One Percent Nation

“When will the White House and when will Senate Democrats get serious about cutting spending?”  So asked Speaker of the House John Boehner last Friday during eleventh-hour negotiations on a 2011 federal budget.  That question, raised with metronomic regularity, will surely be reprised as debate heats up whether to raise the $14.25 trillion debt ceiling in May.

Lamentations about tax-and-spend liberals might be rank hypocrisy—many conservatives vociferously advocated unpaid for wars and a costly prescription drug benefits program that added $3.2 trillion to the national debt over the past decade—but why sing from a different song sheet?  Such hymns resonate: conventional wisdom has it that liberals are spendthrifts while conservatives fiscally prudent.

This bogus narrative helped Boehner and his Tea Party foot soldiers triumph in the mid-term elections.  Fresh from their victory, they demanded and got an across-the-board two-year extension of the Bush-era tax cuts, not just for families making less than $250,000.  The sop to those least in need cost $90 billion, or slightly less than the figure many conservatives want sheared from the federal budget this fiscal year, mostly from social programs catering to those most in need.

That the right’s populism, as ever, is a stalking horse of monied interests is no revelation.  Nor is it insightful to point out that, having helped gut the budget, the right cries foul, blaming lavish lefties for the parlous state of the nation’s balance sheet.  That strategy is old hat.  But harder to understand is just how our politics became so shamelessly plutocratic.

Jacob Hacker and Paul Pierson take a commendable stab at answering the question in Winner-Take-All Politics.  The two economists convincingly argue that, beginning in the 1970s, the business community got serious about political organizing with an eye towards reversing Great Society regulations.  In 1972, the National Association of Manufacturers moved its headquarters to Washington.  The next year, the Business Roundtable was formed.  Results followed.  Labor laws were overhauled to the detriment of unions (just seven percent of the private sector workforce is now unionized).  Deregulation became de rigueur.

The ever-increasing cost of political campaigns fed the vicious cycle, requiring politicians from both parties to extract tithes from a corporate sector willing to open its pockets in exchange for influence.  Rich individuals benefited in tandem, as marginal tax rates plummeted.  With no countervailing force to balance the heft of society’s “winners,” its losers continued to cede ground.  Today, disparities in America are at Gilded Age levels.  (By contrast, inequality has not risen in Germany, France, and Japan).

Exactly how lopsided is our society?  “The upper one percent of Americans are now taking in nearly a quarter of the nation’s income every year,” Nobel Prize winning economist Joseph Stiglitz writes in Vanity Fair.   “In terms of wealth rather than income, the top one percent control 40 percent.”  But wealth isn’t just concentrating.  It’s concentrating while median incomes are stagnant.  In other words, the rich are getting a lot richer as the rest are treading water.

Dangerous distortions flow from such inequality.  Again, Stiglitz: “Whenever we diminish equality of opportunity, it means that we are not using some of our most valuable assets—our people—in the most productive way possible.”   Moreover, the process is self-perpetuating, as those in lower income strata are not given the chance to better their economic circumstances.  Stiglitz’s conclusion is stark: “The more divided a society becomes in terms of wealth, the more reluctant the wealthy become to spend money on common needs…The top one percent may complain about the kind of government we have in America, but in truth they like it just fine: too gridlocked to re-distribute, too divided to do anything but lower taxes.”

Here Stiglitz may be slightly off the mark.  The process of wealth transfer upward does not plateau.  There is no magic equilibrium of inequality that satisfies the beneficiaries of oligarchy.  If one percent enjoys 40 percent of the wealth today, the same sliver will conspire to control 60 percent tomorrow, and 80 percent the day after.  It is in this context that the GOP’s recently unveiled entitlement “reform” plan, which lowers corporate taxes while effectively ending Medicare, should be understood.  Such is greed’s implacability.

In an interview with journalist Ron Suskind, then-Vice President Dick Cheney enumerated the so-called one percent doctrine whereby low risk but high consequence threats warranted responses.  Cheney was talking about terrorism, but another one percent doctrine is a far more serious threat to the country: that of a political system catering to only the tiniest few.

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