This set up the “casino capitalism” of the next decade that would spawn massive criminality and mortgage fraud by the nation’s leading banks—none of which has been prosecuted. The result was the greatest economic collapse since the Great Depression.
By Robert Freeman
November 14, 2010 "CD" -- For the past thirty years the rich have been waging war on the middle class. It’s been astonishingly effective, partly because it has been undeclared. But even that pretense is now being abandoned. The President’s National Deficit Commission has effectively declared that the rich will now go after what is left of working and middle class wealth and will take whatever steps are necessary to seize it. If allowed to succeed, their plan will reduce Americans to a state of serfdom.
Ronald Reagan began the war on the middle class with his “supply-side” economics. Its very purpose, according to David Stockman, Reagan’s Budget Director, was to transfer wealth and income upwards. It cut the marginal tax rate on the highest income earners from 75% to 35% while dramatically expanding spending for war. The results were two-fold: massive federal debt and an astonishing rise in the share of income and wealth going to those who were already the wealthiest people in the world.
The national debt quadrupled between 1980 and 1992. George W. Bush would repeat Reagan’s policies and double it again between 2000 and 2008. Meanwhile, the share of national income going to the top 1% more than doubled, from 9% to 24%. The share going to the top one-tenth of 1% of income earners more than tripled. We now have the most unequal distribution of income in the developing world and the inequality is growing rapidly.
Shifts of this magnitude over such short periods of time have never been seen in American history. With the rich getting much, much richer, its means that everybody else is getting poorer. And in fact, real wages for median workers are lower today than they were in 1973. Indeed, while the inflation-adjusted income of the bottom fifth of workers fell by $6,900 between 1979 and 2007, the top 1% saw its annual income increase by $741,000!
To try to keep up with living standards Americans resorted to debt. They increased their personal debt-to-income ratio from 62% in 1980 to 130% in 2008. When housing prices fell 35% nationwide in the recent collapse it left Americans with a smaller share of equity in their homes, 48%, than at any time since the Great Depression. The share they have lost has been taken by the banks.
In other words, all of the income and wealth gains for middle Americans from the “golden years” between 1945 and 1975 have now been wiped out. Or more accurately, have now been transferred to the very rich. The top 1% holds 34% of the nation’s wealth while the bottom 50% holds just 2.5%. The bottom 40% owns absolutely nothing.
These effects and numbers can be numbing, even dizzying. But it’s important to understand that they have not been the result of random events or impersonal market forces. Rather, they have followed as the intended consequences of the relentless application of a wide array of government and industry policies.
The massive run-up in debt is one such policy. The wealthy are net lenders. This means that massive public and private debt transfers interest income to them from the rest of the economy. Another method for effecting massive wealth transfer: Beginning in 1981 the Reagan administration effectively stopped enforcing anti-trust laws, allowing monopolies to gouge everyone who had to buy their products.
The government actually provided tax subsidies so that corporations could eliminate jobs in the industrial heartland and ship them to Mexico and later, China, India, and other low-wage countries, reducing wages and pitting American workers against each other for those jobs remaining.
The bank deregulation that began in the early 1980s reached its apex with the repeal of the Depression-era Glass-Steagall Act in the late nineties. This set up the “casino capitalism” of the next decade that would spawn massive criminality and mortgage fraud by the nation’s leading banks—none of which has been prosecuted. The result was the greatest economic collapse since the Great Depression.
But even as more than five million homeowners have lost their homes, the wealthy had their losses covered by the Bush and later Obama administrations. Bloomberg news estimates that the transfer to the banks through the financial bailout comes to some $13 trillion dollars.
We could go on and on and on with the roster of ways the wealthy have used the government to transfer national wealth to themselves. Environmental and health laws that are not enforced. Deals with the pharmaceutical industry so they don’t have to compete with foreign manufacturers. Health care “reform” that forces tens of millions of Americans to buy questionable insurance products, even as insurers continue to kick legitimate claimants off their rolls. Give-aways of the telecommunication spectrum worth hundreds of billions of dollars to media monopolies that ladle out state propaganda as if were news and never, ever challenge official narratives.
In these and a thousand other ways, the rich have conspired with the government they largely control to shift more and still more of the nation’s wealth away from the working and middle classes, to themselves. It amounts to the most insidious class warfare and the most rapacious looting of public and private resources in the history of the world.
The result is vast impoverishment, demoralization, and the destruction of the American middle class. One out of eight Americans are on food stamps. One out of five people are in official poverty. One out of four children are raised in poverty. Twenty five million people cannot find enough work, while their skills atrophy and their families and communities are destroyed. These are not figures describing a banana republic, a disaster-stricken region, or a third world country. They describe the United States of America after three decades of plunder by the rich. And now they want to go in for the kill.
Not satisfied with the staggering wealth they have already siphoned away, the ultra-rich are now using Barack Obama’s National Deficit Commission to propose even more brazen plunder. And the looting is no longer taking place behind closed doors or under the cover of arcane public policies.
The commission proposes to cut the federal government’s budget deficit by $4 trillion over the next decade. But 75% of the “savings” will come from gutting programs that help stabilize the middle class and their communities. None of it comes from policies that would harm the rich.
For example, the commission proposes cutting the tax deduction for mortgage payments. Not only will this render housing much less affordable for millions of prospective home buyers, it will reduce housing prices, perhaps substantially, for without the tax writeoff, buyers will be able to afford much less house. This will decimate the sole source of wealth of tens of millions of Americans.
It is housing wealth that undergirds retirement security for the middle class. Or, at least it did until one out of four homeowners went underwater on their mortgage in the recent bank-triggered collapse. Then, even as the Commission plans to decimate home prices and owner equity, it proposes cutting back benefits to Social Security recipients.
It would lower Social Security cost-of living adjustments while raising the minimum retirement age. And this is being proposed at the very moment that the bank-owned Federal Reserve Board is beginning to print hundreds of billions of dollars to bail out the banks from what’s left of their toxic assets still held from the housing crash.
The ensuing inflation is going to destroy the value of retirement incomes at exactly the moment that 77 million baby boomers head off into retirement. It was exactly this process of money printing and bankrupting of retirees that destroyed the German middle class in the early 1920s, giving rise to Adolph Hitler.
The Commission’s proposals would increase co-pays and deductibles for Medicare, making it unaffordable to millions. It proposes taxing as income the health insurance benefits millions receive from their employers. The Child Tax Credit would be eliminated as would 10% of all federal government jobs. This, at a time when more than 20% of the workforce is already underemployed and there are five workers trying for every available job.
We should be crystal clear: these policies amount to a mortal assault on what remains of middle class solvency and the democracy that a vibrant middle class makes possible.
But even as it girds up for this assault, the Commission barely touches the ultra-rich on whose boards they serve and who have gained so much over the past 30 years. And it cannot go without being said that it was these same professional predators who actually wrecked the economy, pitching it into its greatest collapse since the Great Depression.
The Commission’s proposals would actually lower the maximum tax on the highest income earners, from 35% to 24%. The nominal tax rate on corporate income would fall as well, from 35% to 26%. There is nothing proposed to raise taxes after so many decades of steadily amassed wealth. No financial transactions tax (as the IMF recommends) to stanch the kind of tsunami of speculative buying and selling that brought down the economy. Such a tax would raise over $700 billion over the next decade.
Of course, there will be no claw-backs of the trillions of dollars transferred to the rich under the phony duress of “saving the system” during the height of the financial crisis. No proposal that the cap on earnings subject to Social Security withholding should be removed. That proviso alone would raise more than half a trillion dollars over the next decade.
In fact, it is in comparison with other give-aways to the rich that the take-aways from the middle class by the Commission can be seen as so one sided and venal. Remember, they propose to save $4 trillion over 10 years.
But the war in Iraq, which we now know was entirely premised on lies, will cost more than $5 trillion, according to Nobel economist Joseph Stiglitz. It has proven a huge boon to the rich weapons makers, bankers, logistics companies and oil companies that Bush used to coddle as his “base.”
As mentioned above, Bloomberg news estimates that the financial bailout cost some $13 trillion, all of it going to the very richest people on the planet. There is not a syllable in the Commission’s report proposing getting any of that back to help reduce the deficit.
Or consider the notorious Bush tax cuts of 2001 and 2003 where fully 40% went to the top 1% of income earners. Obama once promised to overturn them but, as is his typically cowardly pattern, is now folding. The Center on Budget and Policy Priorities has estimated that they will cost the government more than $18 trillion over their lifetime—four times what the Deficit Commission claims it will achieve in savings. But God forbid we should ask for even a penny of that back to help battle the deficit.
In other words, there are many, many substantial and just ways that the savings the Commission proposes to create could be secured via small contributions from those who have gamed the system and gained the most over the past three decades. But that is not the Commission’s plan. And it is in that omission that its true intent is revealed.
There is no more time for stealth, no more need for subtlety. Western capitalist economies are declining at a pace that is frightening their elite stewards and compelling such desperate, slovenly measures as the wholesale printing of money to postpone the inevitable. While Obama sings lullabies of “hope” and “change” to tranquillize the suckers out front, the rich are backing the truck up to the vault in the back, no longer even deigning to disguise the heist. And of course, why should they? They have the additional diversion of the moronic Tea Party vigilantes (“Keep the government out of my Medicare”), ever ready to cut other people’s throats to cure their own nosebleeds.
The Commission’s proposal is the most naked, undisguised declaration of class warfare possible. Its agenda is not to reduce the deficit but rather to reduce what is left of the American middle class and American workers, to a condition of servitude, of feudal peonage. Their poverty will make them docile and subservient. This will make possible the final looting of America by those whose sociopathic greed has brought it so low already. The battle over this proposal is the last bulwark against the devastation and final destruction of America. It must be fought and won or our freedom and security ceded forever. There is no other choice.
Robert Freeman writes on economics, history, and education.
Robert Freeman writes on economics, history and education.. He can reached at .
Not satisfied with the staggering wealth they have already siphoned away, the ultra-rich are now using Barack Obama’s National Deficit Commission to propose even more brazen plunder...