Sayonara to our democracy and hello to the plutocracy

Rocky Anderson:  For the first time in our nation's history, we fought a war, then two wars -- and, at the same time, instead of raising revenues for the wars, he [President George Bush] and the complicit Congress gave enormous tax breaks to the very wealthy.  It was as if we took out credit cards in the names of our children and charged the costs of the wars on them, while enriching the very rich even more.  It was a continuation of a reckless pattern of pandering by so-called conservatives -- aided and abetted by Democrats.  Between 1979 and 2006, the top incremental tax rate on earned income was cut in half; capital gains taxes were cut by almost as much; and corporate taxes were reduced by more than 25%.  Of course, not many corporations pay according to even that rate because of all the loopholes and deductions their lobbyists have pushed through Congress over the years.

If the Bush tax cuts had been allowed to expire in 2010, as promised, for people with incomes over $200,000, federal revenues would increase approximately $140 billion during this year.  That would be sufficient to cover basic health care needs for those without coverage in the United States.  What would the impact be on those making more than $200,000 a year?  It would reduce their aftertax incomes, on average, by about 4.5%. 

When offered the choice between health care for all or an elimination of the Bush tax cuts for the wealthy, Congress and the President have chosen less taxes for the wealthy.

The corrupting influence of money in our political system -- the massive campaign contributions that essentially put Congress and the White House on retainer to the wealthy -- has contributed significantly to what I call the Great Chasm.  One of many examples is what Washington politicians -- those who are supposed to be representing all of us -- did for hedge fund managers.  Our tax laws now allow hedge fund managers, some of whom make more than a billion dollars a year, to have most of their earnings taxed at the capital gains rate, 15%, while middle class working men and women pay a significantly higher rate.  That loophole alone costs the federal government more than $6 billion in lost revenue, which would be enough to provide health care to three million children.[1]  Almost $2 billion of that tax boondoggle goes to 25 people.[2]

Over the past decade, the incomes of the middle class have fallen, while those in the top 1 percent have enjoyed, on average, an increase of 18% in their incomes.  And what incredible incomes they are!  The top 1 percent in the United States are paid about 25% of the total income -- and they control a whopping 40% of the total wealth.  The disparity in income and wealth between the small privileged class of the economic aristocracy and the rest of us in this nation has never been as great as it is now since the 1920's, on the eve of the Great Depression. 

This is not something that just naturally happens because of market forces.  It happens because of politicians serving the elite financial aristocracy to the immense detriment of the public interest.

How did we build a strong, healthy middle class and a prosperous economy following the Great Depression -- and what is taking us back now to the gross inequality and tremendous insecurity for most people reminiscent of the Gilded Age?

As Paul Krugman[3] describes, in the 1920s, there was a vast political polarization and an enormous income and wealth disparity -- very much like today.  However, political reform -- public policy geared toward making life better for the vast majority of Americans -- made all the difference.  There was a vast narrowing of the gap between the wealthy and the rest of the nation -- what Krugman calls "The Great Compression."  It was entirely the opposite from today's Great Chasm. 

Incomes for the very wealthy actually decreased from the 1920's to the 1950's, while the incomes for middle class families about doubled.  The middle class also had greater security, with employers offering new benefits like health insurance and retirement plans.  The federal government also provided unemployment insurance and Social Security for retirees.  

It all equated to a major economic democratization of American society, with much narrower differences between the pay for executives and line workers, and much narrower differences between employees with formal education and manual laborers.  Just the opposite of what we're experiencing today.

Much of the Gilded Age class consciousness was gone by the 1950s.  And now it has returned.  Many of the wealthy turn their backs on the quality of public education as they enroll their children in private schools.  Many of the wealthy live only among themselves, providing for their own security, as they isolate themselves in gated communities.  Only the best in medical care for the wealthy, while 50 million people go without basic health care coverage -- and, even if the Obama plan is fully implemented 23 million men, women, and children will be without essential medical coverage, unlike any other nation in the developed world.  And 700,000 bankruptcies each year are attributable to enormous medical bills -- again, a tragedy unknown throughout the rest of the industrialized world.

Much of the change came about because of taxes.  In the 1920s, the top income tax rate was only 24%.  The top income tax rate rose to 63 % during the first Roosevelt administration, and 79 % in the second.  By the mid-fifties, the top tax rate had risen to 91% -- and that was under the Republican administration of Dwight Eisenhower.  Today's top tax bracket -- applicable only to income in excess of $388,000 -- is only 35%, yet listen to the wealthy and their lapdogs in Congress howl when anyone has the temerity to suggest that perhaps they should pay their fair share to help reduce the accumulated debt and tremendous interest burden we will hand off to our children and later generations -- and to lend a hand up to those living in poverty, including 22% of our nation's children. 

The average corporate tax rate increased from less than 14% in 1929 to more than 45 percent in 1955 and 48% in 1979.  Today's corporate tax rate is 35%, but the average corporation pays no more than 15%, and many corporations, like General Electric, taking advantage of massive loopholes and deductions corporate lobbyists have pushed through Congress, pay nothing at all.

The same thing happened with estate taxes -- what the Republicans, with the aid of the spin-meister Frank Luntz, would have us call "death taxes."  Estate taxes went from 20% in the 1920's to 45%, then 60%, then 70%, and up to 77%.  Today, the estate tax, applicable only to estates in excess of $5.12 million, is 35%.  Yet listen to some of  the wealthy whine -- as if their descendants are somehow entitled to more than $5 million without any taxation, while 22% of the children in the United States live in poverty.

If, following the 1920s, taxes accounted for the decrease in wealth for the very rich, what accounts mostly for the increase in wealth and income for most of the rest?  In large part, it was the union movement.  By the end of World War II, more than a third of nonfarm workers were union members.  Strong union advocacy means higher wages, better benefits, and a rippling effect that raises wages for others.  It also brings into focus the disparity between the pay of top executives and average workers.

Also, during the war, the Roosevelt administration set wages and, given the values of that administration, it tended to set the wages in such a way that the lower paid workers received more increases than others. 

The increase in taxes for the wealthy, a strong union movement, and wage controls that shrunk the gap between the wealthy and the middle class led to a much more equal distribution of the total income for thirty years -- as well as unprecedented prosperity.  Just the opposite of what we're experiencing today.

The gross inequalities today are alarming -- and tragic.  As of 2007, the top 10% owned 84% of the financial wealth in the United States.[4]  The bottom 80% owned just 7% of all financial wealth.

Between 1983 and 2004, in large part because of tax cuts for the wealthy and the defeat of labor unions, of all the new financial wealth created in the U.S., 43% of it went to the top 1%.  Ninety-four percent of it went to the top 20% -- meaning that the bottom 80% received only 6% of all new financial wealth generated in the United States during the strong economic years of the '80s, '90s, and early 2000s.[5]  In short, as working people produced more because of greater efficiencies, they shared in almost none of the gains -- while investors and top executives took almost all of it.

One factor contributing to this gaping disparity is yet another outrage:  the average executive pay as compared with the average factory worker pay.  CEO pay by 102 major companies was about 40 times that of  average full-time workers in the U.S.  By the early 2000s, CEO pay averaged 367 times the pay of the average worker.[6]  In 2007, the ratio between CEOs and factory workers was 344:1, while in Europe it was about 25:1.[7]

What can we, the American people, do?  First, recognize that the Democratic and Republican Parties are a democracy-destroying political duopoly, which has joined forces in shafting the vast majority of Americans, who are struggling every day to just get by, while serving politicians' campaign contributors, including Wall Street bankers, for-profit insurance companies, the pharmaceutical industry, hedge fund managers, for-profit colleges (many of which are owned by investment banks), and anti-union forces.  These Democrats and Republicans deregulated the financial industry and looked the other way while financial institutions and their officers engaged in wholesale fraud -- all of which led to the economic melt-down from which we are still reeling, while the perpetrators are still lining their pockets with multi-million dollar bonuses, derived from government bail-outs.  

They are the same duopoly that has caved to the fossil fuel industry in failing to provide essential international leadership to prevent the most catastrophic consequences of climate change.  They have become so craven that President Obama even vetoed the EPA's effort to reduce the emission of ground level ozone and has now paved the way for the southern leg of the Keystone XL Pipeline and vastly expanded offshore oil drilling.

They are the same duopoly that thinks so little of our democracy that they have made it almost impossible for any new party or independent candidate to get on several states' ballots -- and, through their total control of the Presidential Debate Commission, which hijacked the presidential debates from the League of Women Voters, have prevented any non-plutocratic voices from being heard by the electorate during presidential debates. 

In short, each of us can say: "We're not going to take it any more.  We have drawn our line -- and won't budge from it. 

• We won't support anyone who disregards our Constitution and the rule of law.
• We won't support anyone who tortures, authorizes torture, or opposes accountability for those who torture. 
• We won't support anyone who targets U.S. citizens for assassination. 
• We won't support anyone who will not work to stop the insane and inhumane incarceration of 2.3 million people, many of them for non-violent offenses -- an incarceration rate far greater than any other nation on earth and which is applied with a vengeance toward African-Americans and Latinos.
• We won't support anyone who fails and refuses to face up to the need for rational, compassionate immigration reform.
• We won't support anyone who will not commit to provide our students with an equal opportunity to obtain a higher education and equip themselves to be competitive globally with students and employees in other nations.
• We won't support anyone who asserts the power to kidnap and indefinitely detain people, including U.S. citizens, without charges, trial, assistance of legal counsel, or right of habeas corpus -- perhaps the most subversive, anti-American stance ever taken by a Congress or a President in our nation's history. 
• We won't support anyone who takes, or purports to authorize a president to take, our nation to war without a finding by Congress that war is justified -- and without compliance with the U.N. Charter, to which the U.S. is a signatory. 
• We won't support anyone who allows the continuation of Bush's budget-busting tax breaks for the wealthy. 
• We won't support anyone who makes it more difficult for working men and women to organize. 
• We won't support anyone who continues to allow multi-national corporations to profit by depriving U.S. workers of their jobs while exporting millions of jobs with nearly slave conditions in other nations.
• We won't support anyone who refuses to implement programs like the Works Progress Administration to hire millions of people to build up our nation's rapidly deteriorating infrastructure. 
• We won't support anyone who refuses to strengthen, rather than undermine, the safety nets provided by Social Security, Medicaid, and Medicare. 
• We won't support anyone who fails to provide crucial leadership on climate change and a thriving clean energy economy.
• We won't support anyone who refuses to commit to do everything possible to rid our government and electoral system of the corrupting influence of money.
• And we won't support anyone who refuses to join the rest of the industrialized world in providing a health care system that costs much less, produces far better medical outcomes, and is available to everyone. 

For those who are cynical, for those who are resigned to not being able to overcome the corruption and perversity of the influence of money in our plutocracy -- that is, government of, by, and for the wealthy --, I urge you to find inspiration in our own nation's long history of progressive social movements, as well as from recent examples in the Arab world.

Major movements, such as the anti-slavery movement, the women's suffrage movement, the labor movement, and the civil rights movement, all succeeded because of the tenacious, passionate commitment and activism by people, organized at the grass roots level.  And there was a lot of money aligned against many of them -- yet they prevailed.

Consider also that people in the Arab world -- for instance, in Tunisia, Egypt, and Libya -- recently organized, utilizing the democratized means of communication offered by social media, and succeeded in overthrowing long-time oppressive dictators.  So, too, can the people of the United States, organize together, take a principled, courageous stand, and overthrow the corrupting influence of money in our government, including our electoral system, and achieve the restoration of the rule of law, a recommitment to fundamental constitutional principles, the reestablishment of the system of checks and balances essential to our republic, and a recommitment to the core values that will make this country great again:  freedom, equal opportunity, compassion, and security.

Ben Franklin was approached by a woman as he was leaving the Constitutional Convention in Philadelphia.  She asked him, "Doctor, what do we have -- a monarchy or a republic?"  Franklin responded, "A republic, ma'am, if you can keep it." 

It's up to us.  If we don't take action, and insist on a return to the practices and policies that reaffirm our most fundamental values, our republic and all it stands for could be lost forever.  However, if we will, we can restore our republic and breathe life once again into our Constitution and recommit to all that can make this nation once again what the Founders, and those who have given their lives for our freedoms and values, intended and expected.

[1] Paul Krugman, The Conscience of a Liberal (W.W. Norton & Company: New York London: 2007), p. 250.

[2] Id.

[3] Paul Krugman, The Conscience of a Liberal.

[4] "Financial wealth" means net worth minus the value of one's home.

[5] G. William Domhoff, "Wealth, Income, and Power," www2.ucsc.edu/whorulesamerica/power/wealth.html?print, citing E. N. Wolff (2007) "Recent trends in household wealth in the United States: Rising debt and the middle-class squeeze.  Working Paper No. 502.  Annandale-on-Hudson, NY: The Levy Economics Institute of Bard College.

[6] Paul Krugman, supra, at 142.

[7] G. William Domhoff, supra.