The Rich Get Richer (Thank Heavens!)

Jack S: ‘Yes, you’re right, it’s not only a good time now to be rich in America, it’s always good to be rich in America, and it’s always bad to be poor. Your real message (why don’t you just come out and say it), is that the rich should give more of their property to the poor, because after all, they get more out of society, and the poor get so little out of our society. I think when people say ‘let’s even the playing field so that everyone has an equal chance,‘ they’re really saying ‘let’s make sure everyone has an equal outcome, not just an equal chance.”

☞ I disagree, Jack. It’s always a balance. The balance shifts. Lately, the balance has been shifting in favor of the wealthy. You may believe that’s long overdue. I would argue the balance was better the way it was.

(I’d also point out that wanting to assure that all children have decent health care – an equal outcome of sorts – is not the same as wanting to assure that everyone lives in a $300,000 house. Wanting to assure that all seniors can get pain-relieving drugs is not the same as wanting to assure that everyone gets a new Taurus every three years.)

Even with the balance the way it was, the wealthy were leaving the poor further and further behind. According to Professor Robert H. Frank (the link from which I got this, inequality.org, seems to be on the fritz), while ‘the top 1 percent of earners now have roughly twice as much purchasing power as in 1979, the real earnings of families in the middle have scarcely grown.’

The Republican response? Let’s provide massive tax relief for that top 1 percent!

Take a look at this, from the same link:

Mean Income Received by Families, 1978 to 1998 (1998 dollars)
Source: Census Bureau

‘According to Business Week‘s annual executive compensation surveys, CEOs of large U.S. corporations earned 42 times as much as the average worker in 1980, but earned 475 times as much in 1999,’ Professor Frank notes.

So do we conclude from all this that the balance needed shifting further in favor of the best-off? This is apparently what the Republican leadership concluded. I don’t think it’s inciting class warfare to disagree.

Professor Frank then asks a particularly pregnant question. Which of these two imagined worlds would you rather live in?

World A: You earn $110,000 a year, others earn $200,000.
World B: You earn $100,000 a year, others earn $85,000.

In World A, you could actually buy $10,000 more stuff or save more money for retirement or drive a bigger car. Yet my guess is that you chose World B.

The point? It may not be enough that the lower-income groups now have TV sets and telephones, where once they didn’t. For the very same reasons you might have chosen World B, they might chafe knowing that they work hard for $16,000 a year while someone they ride the elevator with – who also works hard – earns 20 times as much. (I note that Bear Stearns chief James Cayne, chastened by the need to lay people off as Christmas approached, has cut his own bonus from $30 million to just $12 million this year.)

Well, chafe they must, because almost no Americans believe in ‘equal outcomes.’ I sure don’t. But to shift the balance even further in favor of the best off?

As the estimable Hendrik Hertzberg put it in his November 12 New Yorker column . . .

‘[T]he ‘stimulus’ package that has emerged from the House of Representatives [the one Tom Daschle is currently trying to derail in the Senate – A.T.] is truly shocking. The bill, which was passed October 24 by a vote of 216 to 214 (seven Republicans dared to vote ‘no’), consists overwhelmingly of handouts to the prosperous and the influential. It would earmark more than $140 billion in tax cuts for wealthy individuals and corporations.’

One $25 billion piece would wipe out the corporate ‘alternative minimum tax’ – retroactively for 15 years. Hertzberg notes that this $25 billion ‘is nearly double what the bill contains in relief for taxpayers of modest means. And while all the cuts for the rich are permanent or quasi-permanent, those for the non-rich are (as any tax cut aimed at stimulating immediate demand ought to be) a one-shot deal.’

The genius of the Republicans is that they are able to sell this to so many people who are hurt by it. The huge tax cuts in the Reagan years were phenomenally good for the wealthy, but when Social Security tax was added to the equation, taxes on everybody else stayed about the same or even rose. Yet the tax cuts for the wealthy were wildly popular. And because they drove us deep into deficit, adding $3 trillion to the National Debt, mortgage and auto-loan rates were higher for middle- and lower-income Americans than they would otherwise have been. (Not a problem for the wealthy, who can buy for cash.) Yet there were few complaints.

The Clinton/Gore team – without a single Republican vote – passed a budget that hiked taxes on the best off (but only on the best off), bringing the top bracket partway back up from Reagan’s 28% to 39.6% – though still well below the 50% rate of Reagan’s first term or the 70% rate that had prevailed under the prior five presidents or the 90% top rate under Eisenhower.

The Clinton/Gore rate proved to be a great balance. Low enough to allow the best-off to continue to outstrip everyone else (see the table above and others like it) . . . how could they complain about that? . . . yet high enough to give the bond market confidence that we would rein in our giant deficits. It set off a ‘virtuous cycle.’ America added 22 million new jobs and turned its giant budget deficit into ‘giant surpluses’ that the Bush team told us confidently, in ramming through its tax cut for the best-off, would ‘stretch as far as the eye could see.’

From 1993 to 2000 we had a good balance. But the Republicans have been hell-bent on shifting it ever further in favor of the best-off.

It is a grand time to be wealthy and powerful in America. Even greater than usual, Jack.

Have a wonderful weekend.

[Full disclosure for the benefit of readers new to this column: the writer is treasurer of the Democratic National Committee. These comments, however, are entirely his own.]