The Conning of America

excerpted from the book

Class War in America

by Charles M. Kelly

Fithian Press, 2000, paperback

Taxes and the 1993 Lesson in ECON. 101

P127
When conservatives argue that raising taxes on rich people is bad for the economy or that it costs jobs, don't make the usual responses that the country needs the money, the rich can afford it, and it won't hurt them as much.

Republicans like Bill Archer, Phil Gramm, Dick Armey, Trent Lott, Tom Kasich, and the general run of right-wing spin-doctors love to attack reasons like these. It gives them an opening to criticize higher taxes on the rich as a matter of fairness, since the wealthy already pay so much more tax than poor people do. Their hypocrisy knows no bounds.

It would be much better to point out that our richest citizens have benefited the most from the economic policies of the past 20 years. The wealthy not only caused these policies, but they knowingly forced huge sacrifices on working Americans as a result of them.

It's only fair that they return to society, in the form of tax payments, some of the money they extracted from the incomes of working Americans and to compensate, at least a little, for the deplorable working conditions that resulted from their skullduggery.

Then point out that never in recent history has raw greed been so richly rewarded. Between 1942 and 1962, the income tax rate for our richest citizens was at least 88%, and as high as 91%. It's no accident that this was probably the most prosperous period in our nation's history for working-class Americans.

In those days, when a CEO considered firing thousands of workers for a million-dollar bonus, the moral condemnation didn't seem to be worth it. After taxes, the bonus amounted to, say, only $120,000.

Today, when a CEO fires thousands of workers, he gets a ten million-dollar bonus and he gets to keep five million of it. Suddenly we're talking serious money here. When he retires he can move to one of our country's guarded communities-with his millionaire cronies-and he gets virtually no moral condemnation from his golfing buddies.

We need to go back to the tax rates we had for our richest citizens between 1942 and 1962. Or, we could go to the rates we had from 1962 to 1982, when it was at least 70%. Those weren't the best of times for workers but they were a hell of a lot better than the 1980s and '90s.

And by the way, over that period of forty years between '42 and '82, none of the bad things that conservatives warn about happened. We didn't have massive unemployment, we didn't stifle innovation or economic growth, and, above all, we didn't become communists.

***
Taxes, Republicans and Working Americans

p135
... Republicans have conned the voting public into supporting their scurrilous tax proposals by

* artfully covering up who benefits most from their proposed tax changes,

* outright Iying about the regressive nature of specific tax changes on working-class Americans, ignoring the loss of necessary government services-which benefit mostly middle- and low-income workers-when tax cuts for the wealthy reduce revenues, and

* deliberately causing the public to lose confidence in the Internal Revenue Service itself.

In one way or another, for the past two decades, leading Republicans have done everything they could to distract the voting public from the real results of their tax legislation. Review the quoted comments of Republicans described earlier. Note how they claimed they wanted to cut taxes to benefit:

* "America's workers."

* "Every American taxpayer."

* Those whose incomes came almost entirely from "take-home pay."

* Those with "incomes that have stagnated" for the past 20 years.

* Those whose work demands on both spouses take "time away from their children, their churches and synagogues, and their communities."

* People who wonder: "If I'm working so hard, why is it so tough to make ends meet? Where does all the money go?"

* Parents who are forced to work and who "would prefer to stay home and raise their children."

* Families who need help "to save for their future."

* "Every taxpayer at every stage of life."

* "America's middle-income working families."

* "Workers on Main Street."

* "A working couple making $54,000 a year."

* People who "want to buy their kids school clothes, if they want to buy a much-needed household appliance, new tires for the car."

The above words certainly describe the majority of voting Americans, which is why the Republicans use them to describe their legislation. But their actual legislation doesn't come remotely close to giving such people any appreciable benefits, and in many cases, it makes their tax burdens worse-or reduces their governmental benefits.

p147
Taxes in Perspective

When conservatives are confronted with these facts, they have a pre-planned response: The rich deserve more of the tax breaks because they pay more taxes to begin with. So far, their efforts to put a guilt trip on the American public has worked. It shouldn't.

Don't sweat the fairness issue. To put taxes into proper perspective, look at Business Week's frank explanation of why the wealthy are paying so much in taxes. Under the head "Rich Man, Taxed Man," it recognized what we already know-that America's richest are paying the lion's share of taxes. However, it went on to inject a little realism into the issue:

At first glance, the data suggest that the wealthy are being asked to shoulder an inordinate share of the tax burden....

The catch is that the rich are getting a lot richer. The top 1% took in $524 billion, or 14.2% of total adjusted gross income in 1992, up from 8.9% in 1982. Meanwhile, the income share of the lower 50% fell from 17.7% to 14.9%. Thus, the top 1% now rake in almost as much as the entire bottom half of earners.

The kinds of numbers that conservative think tanks spew out to the public are, indeed, "first glance" numbers, and they suggest that our country has placed an inordinate tax burden on the wealthy. In absolute terms, the wealthiest Americans pay, by far, the largest percentage of our nation's collected taxes. Superficially, to require 1% to pay 27.4% of all taxes seems excessive. But, more importantly:

* The conservative economic policies of the past 20 years are what enabled the rich to get fabulously, incredibly richer,

* to the point where, as of the time of this article, the top 1% took in as much as the bottom 50% of earners. These are the more important numbers to consider. They represent a deliberate, planned transfer of wealth from working Americans to investors, business owners and corporate executives.

The next time Republican politicians talk about the fairness of their tax reduction proposals, remember: Regardless of how you slice it-no matter how "unfair" it is to tax abused rich people-the members of the top 1% are the ones who got rich from the conservative economic policies of the 1980s and '90s. And in the process, they forced huge sacrifices onto the bottom 40-80% of Americans who enabled them to become wealthier.

In 1983, the top 1% owned 31% of all wealth in the U.S. In 1989 it rose to 37%. At last count, they owned over 42% and their percentage was growing. Something is going in their favor, and it sure as hell isn't that they work harder than workers do, or that they work harder than the wealthy did prior to 1983.

***

The Conservative Takeover of Social Security

p149
Consider this. If an American worker

* has a high school degree or less, and has worked hard all his life, or he

* has a Ph.D. in physics, but he's fifty and suddenly finds that his job has been subcontracted out to India, or he

* is an engineer who has been "downsized," and has spent his life's savings to find a new job and to put his kids through college,

* he can still count on having at least a bare-bones income for retirement because of our present, reliable Social Security system.

Social Security is an effective, efficient system for ensuring a decent retirement income for working Americans. Fundamental to its success is its philosophy that hard work is honorable, it contributes to our nation's prosperity, and those who do it should be able to count on, at least, a minimally comfortable old age.

Under our present system, those who work hard don't have to have greed or materialism as their primary or even secondary motivations. They don't have to spend significant amounts of their time studying ways to get wealthy, to play the stock market, or to hoard real estate.

They can focus their efforts on their life's work, whether that work is designing bridges, healing the sick or collecting garbage. Workers "invest" in the future by inventing, building, and maintaining this country-usually for relatively low incomes-and by having a Social Security system that properly recognizes their right to a decent income after they retire.

Our system also assumes that today's workers will be able to make enough money to provide a retirement for those who preceded them-just as those who preceded them had paid for the retirements of their predecessors. Of course, trust funds have to be built up during prosperous times to make up for anticipated imbalances that may occur because of changing birth and retirement rates.

Conservatives want to change all that. The greed and materialism inherent in their philosophy places a premium on inherited wealth, investment income without work, and the manipulation of the markets that restrict workers' wages. That is the way they "invest" in the future-for themselves and their own descendant royalty.

The most immediate beneficiaries of their transparent plans for "saving Social Security" will be Wall Street brokers, bankers, lawyers, everyone associated with the securities industry, and all those who already own massive amounts of stocks and bonds. If Alan Greenspan thought the market was overvalued in 1998 and '99-wait until billions upon billions of government sponsored dollars hit the stock markets. The wealth of the already wealthy will soar as never before.

As is well known by now, the top 1% of Americans own 46.2% of all stocks and 54.2% of all bonds. The top 10% of Americans own 90% of all stocks and bonds. The bottom 70% of Americans own from $0 to $2,000 in securities; in today's economy, that effectively translates into virtually no appreciable investment in today's stock market.

Raising hypocrisy to a new level of sophistication, conservatives have gained respectability for privatizing Social Security by saying that workers should have the same opportunities to invest in the stock market as rich people do, and to realize the same benefits.

But what conservative politicians really want is to

* provide vast sums of money to propel the stock market to ever higher levels, thus making present stockholders (themselves) even more wealthy,

* return favors to many of their biggest campaign contributors - the securities and banking industries,

* force people who don't know the difference between a stock and a bond to compete in the financial markets with those who have made Wall Street, and the accumulation of money, their life's work, and to

* politicize the Social Security process; that is, enable politicians to decide which of their friends will handle workers' investment money.

In other words, conservatives want to create a new Social Security system with horrendous service charges (Wall Street firms, lawyers, brokers, analysts, investment bankers, advertising executives, accountants, etc.) for what is probably the most cost-efficient governmental system in our country. In 1997, Social Security paid benefits of $362 billion. The cost for administering the program was $3.4 billion, or only about .9% of benefits paid.

p160
This whole privatization move is just another way to allow America's most powerful corporations to take control of, and profit from, every aspect of American life.

***

Corporations Should Run Our Country?

p161
Only Republicans and conservative Democrats can read The Wall Street Journal, Forbes, Fortune, Barron's, or Business Week and conclude that corporate bureaucrats are better stewards of our country than are government bureaucrats.

Actually, they're probably just pretending that they believe in such an absurd notion. After all, it is only by discrediting government that they can convince voters to turn control of our country over to corporate executives and their supporters.

The reason Republicans and conservative Democrats are comfortable with fraud, greed, and a callous disregard for the public interest-that corporations demonstrate daily-is that they are the primary beneficiaries of these behaviors. They are the corporations, and they make sure that they and their CEOs and top executives always make money, even from the disasters that result from their actions.

By destroying the public's confidence in government, they have created a free-for-all, everyone-for-himself economy-an economy in which the rich, powerful and organized can take advantage of the poor, unorganized and uneducated.

p168
... when conservatives claim that government is bad and that we should let corporations freely run everything-check out the pages of their own financial publications. As you read, think to yourself: "Would I want these egomaniacs to be in charge of the Post Office, the Internal Revenue Service, or our National Park Service?"

"Would I want to turn over the responsibility for the environment, our health care system, food handling, the testing of drugs, and so on-to these corporate bureaucrats?"

And, while we're on this subject, just what have our newly discovered corporate virtues of greed and materialism already done for worker safety, health care, drug safety, and the costs of auto repair, homes, insurance, medical prescriptions, banking, and on and on?

The excessive enrichment, incompetence and dishonesty of top executives always comes out of the hides of workers and the public in the form of lower moral standards, higher prices, inconvenience, corporate bankruptcy or significant financial loss, loss of jobs, low wages, poorer working conditions-and, above all, loss of what should have been an ethical business competition in the free marketplace.

This is not to say that corporate disasters are always caused by incompetence or dishonesty. Sometimes unpredictable events or simple bad luck play a role. However, the same is true of government. Yet, count on it, any time the government makes a mistake, conservative demagogues will rise in mass to politicize the situation.

Unmanaged competition can create conditions in which the lowest moral standards of just one major corporation can become the norm for an entire industry. If a single corporation reduces its costs by using child labor-others can't be competitive unless they also use child labor. If another company's sales persons use deceptive-but-legal sales practices-others will lose market share unless they also use deceptive practices.

From the abuse of workers to the destruction of the environment-what's legal has become the minimum standard for corporate behavior. Even then, some of our most prestigious corporations have proved that they are willing to risk violating the law if it will benefit the bottom line.

Probably the most significant difference between corporate and government bureaucrats is that government bureaucrats have the welfare of the general public as their charter. Although-like their corporate brethren-some are incompetent, dishonest, or unlucky, they have as their organizational goal the betterment of society.

The charter of corporate bureaucrats, on the other hand, is to do anything to maximize profit, even if the net result is harm to workers, their communities, or the society at large.

That's why the federal government must set, and enforce, sensible minimum regulations for business practices.

***

Who Protects the Freedoms that Count?

p172
Plutocratic vs. Democratic Capitalism

It's important to distinguish between two kinds of capitalism: plutocratic and democratic.

Plutocratic capitalism is designed to benefit the educated, wealthy, and powerful, at the expense of the uneducated, poor, and powerless. It's the product of politicians who believe in "class." Their belief is not simply a recognition of the truth that "the poor will always be with us"-but the belief that their own descendants deserve to inherit the huge advantages that wealth, education and privilege automatically confer. Their attitudes toward those who inherit poverty, illiteracy, and poor health are summed up in the rich man's classic philosophical refuge: "Whoever said that life is fair?"

On the other hand, democratic capitalism, the kind we had between the 1930s and the 1980s, tries to protect the minimal rights of those who are victimized by the predominant economic system. It's designed by politicians who believe that all citizens deserve realistic opportunities to live healthy, productive and rewarding lives-regardless of who their parents or guardians were.

In plutocratic capitalism, two qualities always go together: no regulations (no enforced minimum standards of moral behavior) and high profits to the unscrupulous.

p180

Power Abhors a Vacuum

All societies and all markets are always controlled, all the time Therefore, the only issues in any society, or market, are:

* Who's doing the controlling?

* How did they get their control?

* How are they using it?

* For whose benefit are they controlling?

Ideally, in a democracy, elected officials do the controlling for the purpose of maximizing genuine freedom for its citizens and businesses. The checks and balances of separated powers ensure that all issues and interests are represented fairly. When done ethically, this kind of control benefits society by ensuring that morally based corporations and businesses can dominate the free market by providing the best products and services at the best prices.

To accomplish this, the government must prevent corrupt special interest groups from subverting the system and its markets with their own controls. If government doesn't do its job, with monitoring and sensible regulations, then society-and its markets-become controlled by their most powerful and immoral predators.

And that's exactly what has been happening since Republicans and conservative Democrats began dismantling government.

The great irony is that now-with less "government"-there is more stifling control over the lives of working-class Americans than there was before. Today, in the absence of effective government, wealthy and powerful individuals and their corporations have almost total control of our economy and our markets. It's as simple as that.

* They bought off legislators who favored specific individuals, companies, and industries over the interests of the country.

* They bought unscrupulous lawyers who did whatever it took in court to prevent any lawful attempts to bring about fairness or justice for others.

* They bought control of markets, regardless of the negative effects on their competitors, consumers and workers.

And, to add insult to injury, they not only bought anti-worker legislation in order to keep wages low-but they also paid conservatives in Congress to shift the tax burdens from themselves onto workers.

... wealthy individuals and corporations have purchased the federal government of the United States. They may not own it lock, stock, and barrel yet, but they're close.

The only mystery left about the corruption of the political process is why the public is so passive about it. A major reason has to be that the public knows that incumbent politicians in our two major political parties want to keep the system and they're not about to do anything to change it. It seems futile to work toward improving the system because the people who would do the correcting are themselves corrupt. There appear to be no other choices.

A second reason is that the public doesn't yet realize the magnitude of the damage that these entrenched conservatives have done to our economy and to the long-term welfare of our society-and especially to the long-term welfare of its working-class citizens.

Class War in America

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