Both Newsweek and the Guardian have articles on rich. The Newsweek article is titled 'Do the Media Hate the Rich?' and the Guardian article is 'America's Socialism for the Rich.' Both discuss class warfare.
The two political parties in the US have traditionally been engaged in forms of class warfare. The GOP has been the champion of the affluent and corporations since the party was formed in 1854. The Democratic party has been the champion of the middle class and the poor.
Much of the class warfare stated during the Reagan revolution. During Reagan's tenure, income tax rates of the top personal tax bracket dropped from 70% to 28% in 7 years, while Social Security and Medicare taxes increased. Generally the GOP tries to cut progressive taxes like Income Tax and increases regressive taxes like Social Security and Medicare. Social Security is one of the worst regressive taxes in the US because it is capped at $98,500.
George W. Bush tried to privatize Social Security, by running town hall meetings that were by 'invitation only' and tightly controlled by the Republican Party. If you had a “save the whales' bumper sticker on you auto, you wouldn't be admitted to the 'small tent' the president was speaking in.
Margaret Thatcher had privatized the UK version of Social Security when she was PM. It failed when the UK economy contracted and the government advised its citizens to return to the older and more stable public system.
Because of the financial meltdown in the US, both the Social Security and Medicare programs are less solvent. President Obama will have to look at funding of both programs once the national health insurance program is resolved in the House and Senate. Social Security has been born on the back of the middle class because of the tax cap since the program was created in 1935.
The Reagan Revolution produced a huge national debt and a recession that George H.W. Bush was never able to shake. Its biggest calamity was the fracturing of the middle class. Instead of building new roads, bridges and levees during the 1980s Reagan shifted the national treasure to the Armed Services as part of his agenda to 'defeat communism.' When the dust cleared one third of the middle class became affluent. The remaining two thirds of the middle class treaded water or declined.
As Paul Krugman wrote, “But while the rich got much richer, there was little sustained economic improvement for most Americans. By the late 1980s, middle-class incomes were barely higher than they had been a decade before — and the poverty rate had actually risen.”
The US spends about $500 billion a year on defense while Russia spends one tenth of that and China about one seventh. What do we have to show for this huge investment in the military-industrial complex?
We had a stalemate in Korea and we lost the Vietnam War. We did push Saddam Hussein out of Kuwait but the Kuwaitis didn't reward American businesses with the big lucrative contracts our government expected. The second Iraq War will not produce a military victory regardless of George W. Bush's claim of 'mission accomplished.' The Afghan War may not prove to be winnable. History indicates no one has ever conquered Afghanistan.
The term class warfare was used a lot by Karl Rove in the first presidential campaign of George W. Bush. As Ian Walsh has pointed out, there was a class war and the rich won it. All the middle class and poor did was whimper:
“As So they made themselves rich. They reduced taxation on themselves in a number of ways, they broke union power, they got rid of old New Deal laws that had stopped speculation from getting too bubblicious and they went on a bubble spree - shoving money into various different asset classes, driving them into the stratosphere, taking the profits and then letting the taxpayer eat the loss. They took as much public infrastructure private as they could and they did so for cents on the dollar. They imported manufactured goods from the east to keep goods inflation down and they exported jobs to low cost domiciles to keep wage push inflation down.”
President Obama is now trying put the house back in order again. In the long run an economy cannot be successful that caters to corporations and the affluent. The middle class is the backbone of the economy but it has been suffering from osteoporosis lately.
Attacking CEOs, wealth and luxury is productive for "the mainstream media, the Obama administration and 97 percent of the American population," says Samir Husni, director of the Magazine Innovation Center at the University of Mississippi. "It takes guts in this day and age to come to the defense of the [top] 3 percent.
Bernie Madoff seems to be the poster child for class warfare attacks from the left. So are the large investment banks. While these Wall street banks were receiving huge bail-outs they were meeting with the founder of Home Depot on plans to defeat the Employee Free Choice Act (EFCA).
The Bank of America Corp. hosted a conference call with conservative activists and business officials to oppose the EFCA. At least one representative from another bailout recipient, AIG were asked to contact clients to send "large contributions" to groups working against the EFCA and to contact vulnerable Senate Republicans.
Bernie Marcus, co-founder of Home Depot, with Rick Berman, an aggressive EFCA opponent and called the legislation as a 'threat to American capitalism, or worse.' "This bill may be one of the worst things I have ever seen in my life," Marcus said. I could have been on "a 350-foot boat out in the Mediterranean," but felt it was more important to engage on this fight. "It is incredible to me that anybody could have the chutzpah to try and pass this bill in this election year, especially when we have an economy that is a disaster, a total absolute disaster."
Marcus added that donations of hundreds of thousands, if not millions, of dollars were needed, it was argued, to prevent America from turning "into France." America's banks are pushing back on regulation. They want to continue the status quo since the old system worked so well for them.
It has long been recognized that those America's banks that are too big to fail are also too big to be managed. If it too big to break up as AIG supposedly is, it is a monopoly that should be broken up. Lately it seems that the only place in the world that is willing to discipline the mega-corporations is the European Union. The EU has hit Microsoft and Intel with huge billion dollar fines for anti-competitive behavior.
America has expanded its corporate safety net to commercial banks to investment banks. This is not socialism, but an extension of long-standing corporate welfarism. The rich and powerful turn to the government to help them whenever they can, while needy individuals get little .
We need to break up the too-big-to-fail banks. Bankers are hardly the captains of industry and creators of wealth. They are closer to faceless bean counters. These banks are too politically powerful. They should be broken up and regulated.
The real struggle between the political parties seems to be taxation. The Republicans want to cut the taxes for the affluent under the guise of supply side economics which many Democratic economists consider to be a conservative Trojan horses. The Democrats want increasing tax revenues to restart the economy and to rebuild the American infrastructure.
The Republican argument is that the rich pay to much of the tax tab in the US. The rich do pay an overwhelming amount of the tax bill but the affluent also extract the lion's share of wealth and income every year. “In 2003, the upper 20% household, who were home to roughly 25% of persons, earned 49.7% of all income before and 39.6% of income, after size adjustments.” Wealth distribution in the US is far worse particularly since capital gains tax was cut to 15 per cent. Most of the income and wealth of the millionaires and billionaires in the US is derived from capital gains not ordinary income.
According to Wikipedia, a study by the Southern Economic Journal found that "71 percent of American economists believe the distribution of income in the US should be more equal, and 81 percent feel that the redistribution of income is a legitimate role for government."
Data from the United States Department of Commerce and Internal Revenue Service show that income inequality has been increasing since the 1970s. As of 2006, the United States had one of the highest levels of income inequality, as measured through the Gini index, among high income countries, comparable to that of some middle income countries such as Russia or Turkey.
Most of this class warfare can be explained by the rise of the GOP after Lydon Johnson passed the Voting rights Act which gave blacks bare bone civil rights protection at the polls. Most of the Dixiecrats left the Democratic party and became Republicans. The GOP had won five of nine presidential elections since 1980.
Since Reagan the GOP has made conscious efforts to dismantle the New Deal reforms of FDR. The Republicans rescinded the Glass-Steagal Act (1933) in 1999 which kept barriers between the investment and commercial banks. Senator Byron Dorgan of North Dakota predicted this would result in a financial meltdown in about 10 years.
The Securities and Exchange Commission also caused the current crisis. A former SEC official, Lee Pickard, who says a rule change in 2004 led to the failure of Lehman Brothers, Bear Stearns, and Merrill Lynch.
The SEC allowed five firms — the three that have collapsed plus Goldman Sachs and Morgan Stanley-- to more than double the leverage they were allowed to keep on their balance sheets. The companies were also allowed to remove discounts that had been applied to the assets they had been required to keep to protect them from defaults.
The Republican class warfare agenda includes tax cuts for the affluent, corporate welfare, deregulation, privatization and anti-labor activities. As Ian Walsh has pointed out there has been class war and the rich won because the middle class sat on its kiester and let it happen. Where do we go from here?
Continued support of President Obama and the Democrats seems to be the only way out. The Republicans are fighting each other the consensus seems to be that the party wants to stay to the right to maintain the inequality the GOP has created. The GOP appears to have few solutions for middle class Americans.
Sources:
www.newsweek.com/id/201864/
www.guardian.co.uk/commentisfree/2009/jun/12/america-corporate-banking-welfare
en.wikipedia.org/wiki/Reaganomics
www.ssa.gov/history/briefhistory3.htmlhttp://www.nytimes.com/2008/01/21/opinion/21krugman.html
www.nytimes.com/2008/01/21/opinion/21krugman.html
www.firedoglake.com/2008/07/13/there-was-a-class-war-the-rich-won-it/
www.huffingtonpost.com/2009/01/27/bank-of-america-hosted-an_n_161248.html
www.huffingtonpost.com/2009/01/27/http://en.wikipedia.org/wiki/Byron_Dorganbank-of-america-hosted-an_n_161248.html
www.huffingtonpost.com/2009/01/27/bank-of-america-hosted-an_n_161248.html
en.wikipedia.org/wiki/Income_inequality_in_the_United_States
en.wikipedia.org/wiki/Byron_Dorgan
www.nysun.com/business/ex-sec-official-blames-agency-for-blow-up/86130/
