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“Keeping Desperation As High As Possible”: Why The Greedy Upper Class Loves The GOP

Last week, Reihan Salam took a whack at America’s upper class in Slate. His charge? That the upper class uses its considerable political clout to protect itself from competition and keep its own incomes high, thus making life harder on everyone else further down the economic ladder. And he’s not wrong!

But Salam is also a conservative, with a conservative’s standard desire for low taxes, few regulations, and a skimpy social safety net. And what he conveniently leaves out of his screed is the fact that these preferences are themselves the ultimate expression of upper-class greed and self-dealing.

Let’s start with what Salam gets right. He points out that licensing and accreditation laws protect professions like dentists, lawyers, electricians, hairstylists, and the like from competition, which raises the costs of services they provide and prevents other workers from breaking into the market. The local land-use restrictions and zoning regulations that many in the upper class favor drive up housing prices, which makes it harder for the lower class to live in good neighborhoods with good schools, or to benefit from the economic development that comes with gentrification. The upper class seems implicitly content with an immigration status quo that maximizes competition in working-class jobs while minimizing it among high-skill professions. And of course there was the recent collapse of President Obama’s proposal to raise new tax revenue from 529 college savings accounts, a self-interested revolt of the upper class if ever there was one.

However, if you read between the lines, Salam isn’t really talking about the upper class writ large here. He’s talking about the liberal upper class. The issues he cites are mainly a big deal in cities, where liberals cluster. And conservative commentary in general these days has a tendency to talk about the American upper class as if it’s populated entirely by liberal yuppies who love yoga, organic food, Neil deGrasse Tyson, and abortions, and who think that guns are barbaric and that religion is backwards.

As it happens, however, the GOP relies on the upper class even more than Democrats. Median household income in the United States is $52,250, and if you look at the 2012 election, voters below that mark broke hard for Obama, with those above going for Mitt Romney by lesser margins. This trend of the Democrats getting way more votes below the median income level has roughly held for decades. These days, strong support for Republicans really doesn’t kick in until you get close to $75,000, or roughly the top third of the income ladder.

The difference between the parties is not that one relies on the wealthy and one doesn’t. Both parties lean heavily on those voters and divvy them up in various ways. (Mainly through cultural and social issues.) But the Democrats’ coalition also includes a fair portion that’s lower and working class, that’s still fighting for attention in the party, and that occasionally gets it. Conversely, lower- and working-class voters are mostly just absent from the GOP.

This matters because the upper class also has a pretty distinctive set of economic policy preferences. According to a recent study by Pew, the most financially secure Americans — roughly a fourth to a third of the population, by Pew’s definition — disproportionately say that government can’t afford to do more to help the needy, and that poor people “have it easy” thanks to government benefits. The less financially secure think the opposite. Large majorities of those making below $75,000 say the thing that bothers them the most about taxes is that the wealthy don’t pay their fair share. Large majorities of Americans oppose cuts to everything from Social Security and Medicare to aid for the poor. They support making union organizing easier and more federal spending on education.

Hell, 57 percent of the Republican or Republican-leaning voters who do make less than $30,000 think government doesn’t do enough to support poor people.

The reason the GOP can get away with being on the opposite side on all these matters is the fact that the voting population skews upper class: Even Democrats in the top third of the income distribution are noticeably more economically right-wing than poorer Democrats or Republicans, and Republicans in the top third are really economically right-wing.

There’s a pretty straightforward argument for why the upper class tilts in this direction. As Salam notes, the policy preferences of the upper class that really stick in his craw boil down to protecting their incomes and thus making the goods and services they provide more expensive for everyone else. But the flip side of that is making sure the goods and services everyone else provides — and thus their incomes — come cheap. That’s where the GOP comes in.

The essence of worker bargaining power is the ability to tell an employer “no.” That forces business owners to offer a better deal, driving up wages and benefits. A broad and generous welfare state gives workers leverage in that regard. It also helps boost aggregate demand, getting us closer to the full employment that really gives workers an edge. In short, the income of the working class is inversely proportional to its level of economic desperation. The effect of conservatives’ preferred economic policies — from slashing spending to imposing work requirements for aid — is to keep that desperation as high as possible. And of course, the upper class certainly doesn’t want to shoulder the taxes necessary to make such a system work.

The thing to remember is that, when it comes to what to do with the working class, the interests of the upper class and the super-rich cohere. Whether you’re a corporate CEO, a small-business owner, or just a well-heeled professional who consumes a lot of high-end goods and services, it benefits you to keep the labor of everyday Americans as cheap, compliant, and disposable as possible. It’s true, as Salam notes, that the truly rich aren’t quite as desperate to defend their interests as the upper class is; if you’ve got Mitt Romney’s dough, you can put up with more taxes, regulations, and workers demanding dignified pay and good benefits.

But that just bolsters the point that the fervent bastion of the economic right is the upper class. They’ve got the most to gain by slashing taxes, cutting regulations, scrapping government aid programs, and busting unions.

As Salam acknowledges, he doesn’t want high taxes on the wealthy, or for America to go down the road of the big European welfare states. His fellow reform conservatives and the Republican Party agree with him in this regard. Salam then says of the upper class: “I sensed that their gut political instincts were all about protecting what they had and scratching out the eyeballs of anyone who dared to suggest taking it away from them.”

But aren’t conservative economic policies the perfect expression of that exact impulse?

 

By: Jeff Spross, The Week, February 3, 2015

February 6, 2015 Posted by | Economic Inequality, GOP, Upper Class | , , , , , , , , | 1 Comment

“Acting As Political Human Shields”: The Upper Middle Class Needs To Stop Coddling The 1 Percent

The most criticism I’ve ever received as a writer came from articles suggesting that we curtail tax expenditures that mainly benefit the rich, like the mortgage interest deduction or 529 college savings accounts. (Okay, second-most — the top hate mail–getter, by a large margin, was a quite different issue.)

Why? As President Obama himself found last week, the last people you want to piss off are members of the upper middle class, who are set to a hair trigger when it comes to their personal government handouts. As Paul Waldman writes, they may be “the single most dangerous constituency to anger,” because a) unlike the 1 percent, they are relatively numerous; and b) like the 1 percent, they have a lot of disposable income, which politicians love.

On one level, this is an understandable reaction to a threat to personal economic interest. But on another, members of the upper middle class are being played for fools. They are acting as political human shields for the top 1 percent, which claims more of these benefits proportionally speaking and has been raking in essentially all the benefits of economic growth. The upper middle class (let’s define this as the top income quintile, minus the top 1 percent) ought to demand a lot more than it is getting.

To start, let’s get one thing straight. Tax expenditures are indeed government benefits, economically identical to direct government spending. Preferential treatment in the tax code is just another way of jiggering the national economic structure to direct benefits to one group or another.

Not all tax expenditures are equally terrible. According to a CBO analysis, exclusions for health care and pensions are spread relatively equitably across the population, while the Earned Income Tax Credit and Child Tax Credit are major bulwarks against poverty.

However, the big deductions are unfairly skewed. Two-thirds of taxpayers can’t even use the mortgage interest deduction, because you have to itemize your deductions to get it; other countries manage high rates of homeownership without the subsidy. Overall, 1 percenters get 15 percent of the mortgage interest deduction, 30 percent of the state tax deduction, and 38 percent of the charitable contribution deduction.

Preferential tax rates for capital gains and dividends, meanwhile, are even worse. Over two-thirds of the benefits go to 1 percenters. The supposed idea is to incentivize investment and thus economic growth, but there is zero evidence this actually happens. Close analysis of the Bush administration’s cut on dividend taxes finds that it did not change anything except payouts to shareholders. Longer-term studies on capital gains tax rates finds no relationship to investment or broader economic growth. The major effect is a booming industry in legal chicanery allowing people to reclassify regular income as capital gains.

Meanwhile, over the last generation, 1 percenters have been capturing the vast bulk of economic growth, a trend that is only getting worse. Indeed, according to a new analysis at the Economic Policy Institute by Mark Price and Estelle Sommeiller, from 2009 to 2012 1 percenters literally received more than all the income growth. Because the incomes of the 99 percent fell on average, 1 percenters got 105.5 percent of real income growth. Policies that benefit the very top over everyone else are clearly to blame.

Clearly, that’s no good for anyone who isn’t in the 1 percent, including the merely affluent. But with the middle class lacking much punching power, and the poor largely ignored by everyone, the upper middle class really ought to be asking for more than the preservation of their existing government benefits. At the very least, the upper middle class could demand a cut of economic growth.

And if the upper middle class were willing to ally with the bottom and the middle, there’s reason to think it would be able to keep the structure of its current benefits (that is to say, access to college instead of merely some money to pay for it) while cutting everyone in on economic growth. Taxes might go up somewhat, but that would likely be compensated by better wages and universal benefits.

On the other hand, if the upper middle class can manage nothing but a hysterical defense of its own welfare handouts, and the American system keeps brutalizing the bottom half of the income ladder, a genuine mass movement could appear, as it has in the past. Such movements are not likely to be especially concerned with the upper middle class.

 

By: Ryan Cooper, The Week, February 2, 2015

February 3, 2015 Posted by | Tax Code, The 1%, Upper Middle Class | , , , , , , | Leave a comment

   

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