“We Built This Country On Inequality”: The Wealth Gap Didn’t Spring Up From Policy Gone Awry, It Is The Policy
I admit to tuning out most conversations surrounding income and/or wealth inequality in the United States. It’s not because I don’t find these conversations important; they are vital. The problem is that I always hear the issue of inequality situated around what has happened in the last thirty or forty years, which ignores the fact this is a nation built on inequality. The wealth gap didn’t spring up from policy gone awry—it is the policy. This country was founded on the idea of concentrating wealth in the hands of a few white men. That that persists today isn’t a flaw in the design. Everything is working as the founders intended.
The source of that inequality has changed, as the past thirty/forty years have been dominated by the financial class and rampant executive corruption, but the American economy has always required inequality to function. Even times of great prosperity, where the wealth gap decreased, inequality was necessary. The post-WWII period is notable for the lowest levels of inequality in the modern era, but the drivers of that prosperity (the GI Bill, construction of the highway system, low-interest home loans) deliberately left black people out, and the moments of robust public investment that have benefited racial minorities and women have always been followed by a resurgence of concern over government spending and “state’s rights.”
Our job, then, if we’re serious about forming a society of true equality, is to interrogate and uproot the ideologies that created the original imbalance. In other words, we can’t deal with income/wealth inequality without also reckoning with white supremacy and patriarchy.
So far, we haven’t done a very good job of that. Bryce Covert writes eloquently about the gender gap, while Matt Bruenig writes about the failure to address economic disparity along racial lines. Over at Salon, he says:
Although the Civil Rights Act, the landmark legislation which just reached its 50th anniversary, made great strides in desegregating the economy, economic discrimination is still widespread, and anti-discrimination legislation alone can never rectify the economic damage inflicted upon blacks by slavery and our Jim Crow apartheid regime.
He’s right, though I’d quibble with some of the other points in this piece. Later on, he says, “Even if racism were wiped out tomorrow and equal treatment became the norm, it would never cease being the case that the average white person has more wealth than the average black person.” Except that is racism. The persistence of inequality along racial lines is racism. It may seem to be a minor point, but it’s important in constructing a truer definition of racism, in order that we know what we’re fighting against. It’s important to remember that slavery was chiefly an economic enterprise that created a racial caste system out of necessity. Karen and Barbara Fields chart this history in their book Racecraft.
The larger point still remains, as Bruenig concludes:
Thus, those actually serious about righting the wrongs of enslavement and Jim Crow apartheid must support more drastic leveling efforts. Beefed up anti-discrimination, which is both necessary and good, will not be enough. Ideally, we could work towards reparations in the form of redistributing wealth along racial lines. With that an unlikely possibility though, we can at least think about ways to redistribute wealth more generally from those with wealth to those without it, something that would have a similar, albeit more attenuated, effect as reparations given who the wealthy and non-wealthy happen to be.
I would more than welcome a renewed discussion about reparations. It is, however, as Bruenig notes, a long shot. But there are other avenues to explore that would have a similar impact to reparations, like a jobs guarantee and universal basic income. Perhaps this is an opportunity to revisit A. Philip Randolph’s “Freedom Budget for All Americans.” But any conversation about inequality absent one of white supremacy (and patriarchy) isn’t one worth engaging.
By: Mychal Denzel Smith, The Nation, April 18, 2014
“For Koch Brothers, All Politics Is Local”: Influencing Even The Most Local Policy Decisions
The Tennessee State Senate brokered a deal this week to move forward with a hotly contested bus rapid transit (BRT) project. The bill will provide the city of Nashville and neighboring Moore County with 7.1 miles of rapid bus transit lanes. But because of the compromise in the Senate, the BRT plan will now face greater oversight: The proposed buses will be allowed to use lanes separate from regular traffic, but will need approval from the state Assembly and by the commissioner of transportation before constructing those lanes.
Prior to Thursday, the Tennessee State Senate had been blocking the bill, in part because of an effort by a group affiliated with noted Republican donors Charles and David Koch.
The Koch brothers, and the Tennessee arm of their political organization Americans For Prosperity, had no explicit economic interest in blocking the bus project from moving forward. Rather, as the Tennessee director of Americans For Prosperity told The Tennessean in March, it was something of a trial run for implementing Koch-backed legislation around the country. “With supermajorities in both houses,” AFP state director Andrew Ogles told the paper, “Tennessee is a great state to pass model legislation that can be leveraged in other states.”
The citizens of Nashville and Moore County, however, are not the first Americans to feel the effects of the Kochs’ “model” legislation.
In a similar example of Koch influence on the local level, in 2012 Americans for Prosperity joined the effort to halt a streetcar project in Milwaukee, Wisconsin. The streetcar plan would connect the lower east side of the city with an Amtrak station two miles away.
The drive was led by Republican alderman Bob Donovan. After construction was approved by the Milwaukee Common Council, Donovan held numerous press conferences in the attempt to publicize a petition and force a referendum on the streetcar plan.
The effort got a leg up when Americans for Prosperity set up a website, “A Streetcar Named Disaster,” to gather signatures for Donovan’s petition.
Donovan’s union with Americans for Prosperity led other elected officials to question his loyalties. Jeff Fleming, then-spokesman for the Department of City Development, said in a statement: ”We never hear Ald. Donovan complain about his Republican friends cutting Milwaukee’s local road aids, our recycling aids or our state shared revenue, which funds police and firefighters. The alderman is so tight with groups and individuals who love gutting and kicking Milwaukee, you have to wonder where his loyalties are.”
Coincidentally, the streetcar project is a hallmark of Mayor Tom Barrett’s administration. Barrett unsuccessfully ran for governor of Wisconsin in 2010 and again in a recall election in 2012, losing to Republican Scott Walker both times. Walker has a close relationship with Americans for Prosperity, who argue that his anti-union legislation is an example that other Republican governors should follow.
Like the proposed rapid transit plan in Nashville, the Milwaukee streetcar plan has moved ahead over AFP’s objections.
The Kochs’ distaste for government-subsidized transportation did result in one big victory on the state level. In Florida, a large mass-transit plan to bring high-speed rail to the state was rejected after Republican Rick Scott was elected. The plan would have used state and federal funds to connect the cities of Tampa and Orlando, with plans to extend it to other tourist hotspots in southern Florida.
The Koch brothers’ fingerprints were all over Scott’s rejection of the plan. For starters, Governor Scott and the Kochs have a long and storied relationship. Scott, for example, famously attended a secret, invitation only meeting held by the Koch brothers in Colorado soon after being elected Florida governor.
The Koch brothers’ influence over Florida’s high-speed rail plan, however, extends beyond their relationship with Governor Scott.
As Curt Levine, former legislator in the Florida House of Representatives, noted at the time, Scott’s decision to nominate Robert Poole as transportation advisor deftly revealed the Koch brothers’ influence in his administration.
Levine wrote in a 2011 op-ed: “Poole is director of transportation policy at the Reason Foundation, a right-wing lobby group of road-based transportation industrial interests, including petroleum, asphalt and rubber-tire manufacturers. And, not coincidentally, Reason receives substantial funding by the ultraconservative billionaire Koch brothers. David Koch serves as a Reason trustee.”
Levin further explained that Scott’s decision to reject the high-speed rail plan was based, in part, on a report by the Reason Foundation that urged Scott to reject the plan ”as Wisconsin and Ohio have recently done.”
The fact that Koch-funded groups are influencing even the most local policy decisions should perhaps come as no surprise. As The Nation reported in 2011, the Koch brothers have been funding the American Legislative Exchange Council (ALEC) for years. The council touts itself as an organization that brings together conservative state legislators and members of the private sector to further free-market principles. And ALEC has been living up to that tagline — in precisely the way the Koch brothers want it to.
By: Ben Feuerherd, The National Memo, April 18, 2014
“Feigning Outrage”: Outraised By Grimes, McConnell Rethinks Money-As-Speech
Kentucky Secretary of State Alison Lundergan Grimes (D) has once again outraised Senate Minority Leader Mitch McConnell (R) in their 2014 Senate race — and all of a sudden, McConnell no longer seems so enthusiastic about the use of money as free speech.
In the first three months of 2014, Grimes raised $2.7 million, edging McConnell’s $2.4 million haul. McConnell still holds a decisive financial advantage in the race; his campaign has almost $10.4 million in cash on hand, more than double Grimes’ total.
That said, McConnell’s campaign has already spent more than $7 million in the 2014 election, only to see a slight decline in his polling numbers. And it seems that the new fundraising totals have made the Republican leader’s campaign defensive.
“The very same ultra-rich liberal elite who bankrolled Barack Obama into the White House are pulling out all the stops for Alison Lundergan Grimes,” spokeswoman Allison Moore told the Louisville Courier-Journal. “Kentuckians know darn well her entire campaign is funded by those who seek to destroy Kentucky values and our way of life and the only way they can accomplish that is by getting rid of the man responsible for stopping them, Mitch McConnell.”
Moore’s implication — that Grimes is wrong for taking money from wealthy out-of-state donors — is rather ironic, considering that few politicians raise money from the “ultra-rich elite” better than McConnell does. According to the Wall Street Journal, as of December 31, 80 percent of McConnell’s campaign contributions came from donors outside of Kentucky (good for a total of more than $9.3 million). And the top donors to his campaign committee — which include Citigroup, JPMorgan Chase, and Goldman Sachs — don’t exactly scream “Kentucky values.”
McConnell has also benefited from outside groups that have jumped directly into the race; $3.4 million has already been spent in support of the Republican, according to GOP ad-tracking firm SMG Delta.
Although McConnell’s campaign is now feigning outrage that Grimes has raised big sums from “Obama’s liberal Hollywood friends” like Jeffrey Katzenberg, the senator is generally one of the nation’s most outspoken defenders of outside money in politics. In 2012, McConnell led the opposition to the DISCLOSE Act, which would have required political groups to disclose campaign contributions of more than $10,000. At the time, the minority leader argued that full disclosure could be used as a “political weapon,” enabling the government to unleash “harassment and intimidation tactics” against those who donate to opposition candidates.
Today, it appears that McConnell would like to turn the weapon against the “liberal elite” backing Grimes.
By: Henry Decker, The National Memo, April 16, 2014
“Me, Pay Taxes?”: How Wall Street Avoids Paying Its Fair Share in Taxes
Like many Americans, you’ve probably just spent a good bit of time figuring out how much you owe in taxes. Most of us fill in the forms and follow the rules. But the rules are a lot more flexible for the largest U.S. corporations, and especially for the major Wall Street financial institutions and their top executives and owners. Banks and financial companies capture more than 30 percent of the nation’s corporate profits, but manage to pay only about 18 percent of corporate taxes while contributing less than 2 percent of total tax revenues, according to the Bureau of Economic Analysis and the International Monetary Fund.
What’s more, the owners and senior managers of our major financial institutions can exploit the loopholes in our individual income tax on a far greater scale than the rest of us. Below is a short guide to a few of the major ways that Wall Street avoids paying its fair share.
But I earned it in the Cayman Islands!: American corporations have developed a panoply of ways to route income through low-tax foreign subsidiaries. This practice goes well beyond the financial sector. Indeed, the latest publicized example involves a manufacturing firm, Caterpillar. Because of the inherently “placeless” nature of many financial transactions, however, financial institutions and their investors are among those in the best position to move income around in this fashion. The major Wall Street banks have thousands of subsidiaries in dozens of countries, all capable of engaging in transactions that enjoy the full guarantee of the U.S. parent company even as they take advantage of the tax or legal advantages of their foreign incorporation. Transactions in the multi-trillion dollar global derivatives market, for example, can pretty much be relocated anywhere in the world with the touch of a computer keyboard.
A way to crack down on the massive potential for tax avoidance this creates would be to simply rule that financial transactions backed up by a U.S. firm are in effect U.S. transactions and subject to U.S. tax law. Whatever international tax rules are designed to protect real manufacturing activity in other jurisdictions from inappropriate taxation should not apply to the passive income gained from financial activities that can easily be transacted from anywhere in the world. For some years U.S. tax law attempted to follow this principle, but starting in 1997 an “active financing” loophole made it much easier for multinationals to avoid taxation on financial transactions by moving profits to low-tax foreign subsidiaries. Combined with so-called “look through” provisions, these international tax loopholes mean that U.S. multinationals get to look around the world for the cheapest places to locate their earnings.
It’s not work, it’s investment!: The U.S. taxes capital gains on investments much more lightly than it taxes ordinary income. The details get complicated, but in general the profit on investments is only taxed at a maximum 15 to 20 percent rate, as opposed to a rate of almost 40 percent for high levels of ordinary income. Though its stated goal is to encourage investment and saving, a tax differential of this size can be seen as a subsidy to financial speculation, since it penalizes wage work compared to trading profits, and accrues to any investment held longer than a year, whether or not it can be shown to actually create jobs. In addition to the broad impact of the tax differential, the gap in rates creates a windfall for wealthy Wall Street executives in a position to maximize its benefits. Those who work for big hedge and private equity funds are in the very best position to do that, as they take much of their work income from the investment returns of the fund. Since they are legally permitted to classify this “carried interest” income as capital gains, they can cut their tax rates effectively in half – a windfall that costs the federal government billions of dollars a year, and means that some of the wealthiest individuals in America pay a lower tax rate on their earnings than an upper-middle-class family might.
Who, me, sales tax?: It’s easy to forget at this time of year when we’re all working on our income tax, but the sales tax is also one of the major taxes you pay each year. State and local governments take in more than $460 billion a year through sales taxes charged on everything from cars to candy bars. But Wall Street speculation isn’t charged a sales tax at all. Indeed, you’ll pay more sales tax for your next pack of gum than all the traders on Wall Street will pay for the billions of transactions they undertake every year. The non-partisan Joint Tax Committee of the U.S. Congress estimates that a Wall Street speculation tax of just three basis points – three pennies per $100 of financial instruments bought and sold in the financial markets – would raise almost $400 billion over the next decade. What’s more, such a fee would significantly discourage the kind of predatory trading strategies recently highlighted by author Michael Lewis, strategies that depend on trading thousands of times in a second in order to manipulate stock markets and extract tiny profits from each trade.
This only starts the list of ways Wall Street financial institutions and the people who run them manipulate the system and avoid paying their fair share; there are plenty more, including the use of complex financial derivatives to shelter individual income, the variety of techniques used by hedge and private equity fund partners to avoid effective IRS enforcement, and the continuing tax deductibility of corporate pay above $1 million, as long as it is sheltered under a so-called “performance incentive.” Tax time would be a good time for our elected representatives to get to work closing some of these gaps and loopholes, and leveling the playing field.
By: Marcus Stanley, Economic Intelligence, U. S.News and World Report, April 16, 2014
“Dopey Media Whiffs Again”: No, Dems Aren’t “Playing Politics” By Exposing GOP Idiocy
Lazy Beltway pundits have discovered a new Obama scandal: The president is telling his base the truth about how Republicans are making their lives worse, and he must be stopped.
Last week, Obama was accused of ginning up his base’s anger over voting rights: The New York Times reduced his Friday speech on the issue to an effort “to rally his political base,” while the Washington Post depicted the Democrats’ focus on voting rights as mere partisan strategy, calling it the party’s “most important project in 2014.”
Then came the National Journal’s James Oliphant, declaring that “Democrats are giving Republicans a run for their money in practicing the politics of grievance.” Oliphant accused Democrats of cynically exploiting anger over voter ID laws and the failure of bills to hike the minimum wage, reform the immigration system and help women achieve pay equity, for political gain.
Slate’s John Dickerson has topped them all, however, with “Obama trolls the GOP,” his Thursday column accusing the president of lying about the wage gap between men and women in order to win votes. Dickerson is the one doing the trolling, as he sort of admits upfront, blaming the Internet for rewarding columns that call the president names and make an argument without nuance.
But the essence of Dickerson’s argument is of a piece with the lazy “grievance” meme spreading among his peers: Obama is doing something wrong by telling a component of his coalition, in this case women, that Republican policies are hurting them. In other words, telling the truth while also, yes, practicing politics.
We can certainly debate which number we should use when debating pay equity, but the notion that Obama is deliberately lying to create “stray voltage” by choosing the wrong number seems cynical or worse. Dickerson relies on a Major Garrett column that relies on an older Major Garrett column in which White House adviser David Plouffe explained his theory of “stray voltage” – how any controversy, even ones that seem to hurt Obama, can be put to good political use when “stray voltage” from said outrage sparks the ire of Obama’s base.
Supposedly, the controversy around the White House continuing to use the Census Bureau figure – that women make 77 cents to a man’s dollar – even though other studies find a smaller gap, cements the impression that Republicans oppose measures to close the gap, and may create “stray voltage” to galvanize women voters in 2014 and 2016. Oliphant likewise relies on the pay-gap flap, and the Democrats’ embrace of the doomed Paycheck Fairness Act, as an example of unfair “grievance politics.”
But Republicans do oppose virtually all measures that might close the gap. It’s not just the Paycheck Fairness Act; take the minimum wage. Republicans (and others) say that 77 percent figure exaggerates the pay gap between equally qualified men and women, because women are clustered in low-wage fields. Raising the minimum wage would be a great way to get at that particular pay-gap widener, since two thirds of minimum wage workers are women. But of course, Republicans oppose not only the Paycheck Fairness Act, but an increase in the minimum wage as well.
Oh, but Democrats continuing to agitate for a minimum wage hike? That’s also unfair “grievance politics,” according to Oliphant, because “it may animate minority voters.” Concern about traditional low turnout in midterm elections, he writes:
… has forced the party to find reasons for people to come out and vote, and they’ve selected issues that target slices of the electorate. Hence, equal pay, an issue that especially resonates with single women; the minimum wage, which may animate minority voters; and immigration reform, which galvanizes Hispanics. And likely coming soon to a [Harry] Reid press availability near you: student-loan modification, teed up for the hard-to-get youth vote.
So let me make sure I understand. Telling your voters, accurately, that Republicans are trying to make it harder for them to vote, and are blocking action on pay equity, the minimum wage and immigration reform is unfair “grievance politics”? Likewise, any effort to deal with the scandal of $1 trillion in student loan debt? Oliphant compares it to the grievance politics practiced by Republicans under Richard Nixon and Ronald Reagan. But that form of grievance politics mainly relied on inflaming white voters’ fears of cultural and racial change with false or highly exaggerated claims about Democrats.
I would also argue that when one party’s leaders declare upfront that they’re going to block everything the other party’s president tries to do, and when that party even retreats from solutions to problems that it once favored – in the GOP’s case, that includes the individual mandate, immigration reform, cap and trade, the Voting Rights Act, and periodic increases to the minimum wage — the cultivation of anger in order to turn out voters is an excellent and entirely defensible strategy. In fact, Republican obstructionism seems designed at least partly to demoralize the Obama coalition — many of them occasional voters already discouraged by the political process. If you can convince young people, Latinos and women that voting changes nothing, you can make up for your reliance on aging white voters.
This new story line also reinforces a core Republican claim about Obama and the Democrats: that they’re trying to buy off the electorate with “gifts,” to use sore-loser Mitt Romney’s term. When rich people use the political process to make their lives better, that’s just the way things work. When people who aren’t rich do so, they’re looking for a handout. This new “grievance politics” story line is just one more way mainstream journalism’s weakness for false equivalence, which is intellectually lazy, politically rewards Republicans.
By: Joan Walsh, Editor at Large, Salon, April 17, 2014
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