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||December 13, 2010|
Once upon a time, back in the mythic “Wild Wild West,” we had epic battles between “Cowboys and Indians.” In today’s Lush Lush East — the East End of Long Island where a Hamptons summer rental can run $500,000 — we now have “Rich Boys and Indians” going at it.
The Rich Boys here, Wall Streeters who consider the Hamptons their own private getaway, don’t want the nearby Shinnecock Indian Nation — where annual incomes run around $15,000 — to build a proposed casino on the tribe's reservation. This battle, a new New Yorker profile details, has been going for some time. In the end, some observers feel, the Rich Boys might actually lose.
In Washington, meanwhile, the Rich Boys are winning big. Again. The tax deal the White House cut last week has delivered unto America’s wealthiest a set of tax breaks that Americans, by a two-to-one margin, don’t want the wealthy to get.
So who’s to blame? The President? Or does the tax cut deal reflect a rift far more fundamental? In this week’s Too Much, we go searching for an answer.
Too Much online
|GREED AT A GLANCE|
Top executives at Tiffany & Co., the world’s number-two luxury jeweler, must have been pinching themselves last week. Things simply could not be going any better at the Manhattan-based global chain. The good news started with a third-quarter profit report that showed Tiffany earnings up 27 percent. That kicked off a stock rally that helped triple Tiffany’s share price over its 2009 low. And then last Monday the White House announced a tax cut deal that will add an average $360,000 to the discretionary income of America’s richest 0.1 percent, the high-end luxury sector's prime clientele. Those extra dollars should mean even hotter sales for Tiffany’s swank new handbags like the lizard-skin Laurelton, a $4,800 offering lined in the retailer's “instantly recognizable robin's-egg blue.”
Also pinching themselves last week: the heirs of all the mega millionaires — and the five billionaires — who've kicked the bucket in calendar 2010, the first year since 1916 without a federal estate tax in effect. Those heirs had been keeping their fingers crossed, hoping that Congress would not vote to restore the estate tax retroactively for 2010. The tax cut deal announced last week includes no restoration. The deal, the Wall Street Journal reports, actually makes 2010 even sweeter for wealthy heirs. Some of these heirs face a capital gains tax on the profits they make from selling the stock they inherited in 2010. The new tax deal gives heirs the choice of either paying that capital gains tax or having the 2010 estate of their dear departed taxed at the much-reduced estate tax rate the tax cut deal puts in effect for 2011, whichever ends up costing the heirs less . . .
Still another happy subgroup of America’s super rich: private equity and hedge fund managers. The top 25 hedge fund managers last year averaged just over $1 billion each, but paid taxes at a 15 percent rate on most of those earnings, mainly because a special loophole lets fund managers treat the bulk of their income as capital gains. This neat trick saves them about $200 million on every $1 billion they make. The Obama White House earlier this year proposed ending this “carried interest” loophole, and the House this past May passed legislation that wipes away most of the carried interest tax break. The tax cut deal the White House announced Monday carries no carried interest reform provision . . .
Last week’s fiercest tax-the-rich debate in Washington may actually have taken place off of Capitol Hill — in the legislative chambers of the District of Columbia city council. That council took up a proposal Tuesday that called for a tax hike on D.C. residents who make over $200,000 a year — to maintain child care and rent assistance programs for local low-income families. Argued tax hike co-sponsor Jim Graham: “People say this is about soaking the rich, but let’s be clear, the budget before us soaks the poor, and if you had a choice between soaking the rich and soaking the poor, which would you accept?” A Council majority decided to accept the latter. By an eight-five margin, they voted down the proposed levy on D.C.'s wealthiest . . .
Working Americans have seen their health insurance premium bills shoot up 40 percent over the past six years, a Commonwealth Fund study revealed earlier this month. And those premiums now cover the cost of considerably less care, since deductibles have soared at an even faster rate, 63 percent since 2003. But America’s CEOs may not have noticed. They’re still receiving, USA Today reported last week, supplemental health care coverage “far beyond what's offered to rank-and-file employees.” One example: The Polaris Industries “Exec-U-Care” program funnels five senior company execs as much as $50,000 “in yearly supplemental health pay.” The rationale? Says Polaris spokesperson Marlys Knutson: “Staying healthy is part of our culture."
Quote of the Week
“We should be embarrassed that we are for one second talking about a proposal that gives tax breaks to billionaires while we are ignoring the needs of working families, low-income people, and the middle class.”
Stat of the Week
The White House tax cut agreement, Oregon senator Jeff Merkley and seven of his colleagues noted in a statement last week, “would require American taxpayers to borrow over $50 billion in order to give, on average, $100,000 in additional annual tax cuts to people earning over $1 million per year.” These “bonus” tax cuts sit “on top of the $43,000 per year that millionaires will receive in tax cuts on their first million dollars of income.”
|inequality by the numbers|
The History Behind the White House Tax Deal
The tax cut pact the Obama administration announced last week has angered a good many Americans. But the pact's lavish generosity toward America's rich should not have given anyone a surprise.
Most of the chatter on the tax cut deal the White House has bargained out with GOP leaders in Congress has revolved around the deal's short-term implications, the dollars that extending all the Bush tax cuts for two years — and declaring a one-year Social Security tax “holiday” — will move into America's pockets.
Those dollars — about $77,000, on average, for every 2011 taxpayer in America’s richest 1 percent and just under $400 for average taxpayers in the bottom 20 percent — certainly do make for lively reading.
But the deal's most significant impact, as economist Paul Krugman points out, will almost surely be long-term. We now face “the increased likelihood that low taxes for the rich will be made permanent, crippling policy for decades to come.”
And with this increased likelihood, we may have entered what Wealth for the Common Good co-founder Chuck Collins has just dubbed a “death spiral to plutocracy”: The more wealth concentrates, the more the rich use that wealth — and power — to rewrite our economic rules and concentrate privilege even more.
The White House, by contrast, sees no great danger at all in the extension of the Bush tax cuts to America's richest. In appearances last week, the President dismissed as “purists” those attacking his willingness to make that extension.
“The American people,” the President pronounced, “didn't send us here to wage symbolic battles or win symbolic victories.”
Over 60 years ago, a Democratic Party predecessor to President Obama took exactly the opposite tack. That President, Harry Truman, faced a situation not all that different from the imbroglio that confronts President Obama today.
Victorious Republicans, after the 1946 elections, were demanding across-the-board tax cuts that would mostly benefit the nation’s rich. Truman refused to go along and vetoed the tax cuts GOP lawmakers sent him. In 1948, Republicans finally overrode one of those vetoes. But Truman made them pay.
The GOP, Truman charged repeatedly later that year in his campaign for re-election, “helps the rich and sticks a knife in the back of the poor.”
Truman would go on to score a stunning upset. His consistent opposition to tax cuts for the wealthy had earned him the public trust. That public and Truman, after decades of economic distress, had come to share the same perspective: Vast concentrations of private wealth endanger the national well-being.
America's most revered political pundit, columnist Walter Lippmann, had reflected on that perspective back in May 1937, after the death of John D. Rockefeller.
The nation, Lippmann noted, would likely never see a fortune as grand as Rockefeller's ever again. The 97-year-old John D. had “lived long enough to see the methods by which such a fortune can be accumulated outlawed by public opinion, forbidden by statute, and prevented by the tax laws.”
In the United States, Lippmann would add, “sentiment has turned wholly against the private accumulation of so much wealth.”
Truman understood that political reality. He would have never cut the deal that the White House announced last week — or dismissed the struggle to rein in the rich as something merely “symbolic.” That would have been unthinkable.
And that raises an interesting question. Just when did a deal like last week’s tax cut pact become “thinkable” for a Democratic Party President to make? Ironically, that political sea change in “thinkability” has its roots in the Truman years.
As President, after World War II, Truman did eagerly stand up to right-wingers on taxing the rich. But on other fronts, he tried to steal the right wing's thunder. His moves in that direction, starting with the introduction of “loyalty oaths” in 1947, would set the stage for the hysteria of “McCarthyism” that exploded out in 1950.
The resulting “Red Scare” cast a deep chill over America’s political discourse. Mainstream opinion makers began steering clear of any stance that smacked of “class conflict.” They stopped talking about the rich. Robber Barons, they opined, had become ancient history. America’s class struggles had ended. To move forward, the nation needed simply to concentrate on “growing” the economy.
For mainstream liberal politicians, this emphasis on “growing” the economy had enormous appeal. Growth offered an easy way out of their Cold War box. By chanting the “growth” mantra, they could talk about progress without having to talk about inequality — and risk getting labeled a parlor pink or worse.
By granting “growth” star billing, these politicos could ride out the Cold War unpleasantness, as one University of Missouri historian has noted, “evading tough decisions about the distribution of wealth and power in America.”
In the early 1960s, President John F. Kennedy would take this preoccupation with growth another step further from the New Deal’s egalitarian ethos. High taxes on the rich, Kennedy proclaimed, inhibited growth. An economy “hampered by restrictive tax rates,” he argued, “will never produce enough jobs.”
The Kennedy administration would send Congress a proposal to cut America’s income taxes across the board. The top rate on high incomes, then 91 percent on income over $400,000, would drop to 65 percent under the Kennedy plan.
Congress would eventually approve most of what Kennedy sought. In 1964, the year after his death, his successor Lyndon Johnson would sign into law legislation that dropped the nation’s top tax rate from 91 to 70 percent.
Johnson would evince no further interest in cutting tax rates. LBJ, unlike Kennedy, had cut his political eyeteeth in New Deal Washington. He had grander dreams, a “Great Society,” a “war on poverty.” But these echoes of the New Deal were now reverberating in a fundamentally different political context.
“A generation ago,” an aging Walter Lippmann would note in 1964, “it would have been taken for granted that a war on poverty meant taxing money away from the haves.” But America’s current elected leaders had rejected that idea. They believed, Lippman observed, that social and economic progress no longer required high taxes on wealthy people, that the “size of the pie can be increased by invention, organization, capital investment, and fiscal policy.”
Or, as President Kennedy had famously put it, “A rising tide lifts all boats.”
A political generation later, in 1981, President Ronald Reagan would follow the Kennedy script. Top tax rates, under Reagan, would fall to 28 percent, and Bill Clinton would eventually inherit, in 1993, a 31 percent top rate.
As President, Clinton would almost immediately get that top rate jacked up to 39.6 percent. But he never positioned that increase as any sort of move to trim the wealthy down to a more democratic size. He spoke instead about deficit reduction. Grand fortune would never trouble Clinton.
“We are not a people who object to others being successful,” he would note.
That attitude would remain the dominant ideological strain in Democratic Party circles throughout the George W. Bush years. In a sense, President Obama’s willingness to extend tax cuts to the wealthy, without a fight, merely reflects this decades-old indifference, among top Democrats, to wealth’s concentration.
But the political landscape, amid our Great Recession, has changed. The dangers we as a society invite when we turn a blind eye to the wild chase after grand fortune now stand out more vividly than at any time since the Great Depression.
Reputable and respected pundits and policy makers with mainstream platforms — Nobel laureates like Joseph Stiglitz, former top officials like Robert Reich — have been rigorously linking our current hard times to what Yale political scientist Jacob Hacker calls our “economic hyperconcentration at the top.”
Last week, by challenging the White House tax cut deal, significant numbers of Democratic Party lawmakers served notice that they’re now worrying about that hyperconcentration, too.
In a sense, a desperately needed battle — over the Democratic Party's attitude toward grand concentrations of private wealth — has at long last been joined. Will Democrats in positions of power continue to wink at the wealthy who have wrecked the economy — or dare to curb their wealth amassing?
That will depend, in large part, on how this new battle plays out.
Gregory Junemann, Rich are rich enough; help the middle class, Honolulu Star-Advertiser, December 9, 2010. A federal worker union leader calls for a comprehensive plan that “puts permanent restraint on Wall Street's endless capacity for greed.”
Jennifer Collins, How good the 'Giving Pledges' really may be, Marketplace, December 9, 2010. Why those billionaire pledges to give away half their money may not be as impressive as they seem.
Heather Scoffield, Beware social harm of economic inequality, Canadian Press, December 9, 2010. How wide gaps between the rich and everyone else worsen the quality of life for all, not just the poor.
James Kwak, Who Wanted What? Baseline Scenario, December 10, 2010. A masterful analysis of who won more in the tax cut negotiations between the White House and congressional Republican leaders.
John Kaufman, Thomas Jefferson is unconstitutional, Capital Times, December 11, 2010. A Wisconsin poet examines Jefferson's commitment to a “democratic distribution of wealth” — and the right's assault against his legacy.
Daniel Massey, New York's income chasm: New York's wealthiest have grown rich beyond compare, Crain's New York Business, December 12, 2010. The income share of the bottom 90 percent of New York households, says a new Fiscal Policy Institute report, dropped from 59.1 percent in 1987 to 34.5 percent in 2007.
Some Welcome Hope for the Holiday Season
Jay Walljasper, All That We Share: A Field Guide to the Commons. Introduction by Bill McKibben. The New Press, 2010, 268 pp.
Then you need to get this book. Or give it. This new offering invites us all to hope again — not in a hero, but in ourselves, in what we can accomplish when we work together on behalf of what we share.
And we share, this upbeat collection explains, a great deal. We share the “commons,” a “dimension of property” that covers all the aspects of life that no single individuals — or corporations — can ever with a straight face claim as only their own.
The commons, environmentist Bill McKibben notes in the book's intro, “can be gifts of nature” or “products of social ingenuity,” everything from fresh water and the airwaves to the Internet and language. A commons, suitably nurtured, can enrich us. But a commons can be exploited, too, and create wealth only for a few.
Over recent years, warns All That We Share editor Jay Walljasper, that exploitation has shifted into overdrive. Ecosystems, scientific knowledge, the cultural traditions of childhood are all “slipping through our hands and into the pockets of the rich and powerful.”
All That We Share offers a guide to emptying those pockets — and reclaiming the commons. We meet in these pages people and communities creating neighborhoods and nations where everyone, not just a wealthy few, can enjoy the resources — and opportunities — that by right and reason belong to us all.
These “commoners” come from all over the world, from locales exotic and familiar. A publicly owned brewery in Germany's Baden-Württemberg. A shopping mall outside Seattle reborn into a community center that features a “giant-size chessboard” where kids push around bishops “almost as big as they are.”
An inner-city Cleveland church turned public square that encourages anyone to stop by to browse, pray, and “check their e-mail on the cathedral’s Wi-Fi.” An Indiana library that teaches belly dancing. A street in the Netherlands reclaimed by neighbors who plopped old couches on the roadway to slow speeding traffic.
The visionaries we meet here think both small and big. They're redefining property rights to protect the commons, leveraging “public trusts” to maintain national assets that ought to be benefiting everyone, not just enriching the few.
Add in the book’s imaginative appendices, everything from a list of 51 “(mostly) simple ways to spark a commons revolution” to a rundown on “the best movies, novels, music, and art that evoke a spirit of sharing,” and you have a real winner here, a cheery antidote to the holiday blahs.
“People everywhere,” editor Jay Walljasper notes at one point, “are yearning for a world that is safer, saner, more sustainable, and satisfying.”
All That We Share makes that world seem achievable. In a troubled holiday season, what better message could we possibly pass on?
|About Too Much|
Too Much, an online weekly publication of the Institute for Policy Studies | 1112 16th Street NW, Suite 600, Washington, DC 20036 | (202) 234-9382 | Editor: Sam Pizzigati. | E-mail: email@example.com | Unsubscribe.