President Barack Obama’s state of the union address last month has been described as being "class warfare". In it, the president stressed repeatedly a need for the US to become a fairer society – the most obvious policies being an end to tax cuts for the US’s wealthiest individuals or a change in capital gains tax rates.
While critics claim Obama’s rhetoric exacerbates the building tensions around the 1% versus the 99%, they are sadly missing a growing consensus among the wealthy that, indeed, the US is long overdue in addressing the wealth gap.
Indiana governor Mitch Daniels, chosen by the Republicans to respond to the president’s comments, retorted: "We do not accept that ours will ever be a nation of haves and have nots; we must always be a nation of haves and soon to haves."
However, the US’s poorest individuals are far off being "soon to have". The 1% versus the 99% might be exaggerated, but statistics seem to agree that the wealthiest 10% in the US possess 80% of all financial assets.
It is getting worse. Hundreds of thousands of Americans are as much as two years behind on mortgage payments. And now potential buyers are avoiding homes with such delinquencies because they are regarded as being beyond repair. The real-estate crisis has, in fact, created more ghettos in the US where those in poverty have no means of getting themselves close to being "soon to have".
What is interesting is that the financial sector is realizing this. Even Warren Buffett has publicly criticized the tax system, declaring it absurd that his secretary pays a higher rate of tax than he does.
Now private banks that cater to the 1% to 10% of the world’s wealthiest individuals are starting to move towards products that invest alongside local governments or organizations that can offer some solution to inequality (see article in Euromoney's February issue, Impact investing: Making money, make an impact).
Their clients want to put more money to work in a way that fuses capitalism with government, and the banks are the best conduit for making sure that happens.
The wealthy seem to understand that the economy will improve at a greater rate if they and their financial institutions are involved.
Whether Obama is aware of this growing desire on the part of the wealthy for a fairer society is unclear. But his message is timely and in touch with the shift in mentality away from "greed is good".
If the Republicans fail to realize that times have changed, then they risk alienating the very audience they are trying to target.
