Take the Rich Off Welfare

by Mark Zepezauer

a book review by Tracy McLellan (4/05)

This book, a 2004 update originally published in 1996, opens with Zepezauer's method of presenting complicated, quantitative, and proportional economic equations exposing a leviathan of graft and corruption-and makes plain its meaning: the rich clobber anyone who's not.

Zepezauer compares income and Social Security ("payroll") taxes for rich and poor and the concomitant government services they enjoy. The rich pay a smaller percentage of their income in taxes than do the poor. Capital gains taxes have shrunk drastically in the last half-century. Dividend and investment income is not taxed, and many very wealthy corporations pay no taxes. Adding injury to injury corporations are disproportionately the beneficiary of what Zepezauer says are the five basic types of wealthfare: tax breaks, subsidies, firesales, cost overruns, and lax enforcement of white collar crime.

Regressive taxes, those that disproprtionally hit the poorest, have seen the sharpest increases over the last quarter-century, notes Zepezauer. The wealthy, who have seen sharp increases in income in that time, pay a vastly smaller percentage of their income in taxes than do those of poorer and more moderate means. In the 1950s corporations paid half of federal revenues. Today they pay just 7.4 percent. The lost revenue has to be made up by higher taxes for the poor and middle class or in cuts in services.

Social Security is supposedly in crisis, even though it has perennially run a large surplus. That surplus is supposed to be kept in trust to pay future beneficiaries. Social Security was originally a set-aside program, but was incorporated into the "unified budget" under Lyndon Johnson. It has thus become just another income tax to be sucked up in wasteful military spending or corporate welfare and fraud, says Zepezauer. The Social Security Trust Fund is owed $1 trillion and interest. The payroll tax has seen sharp increases especially beginning with Reagan. At the same time it is capped on incomes over $87,000. Thus Bill Gates, as wealthy as the 100 million poorest people in the U.S., pays the same Social Security tax as a bus driver making $87,000. If this cap alone were removed, Social Security revenues would increase about $80 billion annually.

According to Zepezauer, wealthfare rose from $448 billion a year in 1996 to $815 billion in 2003, an 82 percent increase. In the same period welfare rose from $130 billion to $193 billion, a 41 percent increase and only vaster higher costs for Medicaid figured for any increase at all. Zepezauer' s presentation is straightforward, compelling, and easy to understand.

Wealthfare enjoyed by big business, writes Zepezauer, also includes tax avoidance by transnationals, lower taxes on capital gains, accelerated depreciation, insurance loopholes, business meals and entertainment, tax free municipal bonds, and export subsidies. Other corporate goodies include the savings and loan bailout, agribusiness subsidies, media handouts, nuclear subsidies, aviation subsidies, mining subsidies, oil and gas tax breaks, timber subsidies, and others. Among other particularly egregious developments is a $100,000 "accelerated depreciation" for the largest of the gas-guzzling SUVs.

Military waste and fraud is in its own category and accounts for about a quarter of the wealthfare, says Zepezauer. The Pentagon budget increased $70 billion annually over the two years to 2003, to $393 billion. Supplemental spending on the wars in Iraq and Afghanistan added costs of several hundred billion more. The Pentagon loses outright billions of dollars that it often rectifies by simply making accounting write-offs. Overpaying military contractors through cost overruns and ridiculous prices-a $2,043 nut and a $2,548 pair of duckbill pliers to name a tiny fraction of outrageous examples-costs scores of billions a year. Weapons contractors are convicted of felonies with regularity.

B-2 bombers, originally estimated to cost $550 million each, ended up costing $2.2 billion. Three Seawolf subs were built at $2.4 billion apiece. That project was eventually abandoned to build 30 of the equally redundant Virginia class of submarines, says Zepezauer, at a cost of $73 billion. Dick Cheney, Caspar Weinberger, George Schultz, William 'Perry, James Baker, and Frank Carlucci are just a few of the officials who have swung through the revolving door between high government positions and the military contractors with whom they do business.

"In 1994," writes Zepezauer, "the murderous government of Indonesia got over $125 million in Export-Import loans to buy equipment from Hughes Aircraft. Ex-Im [also] insured a $3 million loan to General Electric to build a factory in Mexico that cost 1,500 jobs in Indiana. The Chinese government used an $18 million loan to modernize a steel plant-even though that company was accused of illegally dumping steel onto U.S. markets below cost." The government provides $7 billion a year in grants to foreign governments, which often come back to U.S. arms manufacturers in the form of sales.

Middle to lower-middle incomes -the vast majority-bear the brunt of this unfair system because they are neither qualified for the benefits of the poorest, such as Medicaid and food stamps, nor are their incomes large enough to take advantage of the corporate welfare of the rich. Other tactics are technically legal, such as what Zepezauer refers to as "the Bermuda Shuffle" in which corporations incorporate in the Cayman Islands or Bermuda by opening a mail drop while still enjoying the superior infrastructure of the United States where they do the bulk of their business.

Take the Rich Off Welfare is among other things, an examination of vast waste, fraud, and corruption in the Pentagon and its budget, a precondition for this type of study. I was disappointed at Zepezauer's tacit acceptance of the underlying premise of the necessity of a strong military. He doesn't fully deconstruct the fact that military spending has by the very nature of its size engendered massive corruption for generations; and even when put to the uses for which it was intended, bred war crimes of historically unprecedented proportions. Nor does he examine that the increasingly deadly firepower of modern weaponry has made it too apocalyptic to use. Martin Luther King's words are more apt today than they were then: our choice today is "nonviolence or nonexistence."

It is obvious only organized popular resistance could counter the trends documented by Zepezauer. The individual would be crushed by the nature and magnitude of the rank corruption rampant in their society. Lamentably largely uninformed, the vast victimized majority is thus unable to promulgate, much less institute, genuine democratic reforms that would be to their advantage and, by definition, just. As long as that's true, the status quo of corporate hegemony will continue to dominate us with its nihilistic values, to the economic advantage of the very few and disadvantage of the many.

This doesn't happen chaotically of its own accord. Those who manipulate this exploitive system know precisely what they're doing, to whom, and for whom, they're doing it.

Tracy McClellan is an activist and writer living in the Chicago area.

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