QUOTE OF THE MONTH: “Inequality has the natural and necessary effect, under the present circumstances, of materializing our upper class, vulgarizing the middle class, and brutalizing our lower class.”
Mixed Essays, “Equality”
1879
SENSE AND NONSENSE—THE WAR AGAINST THE MIDDLE CLASS
From the editor: In a 2006 interview with comedian and political conservative Ben Stein, Warren Buffet said, “There’s class warfare all right, but it’s my class, the rich class, that’s making war, and we’re winning.”
One of the greatest threats to our national security, if not the greatest threat, is the rapidly disappearing middle rungs of the income ladder—rungs that make the dream of “upward mobility” a reality. Since 1980 and Reagan’s war on unionized air traffic controllers, Congress has been steadily and quietly removing the opportunity for lower and middle class Americans to participate in the pursuit of greater economic security.
In the sixth year of his presidency, the Reagan administration presided over a Republican congress that passed The Tax Reform Act of 1986, which prohibited many tax deductions such as a full deduction for medical expenses and deductions for interest paid on credit card loans. This devastating “reform” was sold to a gullible voting public under the rubric of “trickle down” and “supply side” economics. Unbelievably, it lowered the tax rate for the wealthiest taxpayers from 50 percent to 28 percent while increasing the rate for low and middle income taxpayers from 11 percent to 15 percent. (See the March, 2009, issue of The Compass.)
The Buffett interview by Stein, published in the November 26, 2006, issue of The New York Times, documents and underscores the dangerous legacy of Reaganomics and the Bush tax cuts for the very rich. Stein writes: “Mr. Buffett compiled a data sheet of the men and women who work in his office…It turned out that Mr. Buffett, with immense income from dividends and capital gains, paid far, far less as a fraction of his income [emphasis added] than the secretaries or the clerks or anyone else in his office.”
The fraction to which Stein refers defines the numerator as the amount paid in federal income tax and payroll taxes and the denominator as an individual’s taxable income.
A recent interview with Elizabeth Warren, current chair of the Congressional Oversight Committee, conducted by Washington Post reporter Lois Romano, continues to highlight the reality of the disappearing middle class and lack of equal opportunity.
The interview appeared in the October 8, 2009, issue. Following are excerpts:
“ROMANO: Do you agree with Michael Moore’s basic premise that capitalism as it is now has destroyed the country’s middle class?
“WARREN: Well, I believe that the middle class is under terrific assault. And I don’t want to play this as a capitalism issue.
“When we compare middle class families today with their parents a generation ago, we have basically flat earnings -- a fully employed male today earns on average about $800 less, adjusted for inflation, than a fully employed male earned a generation ago. The only way that houses could increase or families could increase their household income was to put a second earner into the workforce, and, of course that’s now flattened out because there aren’t any more people to put into the workforce. So you’ve got, effectively, flat income in this time period with rising core expenses; housing; health insurance; child care; transportation…
“The third leg to the triangle, and that is families, to deal with this, stopped saving and started going into debt.”
“ROMANO: Are we going to look back in two, three years at this TARP [Toxic Asset Relief Program] expenditure and say, well, it worked?
“WARREN: You know, everyone is going to have a point of view on this…But the TARP money was spent in ways that really are ground breaking for America. They changed the rules of the game in fundamental ways.
“When a business failed in the past and needed a bailout, we did it very rarely, but when we did, it was only after the shareholders had been wiped out, debt had taken a haircut; in other words, the losses had been borne privately to the extent that they could be borne privately.
“What was so astonishing about the first expenditures under TARP was that taxpayer dollars were put into financial institutions that still left all of their shareholders intact, that were still paying dividends, that paid creditors a hundred cents on the dollar.
“We put taxpayer money in without saying you’ve got to use up everyone else’s money first…
“That is a whole different approach than any we’ve ever used before in the United States.”
“ROMANO: What more can we be doing to protect the middle class, to protect what Michael Moore refers to as the ‘American Dream’?
“WARREN: Oh, you know, the answer is we’re in trouble on so many fronts.
“I will start with credit. We clean up the credit mess. This is like sewing up a hole in the bottom of someone’s pocket. This is literally tens of billions of dollars that are just falling out of the pockets of middle class families and making their way over to a handful of very large financial institutions. We can change some laws, and we can fix that one.
“I have to say on health care, I do studies on families filing for bankruptcy in the aftermath of serious medical problems. Whatever else is going on in the debate is the reminder that even people with health insurance are paying enormous sums for medical care, whether it’s about co-pays, things that are denied and higher prices that they’re paying for their health insurance. So whatever we can do to bring those costs under control for middle class families will help enormously.
“Sending the kids to college, the costs are just out of control. And we are putting debt loads on children unlike those we have ever imagined.
“The housing crisis. The way in which most American families build wealth is not through the stock market. It’s by buying a home and paying it off. That is, for most Americans, their retirement account…The chaos in the housing market is destroying wealth for middle class families…We’re watching more and more families go underwater on their mortgages by 25 and 30 percent…
“And, of course, the last one I would mention is the income front. As the pie grew throughout the 20th Century, the portion that went to workers, went to the median earning family in the United States, it stayed the same percentage wise, but that meant a bigger and bigger pie was a bigger and bigger slice of pizza.
“That began to shift in the ‘70’s, and, ultimately, what happened is that the pie kept getting bigger. It’s measured through productivity. It’s measured through GDP [Gross Domestic Product]. But the proportion that middle class families got in income began to shrink…
“In the 1950’s and the 1960’s, coming out of World War II, we said as a government, as a people, what can we do to support the middle class. You know that’s what FHA was to help people get into homes, right? VA, GI loans on education, we looked at policies, like whether or not they strengthen and support the middle class.
“Somewhere, that began to change in the late 1970s, early 1980s, and the middle class instead became like a resource to be pulled from, and you know, they became the turkey at the Thanksgiving dinner…
“The consequences of that are far more than economic. The middle class is what makes us who we are. It affects the poor. A strong and vital middle class is a middle class that can offer a helping hand to the poor. A strong and vital middle class is a middle class that has room, is creating new jobs to basically suck the poor up out of poverty and into middle class positions. The middle class is what gives us political stability. It’s what gives us an America that’s all bought into the whole process that what we do is not just about a handful of folks at the top who profit from it…
“And every time we hollow that out, every time we take away a little piece of that, we run the risk that some of what we understood as America, some of what we know as America begins to die. That’s what scares me.”
Editor’s Final Comment: This article is the last in a series of three interviews with current heroines and heroes in America’s struggle to survive the excesses of the latest 40 years. Capitalism, the so-called free market, and the profit motive are not our enemies. It is the people who abuse the profit motive, who believe their ends justify any means, and who believe that super power nations are exempt from prosecution for war crimes. We began this series with the proposition that the three greatest threats to our country are: 1) deregulation of the financial investment and banking industry; 2) disappearance of the middle class in America; and 3) extremism and abuse of power in the Israeli/Palestinian conflict. After publishing the interviews with Brooksley Born, Judge Richard Goldstone, and Elizabeth Warren, I am even more convinced of the appropriateness of the proposition. We end this series with an anecdote featuring quotes from the current poster child for all three of these threats, Dick Cheney.
Maynard Chapman, Editor
The Compass Newsletter
THE GROTESQUE DICK CHENEY
From The Atlantic Magazine: Following are excerpts from an article in The Atlantic, written by Conor Clarke and published in the May 28, 2009, issue:
“It’s good of Dick Cheney to tell the world (via Larry Kudlow) what he really thinks about deficits:
‘Well, I think the budgets he [Obama] submitted are way out of whack. I think what it does not only to the short term deficit but long-term debt situation is very objectionable.’
“Which is a perfectly fine sentiment. But it’s really just fish in a barrel to point out that this is the exact opposite of what Cheney was saying in 2002 (with similarities right down to the budget figure):
Shortly before he was fired, Treasury Secretary Paul O’neill confronted Cheney about the Administration’s latest proposal to cut taxes by another six hundred and seventy-four billion dollars over ten years, pointing out that the country was ‘moving toward a fiscal crisis.’ The Vice-President stopped him. ‘Reagan proved deficits don’t matter,’ he said. ‘We won the midterms. This is our due.’
“That’s from John Cassidy’s retelling of the famous scene from Ron Suskind’s The Price of Loyalty. Nice to see Obama getting his due.”
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