  $100,000?

14 2008 Individual Returns Median AGI $33,048 Top 1-percent AGI $380,354 Top 10-percent AGI $113,799 Bottom 10-percent AGI $5,942

15  Cognitive Psychology  Departures from rational decision-making that are both systematic and predictable  Over-confident and above average bias unduly skews deterrence in connection with products liability and negligent conduct Heuristics or Biases My Job is to help you minimize risk!

16 Your Earnings  From 24 to 65 men earn $ 2,140,200  (Average income of an American with bachelor’s degree in 2009)  Your living expenses $1,080,000  Medical expenses $1,500,000  1 Child$600,000  Net on retirement $1,040,000

17 $ 100 B bailout Default Rates Cars and Children

18 A Tale of Two Countries  Broadland ( ) Population 203 Million Poor 25 Million 13 %  Richistan ( ) Population 307 Million Poor45 Million 14 %

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21 Income Distribution  1974 the top 1% earned 8% of all income  2009 the top 1% earned 25% of all income  2009 the top 0.1% earned 12% of all income the top 0.01% earned 6% of all income  The 400 richest Americans have more wealth than the bottom 155 million combined.

22 The Government invests: Wealthy children $ 665,000 Poor children $ 40,000  $450,000 Home Mtg  $ 150, Svgs  $ 18,000 child tax credit  $47,000 public school $1million Home mortgage interest deduction lasts 30 yrs 529 and child tax credit last 18 years  TANF funds $ 3,000  Public school$25,000  TANF has a 5 year max

23 Let’s include capital gains and estate taxes  Annual income $385,000  60% from capital gains15% tax rate  Over 30 years $2,079,000  Eliminating estate taxes $666,000,000,000

24 How much do we invest?  Wealthy children  $ 2,665,000  Poor children  $ 40,000

25 The Racial Divide

26 Does Inequality Matter?  Inequality is positively correlated with: Homicide rates Infant mortality rates Disease and morbidity Illiteracy High school drop out rates Illegal drug use Mental illness Distrust of others Social immobility

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30 Inequality and Social Mobility

31 Inequality is Painful

32 Inequality is Expensive

33 Solution 1 Tax Structure  Austan Goolsbee  p8PcaY8 p8PcaY8

34 Unsustainable Investment 30 years in prison $504,690

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36 Your Earnings  From 24 to 65 Duke Law School grads $ 3,000,000  Your living expenses $1,080,000  2 Children $2,200,000  Medical expenses $1,500,000  Net on retirement $1,780,000

37 Your Earnings  From 24 to 65 Duke Law School grads $ 3,000,000  Your living expenses $1,080,000  1 Child $1,100,000  Medical expenses $1,500,000  Net on retirement $680,000

38 Women in Retirement:  % or 13mill single women are entirely dependent on SS Below poverty line  If she owns her own home <50%  If she doesn’t<70%

39  If the top 10% strongly support a bill, it is 3 times as likely to pass as when they oppose it.  For the bottom 10%, 90% support is indistinguishable from 10% support for a measure in impact on representatives.  Strong support from middle income voters has no discernable impact on representatives.  Inequality is strongly correlated with lower voter participation, particularly by voters at the bottom of the income distribution.


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