Occasional blogging, mostly of the long-form variety.

Sunday, July 18, 2010

Attack of the Plutocrats

Plutocracy and democracy don't mix.
- Bill Moyers

There’s class warfare, all right - but it’s my class, the rich class, that’s making war, and we’re winning.
- Warren Buffet

Check out any mainstream news outlet, and before long you'll encounter some rich person claiming that extending unemployment benefits makes people lazy or that the social safety net needs to be slashed. Others will whine that (despite historically low tax rates) the rich are overtaxed or that (despite under-regulation almost destroying the world economy) business is overregulated. Still others will claim that spending on the middle class and poor needs to be off-set, but tax cuts for the wealthy don't need to be paid for. Among the ruling class, austerity is all the rage - not for themselves, but to impose on the lower orders. Almost every discussion by the chattering class is heavily skewed by the fact that America is increasingly becoming a plutocracy, and most of the chatters themselves are members of the ruling class. This has been the norm for over a decade, and quite common for the past thirty years of Reaganomics, which have massively enriched the wealthiest Americans while squeezing the middle class.

It doesn't need to be this way, and capitalism can be done much better in America. In fact, it has been in the past. From the New Deal up to the Reagan administration, a variety of factors helped reduce wealth inequity and created a large, prosperous middle class, which in turn bolstered the overall economy. While correlation isn't cause, in The Conscience of a Liberal Paul Krugman makes a persuasive case that more liberal economic policies are much better for the majority of the population and also benefit the national economy. Roughly speaking, what's good for the middle class is good for America. Being able to achieve basic prosperity has always been a key part of the American Dream. Restraining the abuses of the rich and powerful is also an essential component of a healthy economy, though. While "trickle-up" policies typically work well, "trickle-down" approaches have proved ineffective, harmful or outright disastrous. "The past decade was the worst for the U.S. economy in modern times," with zero net job creation and the middle class making less than they did in 1999, when adjusted for inflation. Meanwhile, the wealthiest Americans grew even richer, and wealth inequity has grown even more pronounced, back to "Gilded Age" levels.

Despite conservative accusations of class envy or class warfare, the reality is what Warren Buffet described back in 2006: The rich have been waging an aggressive class war, and they've been winning. It's foolhardy to ignore this, and a sucker's move to buy the scolding of upper class warriors given this reality. It's not necessary to believe that all the rich are evil, even if the old saw is true: power corrupts, and absolute power corrupts absolutely. Beyond any proclivity toward greed or other faults, it's simply that the rich and powerful – due to being (duh) rich and powerful - can cause far more damage, and with far smaller effort. Consider: the campaign to repeal the estate tax has been lead most aggressively by a mere 18 families, comprising some of the wealthiest people in the country. They can easily spend millions every year to potentially net them billions more (and cut into the U.S. Treasury). A dozen or so wealthy Wall Street firms and corporations, greedy for even more, acted recklessly and almost destroyed the entire world economy. Any populist anger at Wall Street pales in comparison to the narcissism, spite, recklessness and grandiose sense of entitlement from some Wall Street players.

For any policy, it's wise to ask, what are the consequences? Who benefits? (And how much? And compared to whom?) Also, who holds the power, and how will this policy affect those dynamics? On almost every domestic issue (and foreign policy issue) currently before the American people, the GOP, the Blue Dogs, and many in the chattering class are pushing policies that benefit the rich and powerful much, much more than the middle class. Sadly, that's become increasingly common over the past thirty years. Moreover, it's become increasing common in the past ten years for the same forces to push for policies that only benefit the rich and powerful and screw over the middle class (not to mention the poor). It's difficult to think of a single Republican measure in the past 10 to 20 years that has favored average Americans over the ruling class. Often, the Democrats haven't been that much better, vying for corporate backers themselves. It's not solely due to greed - ideology has played a major role, too, especially on the conservative side. As Digby's remarked, the Republican Party of 1956 would be denounced as socialists by today's GOP. If both parties merely competitively pandered to the middle class (as they often did during the middle of the 20th century), they'd be far more responsible and responsive than they presently are, and America would greatly benefit. The current assaults on (perfectly fine) Social Security and the resistance to expanding much-needed (and economically stimulative) unemployment benefits are utterly appalling. But as has been noted for millennia, members of an entrenched ruling class often lack a conscience.

Plutocracy and democracy don't mix. Ever-increasing wealth inequity is one of several key factors making America into more of a plutocracy, and endangering American democracy. We'll take a look at several factors in more depth.

Widening Income and Wealth Inequity

(Click any image for a larger view.)

As the Center on Budget and Policy Priorites (CBPP) documents:

The gaps in after-tax income between the richest 1 percent of Americans and the middle and poorest fifths of the country more than tripled between 1979 and 2007 (the period for which these data are available), according to data the Congressional Budget Office (CBO) issued last week. Taken together with prior research, the new data suggest greater income concentration at the top of the income scale than at any time since 1928.

This has led to staggering income inequity:

(Read their full post for much more.) Moreover, while most Americans are facing economic woes, most of the rich have quickly recovered.

The picture is even more imbalanced if one looks not just at income, but at net worth and overall wealth, as Professor G. William Domhoff does in "Wealth, Income, and Power" (graphics used with permission):

This is mind-boggling. (Domhoff's piece, which he continues to update, is well worth reading in its entirety.) Let's simplify this data slightly and look at it through a more feudal lens, befitting America's ruling class:

Given this reality, basically, when anyone claims that the rich are overtaxed or put-upon, and that the American middle class and poor are the ones who need to sacrifice – they are completely full of shit.

Paul Krugman's 2006 piece "The Great Wealth Transfer" is still an excellent read on these dynamics, including the widening gap between executive pay and that for the average worker:

According to the federal Bureau of Labor Statistics, the hourly wage of the average American non-supervisory worker is actually lower, adjusted for inflation, than it was in 1970. Meanwhile, CEO pay has soared -- from less than thirty times the average wage to almost 300 times the typical worker's pay.

The widening gulf between workers and executives is part of a stunning increase in inequality throughout the U.S. economy during the past thirty years. To get a sense of just how dramatic that shift has been, imagine a line of 1,000 people who represent the entire population of America. They are standing in ascending order of income, with the poorest person on the left and the richest person on the right. And their height is proportional to their income -- the richer they are, the taller they are.

Start with 1973. If you assume that a height of six feet represents the average income in that year, the person on the far left side of the line -- representing those Americans living in extreme poverty -- is only sixteen inches tall. By the time you get to the guy at the extreme right, he towers over the line at more than 113 feet.

Now take 2005. The average height has grown from six feet to eight feet, reflecting the modest growth in average incomes over the past generation. And the poorest people on the left side of the line have grown at about the same rate as those near the middle -- the gap between the middle class and the poor, in other words, hasn't changed. But people to the right must have been taking some kind of extreme steroids: The guy at the end of the line is now 560 feet tall, almost five times taller than his 1973 counterpart.

What's useful about this image is that it explodes several comforting myths we like to tell ourselves about what is happening to our society...

Domhoff provides several other useful charts. For instance, here's CEO pay as a multiple of the average worker's pay over 27 years:

And here's CEO's average pay compared to production workers' pay and several other factors:

That top line pretty much tracks the top line of the first CBPP diagram (no surprise).

We won't cover every angle in this post, but comparatively low taxes on capital gains and other assets predominantly owned by the rich further contribute to widening wealth inequity.

Squeezing the Middle Class

Income and wealth inequity by themselves wouldn't be so bad if there were a healthy baseline of prosperity for the vast majority of Americans. However, that isn't the case at all, and hasn't been for some time, thanks again to Reaganomics. Furthermore, squeezing the middle class, bad enough on its own, carries other perils for the economy as a whole. Robert Reich summarizes these problems well in "The root of economic fragility and political anger":

Missing from almost all discussion of America’s dizzying rate of unemployment is the brute fact that hourly wages of people with jobs have been dropping, adjusted for inflation. Average weekly earnings rose a bit this spring only because the typical worker put in more hours, but June’s decline in average hours pushed weekly paychecks down at an annualized rate of 4.5 percent.

In other words, Americans are keeping their jobs or finding new ones only by accepting lower wages.

Meanwhile, a much smaller group of Americans’ earnings are back in the stratosphere: Wall Street traders and executives, hedge-fund and private-equity fund managers, and top corporate executives. As hiring has picked up on the Street, fat salaries are reappearing. Richard Stein, president of Global Sage, an executive search firm, tells the New York Times corporate clients have offered compensation packages of more than $1 million annually to a dozen candidates in just the last few weeks.

We’re back to the same ominous trend as before the Great Recession: a larger and larger share of total income going to the very top while the vast middle class continues to lose ground.

And as long as this trend continues, we can’t get out of the shadow of the Great Recession. When most of the gains from economic growth go to a small sliver of Americans at the top, the rest don’t have enough purchasing power to buy what the economy is capable of producing.

America’s median wage, adjusted for inflation, has barely budged for decades. Between 2000 and 2007 it actually dropped. Under these circumstances the only way the middle class could boost its purchasing power was to borrow, as it did with gusto. As housing prices rose, Americans turned their homes into ATMs. But such borrowing has its limits. When the debt bubble finally burst, vast numbers of people couldn’t pay their bills, and banks couldn’t collect.

Each of America’s two biggest economic downturns over the last century has followed the same pattern. Consider: in 1928 the richest 1 percent of Americans received 23.9 percent of the nation’s total income. After that, the share going to the richest 1 percent steadily declined. New Deal reforms, followed by World War II, the GI Bill and the Great Society expanded the circle of prosperity. By the late 1970s the top 1 percent raked in only 8 to 9 percent of America’s total annual income. But after that, inequality began to widen again, and income reconcentrated at the top. By 2007 the richest 1 percent were back to where they were in 1928—with 23.5 percent of the total.

We all know what happened in the years immediately following these twin peaks—in 1929 and 2008...

Concentrating wealth among a few and not investing in the middle class is a horrible strategy for both the long term and short term.

On a related note, socioeconomic mobility is America simply isn't good, especially when compared to other countries. While the landscape doesn't look great for middle class families, it's particularly bleak for the poor. It's all the worse given that, rather than leveling the playing field, "government subsidies and new regulations have quietly funneled money from the poor and the middle class to the rich and politically connected." This strikes at the heart of the American Dream, which is that our country is a meritocracy, and if you work hard and play by the rules, you can prosper. As Jonathan Chait observed in "Wealthcare," (a piece on that sociopath high priestess of selfishness, Ayn Rand):

The association of wealth with virtue necessarily requires the free marketer to play down the role of class. Arthur Brooks, in his book Gross National Happiness, concedes that "the gap between the richest and poorest members of society is far wider than in many other developed countries. But there is also far more opportunity... there is in fact an amazing amount of economic mobility in America." In reality, as a study earlier this year by the Brookings Institution and Pew Charitable Trusts reported, the United States ranks near the bottom of advanced countries in its economic mobility. The study found that family background exerts a stronger influence on a person’s income than even his education level. And its most striking finding revealed that you are more likely to make your way into the highest-earning one-fifth of the population if you were born into the top fifth and did not attain a college degree than if you were born into the bottom fifth and did. In other words, if you regard a college degree as a rough proxy for intelligence or hard work, then you are economically better off to be born rich, dumb, and lazy than poor, smart, and industrious.

Fairness and a Sustainable System

While I'll look at this issue in more depth in future posts, just consider the prospects of children born in present-day America. Take 100 children, spread across the wealth spectrum by percentage. Using Domhoff's calculations, one child would be born to an extraordinarily wealthy family, another 19 would born to very well-off families, and the remaining 80 would be born to families likely facing financial insecurity, stagnant wages, and possibly outright poverty. Nor, based on the mobility studies cited above, would those 80 children have much hope of improving their situation by much. It's impossible to argue credibly that that situation is in any sense "fair." Every argument for a flat tax (a favorite cause of billionaire Steve Forbes) ignores that Americans do not all begin at the same starting line, with the same resources, opportunities and support. Even if wealth and income were zero-sum games, money could be much more fairly distributed in the United States – and the rich could even stay obscenely wealthy. However, wealth and income are not zero-sum games, because economic activity is often synergistic. More liberal economic policies, such as those discussed by Robert Reich above and in far greater depth by Paul Krugman in The Conscience of a Liberal, generate far more economic growth than do conservative trickle-down policies. Investing in the middle class, in "trickle up," is in a sense just good, basic portfolio advice – diversify.

There is such a thing as excessive levels of taxation on the rich and powerful, but overall, we are nowhere near that in America. When a self-described libertarian assails progressive taxes, or taxes altogether, and preaches about the virtues of the free market, this ignores both the starting line issue, and that wealth and power tend to concentrate among a very few over time – unless there are strong countervailing forces. This concentration is not good for freedom - except the "freedom" of the powerful to impose their will on others. Shockingly enough, those with largely unchecked power often do not wield it virtuously. Government (of the people, by the people, for the people) can be one of the strongest checks against such abuses. Meanwhile, when government allies itself with the plutocrats, and further tilts an already rigged game in their favor, it can inflict great damage.

For the rich, a more liberal economic approach would mean the gap between them and the lower orders would shrink. (Judging from indignant pieces from Wall Street players and other plutocrats, this upsets them a great deal, their own central culpability in the economic meltdown notwithstanding.) However, they would still be extremely rich, and they would continue to prosper - along with their fellow Americans. The main challenge facing America economically and fiscally is not whether or not the middle class and poor must sacrifice even more than they already have for the past 30 years. The main challenge is whether the rich and powerful will forsake some small measure of greed – and more realistically, whether they'll be forced to do so.

The Clueless, the Callous and the Downright Evil

The plutocrats shaping our discourse generally break down into the clueless, the callous, and the downright evil. Many mainstream reporters on TV fall into the clueless and cloistered category. Charlie Gibson is a prime example. To quote from an earlier post:

While the mainstream media's stories on social issues can be quite superficial, they tend to be better than their pieces on economic matters, which generally are told from a rich, corporate angle. Some of the problem is simply who's reporting. It's not an accident that ABC's millionaire Charlie Gibson, during the 2008 primary debates, thought $200,000 was a middle class income for a married couple, and repeated debunked claims about capital gains taxes that affect the rich the most. Nor is it surprising that during ABC's town hall with Obama on health care this June, Gibson and Diane Sawyer asked most of their questions from a "Shouldn't we be scared?" insurance industry perspective that ignored major problems with the status quo. They also weren't about to compare America's much higher health costs to those of other industrialized nations, or hammer Obama to justify why it wouldn't be wiser just to go straight to a single-payer system.

On Gibson's $200,000 gaffe, it's unlikely he wanted to look that clueless in front of a national audience and have the auditorium audience laugh at him. Many rich TV stars cultivate a "regular folks" image and emphasize humble roots (Tim Russert put great effort into this, and Brian Williams is always quick to mention his volunteer fireman stint). Of course, humble pasts don't matter much if the same people push a rich, corporate perspective in the present day. The cloistered perspective of many journalists is a serious problem, but in theory, some of the clueless chattering class can actually be reached and persuaded.

What of our elected representatives? A study in 2009 from the Center on Responsive Politics found that:

Two-hundred-and-thirty-seven members of Congress are millionaires. That’s 44 percent of the body – compared to about 1 percent of Americans overall...

All told, at least seven lawmakers have net worths greater than $100 million, according to the Center’s 2008 figures.

“Many Americans probably have a sense that members of Congress aren’t hurting, even if their government salary alone is in the six figures, much more than most Americans make,” said CRP spokesman Dave Levinthal. “What we see through these figures is that many of them have riches well beyond that salary, supplemented with securities, stock holdings, property and other investments.”

The CRP numbers are somewhat rough estimates – lawmakers are required to report their financial information in broad ranges of figures, so it’s impossible to pin down their dollars with precision. The CRP uses the mid-point in the ranges to build its estimates.

Senators’ estimated median reportable worth sunk to about $1.79 million from $2.27 million in 2007. The House’s median income was significantly lower and also sank, bottoming out at $622,254 from $724,258 in 2007.

But CRP’s analysis suggests that some lawmakers did well for themselves between 2007 and 2008, even as many Americans lost jobs and saw their savings and their home values plummet.

Given this, it's not surprising that members of Congress would reflect the plutocratic attitudes of many members of their class. Politicians may easily become cloistered and clueless without regular reality-checks from average constituents.

Some politicians are far worse, though. For decades now, Republican politicians have shown no interest in acknowledging fiscal realities. (See "The Persistence of Ideology" for more on this general dynamic.) Here's part of TPM's "It's Unanimous! GOP Says No To Unemployment Benefits, Yes To Tax Cuts For The Rich":

For weeks, Senate Republicans have filibustered an extension of unemployment benefits on the grounds that Democrats aren't willing to cut spending or raise taxes to pay for them. At the same time, the Bush tax cuts are set to expire, and Republicans want them to be renewed. For two days, Senate Minority Whip Jon Kyl has raised eyebrows by insisting that emergency aid to unemployed people -- what he called a "necessary evil" -- be paid for through either tax hikes or spending cuts, while the tax cuts (which mostly benefit wealthy people) not be offset in any way. Yesterday claimed that this view is shared by "most of the people in my party."

He was correct.

"That's been the majority Republican view for some time," Minority Leader Mitch McConnell told TPMDC this afternoon after the weekly GOP press conference. "That there's no evidence whatsoever that the Bush tax cuts actually diminished revenue. They increased revenue, because of the vibrancy of these tax cuts in the economy. So I think what Senator Kyl was expressing was the view of virtually every Republican on that subject."

The CBO and other budget experts strongly disagree. And Democrats want to preserve the Bush tax cuts for people making less than $200,000-$250,000 a year -- but only for them. Allowing them to expire for wealthier people would raise hundreds of billions of dollars over 10 years, which could allow them to offset the spending Republicans currently decry.

The entire piece deserves a read. In a similar vein, John McCain decries paying teachers as pork, but is all for cutting taxes on corporations and for paying military contractors.

Back in reality, the Bush tax cuts - just like the Reagan tax cuts - lost revenue. Both presidents gave massive tax cuts to the richest Americans and increased military spending. Reagan nearly tripled the national debt and Bush nearly doubled it. This isn't exactly secret information.

So what's the explanation for the GOP's magical thinking? As always, it's the stupid versus evil question, or the hack versus zealot question. Surely some conservative leaders know what they're peddling is complete bullshit. But some others seem to actually believe this crap. I think the best catch-all explanation is that they just don't give a damn whether what they're saying is true or not, making them classic bullshitters, or "callous" as opposed to clueless. Their primary goal is to give more money to the rich, which benefits them personally as well as their most wealthy donors. They simply don't care about any negative consequences of these policies, except perhaps as an afterthought. And what's to make them stop? The press won't fact-check them or call them out. The Democratic Party often doesn't even try. And middle class and poor conservative voters don't know or don't care that they're voting against their own interests.

As Ezra Klein observes, statements like Kyl's about no need to off-set tax cuts is "how you tell people who care about the deficit apart from people who are interested in exploiting fears of the deficit to shrink the size of government." And as Matthew Yglesias points out, conservatives don't care about the deficit: "conservatives care more about making taxes as low as possible than they do about reducing spending or reducing the deficit." (See also "Conservatives Don't Care About the Deficit" #1 and "Revealed Preference and the Deficit.") Yglesias also notes that raising taxes on the rich is the most politically feasible path for reducing the deficit, if that were actually the goal. However, conservative politicians oppose this, voters often don't understand what spending cuts will actually entail, and the press doesn't explain any of it well, if at all.

As for the downright evil, there are several powerful groups who very consciously work to destroy any sort of social safety net, eliminate progressive taxes, or eliminate taxes altogether. It's horrible policy, not to mention heartless in its consequences, but it's the core of movement conservatism on economic and fiscal matters. Thom Hartmann gives a good summary of the history in "Two Santa Clauses, or How The Republican Party Has Conned America for Thirty Years," and explains Starve the Beast and other core conservative strategies. Key figures include Grover Norquist, Pete Peterson and Paul Ryan.

Grover Norquist is the head of Americans for Tax Reform, and sponsors regular conservative lectures in Washington. A friend of Karl Rove and Jack Abramoff, Norquist infamously said, "I don't want to abolish government. I simply want to reduce it to the size where I can drag it into the bathroom and drown it in the bathtub." I've covered him in more depth in previous posts, but Norquist is an anti-tax zealot who wants to get rid of taxes altogether, and pressures Republicans to sign an anti-tax pledge, that they will never support any tax increase ever, even in the face of Armageddon. Norquist was also one of the major forces behind creating the myth of Saint Ronnie Reagan.

The Peterson Foundation, run by former Nixon cabinet member Peter G. Peterson, keeps trying to slash Social Security and Medicare. It has at least one billion dollars to spend toward these ends. Among other things, the Peterson Foundation commissioned a documentary to push its views, and the Texas School Board has echoed Peterson's arguments. The Peterson Foundation recently sponsored "America Speaks" meetings in 19 cities across the country. However, these were very slickly designed events with Peterson's biases enforced on the participant discussions to arrive at pre-determined conclusions. In fact, 86% of Americans wouldn't cut Social Security, and similar majorities oppose cutting Medicare and Medicaid. But what does that matter for Peterson and his allies? What's important is the illusion of public opinion, not the real thing. (The same goes for independent expert opinion.)

Republican Congressman Paul Ryan has been advocating similar measures in the House. Ryan, a huge fan of Ayn Rand, has been pushing a radical budget plan that he claims will balance the budget. In fact, it wouldn't even do that, but would destroy the social safety net, and make taxes far more regressive, raising taxes on the middle class and slashing them on the rich. The Tax Policy Center pointed out the fundamental error that Ryan's budget hinges on and the plan's other consequences. The CBPP provided a detailed analysis of the Ryan "Roadmap," and also dissected his "off-base" response to their analysis. Citizens for Tax Justice came to similar conclusions, remarking that:

It’s difficult to design a tax plan that will lose $2 trillion over a decade even while requiring 90 percent of taxpayers to pay more. But Congressman Paul Ryan has met that daunting challenge. This analysis makes obvious that Congressman Ryan’s budget plan has nothing to do with balancing the budget, but has everything to do with creating a system that takes more from the poor and less from the rich.

Ryan has complained about reality-based criticisms of his highly regressive plan, and is still pushing the same crap, in some cases directly contradicting himself or just lying (the CBO has not proven his case). What Ryan is pushing is evil - although zealotry seems to be his defining characteristic.

Tallying the Bill, and Where to Go Next

Who's really to blame for the debt and the deficit? One way of looking at it would be tally up all the costs by the political parties that incurred them. (Hint: Reagan and Bush the Younger would sink it for the GOP.) However, another way to look at it is to examine who benefited from these deficits. Cui bono?

Here's a revealing diagram from CBPP:

The biggest problem is the Bush tax cuts. After that, it's the ongoing wars in Iraq and Afghanistan, started under Bush, never ended under Bush, and now continuing under Obama. Most of the TARP money went to wealthy Wall Street banks. The middle class and poor who have lost their homes certainly haven't won in this scenario, and the military personnel who get injured and die serving overseas tend to be middle class or poor.

Here's a CBPP diagram that renders the situation more starkly:

This covers 2001-2007, not all the way back to Reagan or earlier. Still, overwhelmingly, our national debt has resulted from funneling money to the rich and to the military-industrial complex. Yet oddly, the plutocrat consensus is that this trend should continue – and that the middle class and poor should sacrifice more to lower the debt. Hmm.

If the debt is such a terrible threat to our national well-being, why not let those who benefited from all that money repay it?

Here's my deal. I'll be willing to look at conservative pet causes, such as cutting Social Security in some fashion, if and only if we try sensible policies first and they don't work. So sure, we can cut Social Security, if first: We make income taxes much more progressive again, at something resembling pre-Reagan levels, and probably with a couple of extra tax margins added at the top. (I defer to the experts on the details, for this measure and all the rest.) Make sure the estate tax continues and is progressive, allowing family farms and small businesses to continue (the argument that they've ever been imperiled is largely conservative propaganda). Examine capital gains taxes and other income that primarily benefit the wealthy. Close tax loopholes for the rich and ensure that corporations actually pay their taxes. Make any tax cuts targeted and jobs programs focused so they actually create jobs, since we have proof that massive, blanket giveaways to the rich don't. Re-examine usury laws and allow mortgage cramdowns to help average consumers. Invest in education, scientific and medical research, the arts and humanities. Invest in infrastructure and in public services and works that benefit everybody. Consider a new New Deal to do that, putting Americans to work. Cut military spending, particularly on obsolete or useless programs, and end the wars in Iraq and Afghanistan.

The short version: tax the rich, cut military spending, end the wars, and invest in the middle class and the country as a whole.

The United States of America was founded by overthrowing a monarch. As Bill Moyers states, plutocracy and democracy don't mix. Ever-increasing wealth inequity is one of several key factors making America into more of a plutocracy. The campaign to increasingly concentrate wealth and power with a tiny few is a dangerous, regressive movement. The ruling class has almost advantage on its side – except the vote. Every measure that pushes us towards a plutocracy and a neo-feudal state is perilous, and every step toward a more egalitarian society is a small but important victory.

(Cartoon by Matt Wuerker.)


Anonymous said...

Batocchio - This is your best post ever. Thanks.

My one quarrel is where you say, "America is increasingly becoming a plutocracy." America has BEEN a plutocracy for many decades, since well before Reagan, certainly by the time Nixon killed the Great Society. But the plutocracy has become so overwhelming since Reagan, for so long, that we've forgotten what democracy possibly could be.

Don't you think plutocracy is inevitable where private contributions to political campaigns are legal?

Batocchio said...

Yeah, I was debating that one. America has always had a ruling class, but it's been held in check at times. I think the major turning point was Reagan, and the plutocrats have been gaining more power ever since. You're putting it a bit earlier, to Nixon's first term, I guess? There's no doubt that he was a bastard, and part of the problem, but it was Reagan who really slashed taxes for the rich and ran up the debt. One could say, "America is increasingly becoming a plutocracy," or one could say, "America is becoming even more of a plutocracy than it already was." I don't think of them that differently, especially given the context of everything else in the post, but you're right that they read a little differently.

On the private contributions thing, I'm all in favor of public funding of elections, but that's a major uphill battle, alas. Contribution limits helped a bit, but Citizens United has shot things to hell, huh?

Graham Firchlis said...

Bit late to this one, picked up the link from your guest post at Digby's.

This is a very nice summary of a comlex issue, and I'm pleased to see it. There is no reason to just accept things as they are, as though there was a natural right for there to be such a huge discrepancy between the economic classes.

I agree that the current swing towards massively disproportionate income and wealth distribution began with Reagan, all the evidence points to that, but it is also true that the shift towards greater equality that started under FDR is an anomaly.

From the beginning our society was dominated by white men of wealth and property, and they wrote our governing documents to preserve their power. The nation's public policies steadily resulted in an increasing concentration of wealth in the upper few percent, and that disproportionate concentration along with lax regulation of financial transactions led to the Great Depression.

Imposition of regulations and policies under FDR, HST and LBJ that marginally redistributed wealth tempered the disproportionality and contributed to the great equitable economic expansion of the 50s and 60s but Reagan's reintroduction of laissez faire policies and greatly reduced top marginal rates led directly to the current Great Recession.

It is good to see Prof. Domhoff cited. Any Progressive who wants to understand how America works and what needs to be done to change our structure must read and understand his work. I note that you haven't marked his figures as copywrited and used with permission. He does reserve copyright on them, rather than the usual internet Creative Commons license, and that should be respected and made clear for others who might copy them from here. If you didn't get permission to reproduce them, you really should. He's a very nice guy and I'm sure he would grant permission retroactively.

Again, great post.

Batocchio said...

Graham, thanks for a detailed, thoughtful comment here and over at Hullabaloo!

Batocchio said...

Graham, thanks for the permission prod - sloppy on my part. It's done, I've updated the post accordingly, and as you said, Prof. Domhoff was very gracious.

Mom in Omaha said...

"From the New Deal up to the Reagan administration" things were okay. However the cause of the degrading economy comes from Nixon. The gulf widened after Nixon ended bretton woods (google it)which limited inflation rate each year. Nixon needed money for his war and fire bombing villages, and didn't want to raise taxes as it was too visible (sounding like Bush?)

The silver in the 1960's quarters is now worth over $5 as inflation slowly accelerated and eventually debased our currency. Here is how the rich avoid much of the 'inflation tax' we pay.

Simple Example:

Let's assume you have saved $10,000 and buy a savings bond paying 7% interest compounded annually. Your bond would be worth $19,671.51 after 10 years, resulting in capital gains taxes on $9,671.51, in Nebraska with 7% capital gains plus 15% federal, total tax you owe is $2,127.73 resulting in a net gain on paper of $7,543.78 in currency. But...

Now lets assume inflation tied to the amount of money the federal reserve was creating was at 5% all 10 years. (Note: fed controls both interest rates and inflation) The amount of money needed to buy the same goods as 10 years ago at the time of your investment of $10,000 would be $16,288.95 in currency.

Your actual gain in buying power is $3,382.57 in today's currency. If we subtract the capital gains taxes paid from the actual gain in buying power, your gain in buying power was only $1,254.83 and your TRUE tax rate was more like 63% on actual capital gains.

Meanwhile, the banks are receiving federal reserve notes BEFORE the inflation rolls down hill to the pool of our existing currency. Is it any wonder the divide between mega-rich and the average person is growing?

Geithner was head of the NY Federal Reserve bank, Paulsen was CEO of Goldman Sachs.. none of these folks care for us except to keep our votes electing fed friendly politicians. Like most, they care mostly about their buddies.

Mom in Omaha said...

"From the New Deal up to the Reagan administration" things were fairly good. However the cause of the degrading economy comes from Nixon. The gulf widened after Nixon ended bretton woods (google it)which limited inflation rate each year. Nixon needed money for his war and fire bombing villages, and didn't want to raise taxes as it was too visible (sounding like Bush?)

The silver in the 1960's quarters is now worth over $5 as inflation slowly accelerated and eventually debased our currency. Here is how the rich avoid much of the 'inflation tax' we pay.

Simple Example:

Let's assume you have saved $10,000 and buy a savings bond paying 7% interest compounded annually. Your bond would be worth $19,671.51 after 10 years, resulting in capital gains taxes on $9,671.51, in Nebraska with 7% capital gains plus 15% federal, total tax you owe is $2,127.73 resulting in a net gain on paper of $7,543.78 in currency. But...

Now lets assume inflation tied to the amount of money the federal reserve was creating was at 5% all 10 years. (Note: fed controls both interest rates and inflation) The amount of money needed to buy the same goods as 10 years ago at the time of your investment of $10,000 would be $16,288.95 in currency.

Your actual gain in buying power is $3,382.57 in today's currency. If we subtract the capital gains taxes paid from the actual gain in buying power, your gain in buying power was only $1,254.83 and your TRUE tax rate was more like 63% on actual capital gains.

Meanwhile, the banks are receiving federal reserve notes BEFORE the inflation rolls down hill to the pool of our existing currency. Is it any wonder the divide between mega-rich and the average person is growing?

Geithner was head of the NY Federal Reserve bank, Paulsen was CEO of Goldman Sachs.. none of these folks care for us except to keep our votes electing fed friendly politicians. Like most, their care mostly about their buddies.