“Growing Inequality”: A Rich Man, Poor Man Election
Three new reports on taxes, inequality and economic mobility add up to one conclusion: The 2012 presidential election should be about one thing, and one thing only: class warfare.
Let’s start with a report from the Pew Charitable Trusts, “Pursuing the American Dream: Economic Mobility Across Generations.”
The Pew Economic Mobility Project has been tracking the economic status of thousands of families since 1968 — the data covered in the current report is through 2009. And there is some good news: Absolute income has increased for Americans of all economic classes, from the poorest to the richest. The richest Americans have seen much larger relative gains, and, naturally, are far more immune to skyrocketing healthcare and education costs than are the poor, but at least part of the American dream is still intact: Children are still earning higher incomes than their parents.
But then comes the bad news: When one measures wealth — the total assets held by families — instead of income, the picture is substantially different. As Catherine Rampell summarized in the New York Times:
The median person in the poorest quintile has a family net worth that is 63 percent less than that of his counterpart a generation ago: $2,748, versus $7,439 …
The median family in the top socioeconomic class today (i.e., the family at the 90th percentile) is worth $629,853, compared to $495,510 in the last generation. That’s a 27 percent increase in the size of the median fortune in the top income stratum.
If you’re scoring at home: Rich: richer; Poor: poorer.
Now let’s move to “Inequality and Redistribution During the Great Recession,” a research paper produced by the Minneapolis Fed.
In 2010, the bottom 20 percent of the U.S. earnings distribution was doing much worse, relative to the median, than in the entire postwar period. This is because their earnings (including wages, salaries, and business and farm income) fell by about 30 percent relative to the median over the course of the recession. This lowest quintile also did poorly in terms of wealth, which declined about 40 percent …
However, even as earnings plunged, disposable income and consumption managed to hold even, relatively speaking, for the poorest Americans as compared to other classes. This is a bit of a mystery, noted the authors, who believe it can be explained by aggressive government redistribution and tax cuts.
Our main substantive conclusion is that government redistribution in the Great Recession was at historical highs and partially shielded households from experiencing large declines in disposable income and consumption expenditures. The same households, though, have experienced losses in net wealth, and this might make them more vulnerable to further or more persistent earnings declines in the future.
If you’re still keeping score: While the rich were getting richer and the poor poorer, the Great Recession absolutely hammered the worst-off Americans, but substantial government support — unemployment benefits, food stamps, Medicaid, tax cuts — saved the most vulnerable Americans from utter disaster.
And that brings us to our third report, the Congressional Budget Office’s latest numbers on federal taxes: “The Distribution of Household Income and Federal Taxes: 2008-2009.”
The bottom line: In 2009, as a result of tax cuts included in the stimulus, Americans ended up paying the lowest percentage of their income in federal taxes since 1979.
The observations included in these reports mutually reinforce each other. For example, one reason why the wealthiest Americans have done so much better than everyone else is directly related to substantial cuts in the capital gains tax rate over the past several decades. High unemployment and the collapse in home prices as a result of the Great Recession, on the other hand, have a disproportionately greater effect on poorer Americans, whose net wealth has been declining over past decades.
The numbers also beg to be put in political context. Over the long term, the rich have been getting richer and the poor poorer. In the short term, the poor took the brunt of the impact of the Great Recession, and were only kept afloat through government assistance. However, as tax rates have fallen to historic lows, it has become more and more difficult for the federal government to find the resources necessary to ameliorate widening inequality.
Now consider the fact that the Republican candidate for president wants to cut taxes even further, while eviscerating the social welfare safety net that is the only thing staving off complete economic disaster for poorer Americans. It’s class warfare all right, but one side seems to have already won.
By: Andrew Leonard, Salon, July 11, 2012
“Big Fiscal Phonies”: Republicans Are Fake Deficit Hawks With “Magic Asterisk” Solutions
Quick quiz: What’s a good five-letter description of Chris Christie, the Republican governor of New Jersey, that ends in “y”?
The obvious choice is, of course, “bully.” But as a recent debate over the state’s budget reveals, “phony” is an equally valid answer. And as Mr. Christie goes, so goes his party.
Until now the attack of the fiscal phonies has been mainly a national rather than a state issue, with Paul Ryan, the chairman of the House Budget Committee, as the prime example. As regular readers of this column know, Mr. Ryan has somehow acquired a reputation as a stern fiscal hawk despite offering budget proposals that, far from being focused on deficit reduction, are mainly about cutting taxes for the rich while slashing aid to the poor and unlucky. In fact, once you strip out Mr. Ryan’s “magic asterisks” — claims that he will somehow increase revenues and cut spending in ways that he refuses to specify — what you’re left with are plans that would increase, not reduce, federal debt.
The same can be said of Mitt Romney, who claims that he will balance the budget but whose actual proposals consist mainly of huge tax cuts (for corporations and the wealthy, of course) plus a promise not to cut defense spending.
Both Mr. Ryan and Mr. Romney, then, are fake deficit hawks. And the evidence for their fakery isn’t just their bad arithmetic; it’s the fact that for all their alleged deep concern over budget gaps, that concern isn’t sufficient to induce them to give up anything — anything at all — that they and their financial backers want. They’re willing to snatch food from the mouths of babes (literally, via cuts in crucial nutritional aid programs), but that’s a positive from their point of view — the social safety net, says Mr. Ryan, should not become “a hammock that lulls able-bodied people to lives of dependency and complacency.” Maintaining low taxes on profits and capital gains, and indeed cutting those taxes further, are, however, sacrosanct.
Still, Mr. Ryan and Mr. Romney are playing to a national audience. Are Republican governors, who have to deal with real budget constraints, different? Well, there have been many claims to that effect; Mr. Christie, in particular, has been widely held up, not least by himself, as an example of a politician willing to make tough choices.
But last week we got to see him facing an actual tough choice — and aside from the yelling-at-people thing, he proved himself just another standard fiscal phony.
Here’s the story: For some time now Mr. Christie has been touting what he calls the “Jersey comeback.” Even before his latest outburst, it was hard to see what he was talking about: yes, there have been some job gains in the McMansion State since Mr. Christie took office, but they have lagged gains both in the nation as a whole and in New York and Connecticut, the obvious points of comparison.
Yet Mr. Christie has been adamant that New Jersey is on the way back, and that this makes room for, you guessed it, tax cuts that would disproportionately benefit the wealthy.
Last week reality hit: David Rosen, the state’s independent, nonpartisan budget analyst, told legislators that the state faces a $1.3 billion shortfall. How did the governor respond?
First, by attacking the messenger. According to Mr. Christie, Mr. Rosen — a veteran public servant whose office usually makes more accurate budget forecasts than the state’s governor — is “the Dr. Kevorkian of the numbers.” Civility!
By the way, even Mr. Christie’s own officials are predicting a major budget shortfall, just not quite as big. And the two big credit-rating agencies, Moody’s and Standard & Poor’s, have recently issued warnings about New Jersey’s budget situation, which S.& P. called “structurally unbalanced” because of the governor’s optimistic revenue assumptions.
New Jersey, then, is still in dire fiscal shape. So is our tough-talking governor willing to reconsider his pet tax cut? Fuhgeddaboudit. Instead, he wants to fill the hole with one-shot budget gimmicks, including reneging on a promise to reduce borrowing for transportation investment and diverting funds from clean-energy programs. So much for fiscal responsibility.
Will Mr. Christie’s budget temper tantrum end speculation that he might become Mr. Romney’s running mate? I have no idea. But it really doesn’t matter: whoever Mr. Romney picks, he or she will cheerfully go along with the budget-busting, reverse Robin Hood policies that you know are coming if the former governor wins.
For the modern American right doesn’t care about deficits, and never did. All that talk about debt was just an excuse for attacking Medicare, Medicaid, Social Security and food stamps. And as for Mr. Christie, well, he’s just another fiscal phony, distinguished only by his fondness for invective.
By: Paul Krugman, Op-Ed Columnist, The New York Times, May 27, 2012
“No More Tax Cuts For The Wealthy”: As Debt Battle Looms, No Option But To Raise Taxes
President Obama and Republican leaders in Congress made history of sorts last year when they agreed to a 10-year plan to reduce annual deficits with spending cuts and no tax increases. Mr. Obama vows not to let it happen again.
Both he and Speaker John A. Boehner put down their respective markers this week, suggesting a potential replay of their damaging showdown over the debt ceiling last summer. On Tuesday, the speaker reiterated what has become known as the Boehner Rule: House Republicans will not increase the debt ceiling again without spending cuts of a greater amount. Mr. Obama, on Wednesday, told him Congress must pass a “clean” debt-limit increase to cover the nation’s obligations; there will be no more deficit deals, he said, without higher tax revenues from the wealthiest Americans.
While the Republicans largely prevailed last year, this time the Obama administration believes it has the greater leverage. The pain of the reductions is being felt as House Republicans advance the annual spending bills; already they have proposed to raise the spending caps for the military, and they are squabbling over domestic programs.
“It’s not reasonable or right for there to be another discussion of a spending-only package” for reducing deficits, said Jacob J. Lew, the White House chief of staff and former budget director. “When you look at how we got into the hole we’re in, it’s very clear that tax cuts for the wealthy were part of contributing to the deficits we’re now trying to close.”
Mr. Obama’s position leaves open the question of whether election-year politics will play to his advantage among voters who do not like deficits or the measures needed to reduce them. Neither party expects the fight to be resolved until after the election, the results of which will determine who actually has the upper hand in a lame-duck Congress. The debt limit must be raised by early 2013, Treasury has said.
The two budget deals last year — the deficit-reduction compromise in August and a smaller agreement before that — called for cutting $1.7 trillion from so-called discretionary spending, which covers the bulk of federal programs whose budgets Congress controls annually, including air-traffic control, the military, education, research and much more.
Those deals left unscathed the entitlement programs like Medicare, Medicaid and Social Security, which, given the growing aging population, are driving projections of unsustainable deficits.
And those deals, because of Republicans’ resistance, did not raise taxes, unlike the deficit measures of the 1980s and 1990s.
“Tax hikes destroy jobs,” Mr. Boehner said in his speech on Tuesday.
But veterans of past budget wars say that discretionary spending for domestic programs, which make up just 15 percent of the federal budget, cannot continue to bear the brunt without significant implications for government services. “They’ve gone way past fat and are cutting into muscle,” said Bruce R. Bartlett, who was a Treasury official in the Reagan administration.
Nor, these people say, would the public support the deeper reductions that would have to be made in programs like Medicare if taxes are not part of the mix.
“That’s basically why I, and a very large number of other people, conclude that you do need some additional revenues,” said Rudolph G. Penner, a Republican who headed the Congressional Budget Office in the 1980s and was co-chairman in 2010 of a blue-ribbon panel that proposed a debt-reduction plan.
“I’ve been kind of surprised at these recent agreements, where almost all of the reduction comes from discretionary programs over 10 years,” he said. “What you’re talking about is a very large number of years of austerity — through various Congresses, elections and possible natural disasters and terrorist attacks and on and on, which is just not plausible to me.”
Barry Anderson, a former deputy director of the White House and Congressional budget offices, said, “Eventually you’re going to have to increase taxes across the board” — not just for the wealthy — “by at least a third.”
Former Senator Pete V. Domenici, who was the chairman or senior Republican leader on the Senate Budget Committee from 1981 to 2007, said in an interview, “Adequate projections of revenues and expenditures have to be put on the table. Everything has to be on the table.”
Senator Domenici, with Alice Rivlin, a former budget director for Congress and the Clinton administration, was chairman of a panel in 2010 of former lawmakers, administration officials, academics and executives, that produced a blueprint for debt reduction. It came just before a roughly similar plan from a majority on Mr. Obama’s fiscal commission, which was led by Alan K. Simpson, a former Senate Republican leader, and Erskine B. Bowles, a businessman and former chief of staff to President Bill Clinton.
All three recent debt proposals — Bowles-Simpson, Domenici-Rivlin and that of Mr. Penner’s group, sponsored by the National Research Council and the National Academy of Public Administration — recommended trillions of dollars in savings, both from higher taxes and reduced entitlement spending. Yet it is those two sources that the White House and Congress have avoided, given Republicans’ opposition to tax increases and Democrats’ to cutting Medicare unless taxes are raised.
Tax increases were part of nearly every significant deficit-reduction measure of the 1980s and 1990s, including the 1982, 1984 and 1987 packages signed by Ronald Reagan, the 1990 accord under George H.W. Bush and Mr. Clinton’s 1993 measure. The exception was a deal in 1997, though by that agreement Congressional Republicans ratified Mr. Clinton’s 1993 tax increases that they had vowed to repeal.
Mr. Obama’s chief of staff, Mr. Lew, participated in most of those deals, as an aide to House Democratic leaders and then as Mr. Clinton’s budget director.
“The history of dealing with big problems like this is, almost in every case, it’s been a balanced package” of taxes and cuts in both discretionary and entitlement spending, Mr. Lew said. “So it’s not like it is some radical Democratic position.”
By: Jackie Calmes, The New York Times, May 18, 2012
“Roundabout And Silly”: Paul Ryan Suggests Need To Shred Safety Net Because Rich People Give Politicians Money
“Every other country in the world calls it bribery. We call it campaign financing.”
“That’s BS,” a constituent told Rep. Paul Ryan (R-WI) during a town hall Friday. “I don’t think you or any of the rest of the politicians want to fix” it, the Wisconsinite declared as the crowd roared with applause.
Ryan, however, was less than sympathetic to their views. He insisted instead that money will always follow power, so because Washington is where policy is made, there is little we can do to mitigate the influence of money in politics. Worse, Ryan even claimed that the rush of corporate and billionaire donations authorized by the Republican justices in Citizens United justifies enacting his draconian budget.
CONSTITUENT: You have all these different things and I look up there and I say none of them will ever work because of one single item we have in our country today, and I don’t think you or any of the rest of the politicians want to fix. It’s called “campaign financing,” which makes special interests. [Crowd applauds.] This country is bought, it’s paid for, it’s gift-wrapped. Supreme Court didn’t help us one bit when they made corporations humans, now they can dump all this money in. When you dump $16 million into your campaign fund, I own you. You can look me in the eye and say, “oh no, that’s not going to me anything to me.” That’s BS. This is what’s wrong with our country today. We need to get rid of it. Every other country in the world calls it bribery. We call it campaign financing.
RYAN: The point I would make is so long as so much money is going to be handled and run through government, through Washington, there will always be an attempt to influence it. So to me the best antidote is not give all of our money and our power to Washington, keep it for ourselves and our communities so there’s less influence-peddling there in the first place. […] Even under the so-called new clean law that Russ Feingold wrote, even with the Supreme Court ruling that affected parts of that law. So let’s try and have more transparency so you see where the money’s going, let’s not destroy the political parties which are more [inaudible] to elected officials. Right now you have all these groups that pop up and then they go down come the election cycle.
Watch it: http://youtu.be/bKmUcP7pAkg
Ryan’s argument is both roundabout and silly. Rather than fighting to remove the corrupting influence of money on politics, he thinks we should simply pack up our bags and accept draconian cuts to Medicare and Medicaid — because such programs are doomed to be corrupted by the very donations Ryan’s Supreme Court allies authorized in Citizens United. It’s a bit like saying that, rather than banning drunk driving, we should simply tear up all the nation’s roads.
Moreover, he may call for shrinking Washington in order to shrink the influence of campaign money, but even under Ryan’s own budget, the government still spends more than $3.5 trillion. With a budget that size, under our current campaign finance law, the Koch Brothers can spend a few million dollars and get a fantastic return on investment. In modern America, it is impossible to achieve Ryan’s “antidote” of having a national government small enough that those with money wouldn’t be tempted to influence it.
It’s worth noting that, while Ryan also touts transparency as an alternative to keeping big money out of politics, he hardly has credibility on this point either. He was given an opportunity to actually vote on requiring more disclosure, he voted against the DISCLOSE Act. If Ryan now wants groups like Crossroads GPS to be forced to disclose their multi-million-dollar donors, wonderful. If he’s simply using this as a rhetorical sleight of hand to justify unlimited campaign funding from billionaires, as many Republicans are now doing, shame on him.
By: Scott Keyes, Think Progress, May 8, 2012
“Dangerously Unmoored From The American Consensus”: The GOP Is Crazier Than You Thought
In his latest speech, the president presents the modern Republican Party as a radical aberration from the American consensus.
If there was a question President Obama tried to answer with his speech this afternoon to the Associated Press, it was this—“what happened to the Republican Party?” And to that end, he marshaled evidence from a century of political history to show that today’s Grand Old Party is dangerously unmoored from the American consensus, with a budget proposal that amounts to “thinly veiled social Darwinism.”
To a large degree, Obama’s speech was filled with the frustration of liberals who see the extent to which the Republican Party has rejected the notion of a government that works positively within the economy. “It was Dwight Eisenhower who launched the interstate highway system and made investments in scientific research … Reagan worked with Democrats to save Social Security … It was George W. Bush who expanded Medicare to include prescription drug coverage,” he said, citing Republican presidents who worked to strengthen the social safety net over the course of the last century. “What leaders in both parties have traditionally understood,” he declared, “is that these programs aren’t schemes to redistribute wealth … they are signs that we are one nation.”
Today’s Republican Party, Obama argued, has abandoned this traditional understanding, in favor of a “failed approach” of trickle-down economics. “In this country, broad-based prosperity has never come from the success of a wealthy few,” he said.
Case in point is Paul Ryan’s latest budget, which—like his Roadmap released last year—would require massive cuts to existing social spending and destroy any semblance of fairness in the economy, as the rich received huge benefits from an economy slanted in their favor. As Obama described it, “The Republicans have doubled down and proposed a budget so far to the right that it makes the Contract for America look like the New Deal.”
Indeed, Obama took the time to illustrate the extent to which the Ryan budget would demolish the federal government as we know it, citing the millions of people who would lose health care coverage with Medicaid cuts, the millions of children who would lose access to healthy food with WIC cuts, and the millions of students who would lose a shot at college because of cuts to Pell Grants and other programs designed to make school more affordable.
He pointed out that while Republicans refuse to say where they would make cuts, cuts have to happen if we adopt their budget, “Perhaps they will never tell us where the knife will fall, but you can be sure that with cuts this deep, there will never be a secret plan to protect the investments we need for our economy to grow. This is not conjecture, I am not exaggerating, these are facts.”
From his aggressive tone to his sharp and clear language, this was a campaign speech, and he took care to tie his likely competitor—former Massachusetts governor Mitt Romney—to the policies pushed by congressional Republicans. “He called it ‘marvelous’,” said Obama, highlighting the degree to which the “Path to Prosperity” is the Republican Party platform for 2012.
I said this morning that thanks to the short-sighted ideological fervor of Paul Ryan, Obama can make a strong and clear case against the Republican Party. I didn’t realize that this would also be a brutal indictment of the party’s priorities. With his speech, Obama presented the GOP as the defenders of a failed ideology that would leave most Americans trapped in their station, struggling in a hostile economy. If this sounds far-fetched, look no further than the last three years—Republicans have either pushed to eliminate regulations and cut taxes on the rich, or they have stood against any effort to make the economy more fair, or put some restraints on those who caused the financial crisis.
Obama’s challenge is to convince the public that Republicans would continue on that path if elected to office. At the risk of sounding too certain, I think he can do it.
By: Jamelle Bouie, The American Prospect, April 3, 2012
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