The last essay closed with a quote to ponder. It was spoken by the Pig in George Orwell's novel Animal Farm: “All animals are created equal, but some animals are more equal than others.”
Rich republicans have taken a demented series of steps during and since the last election cycle. Given their genetic disinclination to introspection, we have to point out to them, in rather blunt language laced with financial terminology (classical conditioning; I promise, you'll see them salivate.), how their actions, which in their warped psyches appear cohesive, are actually the products of unexamined, irrational motivations.
But your neighbor, though republican in thought, word, and donation habit, is not rich. You two have begun an over-the-fence conversation in which you've shown that, while soil conditions in your lawn tend to promote the growth of Democratic campaign signs, you are not a card-carrying, flag-burning Marxist, socialist, communist, or Adventist.
Without much premeditation on your part, just a sharing of perspectives, you two have made inroads. Bridge-building has begun. A dialogue has opened up, in no small measure because you both want it. However much a republican perspective has provided your neighbor certainty, comfort, clarity, and simplicity of worldview, nagging doubt remains. He can see that the economy is shaky, that his 401K took a body blow and is reeling, that foreclosed homes pepper the neighborhood, that numerous financial and political scandals have trickled down from the money and power centers and tainted the lives of more honest, earnest, sober and grounded Americans. (This is the dark side of trickle-down economic theory. Of course, even mere trickles can rock and collapse the livelihoods and living standards of ordinary Americans far more than they affect the wealthy.) He knows that you or your relatives and friends work in the public sector and belong to a union, so he's curious to learn if you've ever met Fidel, or happen to be fluent in Russian. The media he consumes has planted such questions in his mind.
Yet you quickly find that you can commiserate over the BP Gulf oil spill, deadly mine collapses and explosions, and the pain experienced by families with members serving in the military in Iraq and Afghanistan.
You've mentioned union contributions to better living standards such as the five day, forty-hour work week, workplace safety standards, the fact that unions and union members played no part in the panics, recessions and depressions that have plagued this country since before the Constitution was ratified. Your neighbor will be impressed and interested to hear that the culprits were greedy speculators and wealthy, would-be monopolists, who indulged in short-term thinking and investing with only their own wealth-enhancement in mind, national security be damned. He is not getting this information through his preferred media outlets. And if your neighbor inclines to Tea-Party talking points, you've just scored big by mentioning the Constitution, albeit in a different context than the ones they gravitate to.
Credit your neighbor where due. He is concerned about the growing deficit and government waste. You can agree that the complexity of the tax code and the ridiculous amount of time that you both waste preparing tax forms is a prime example of government failure. Pork barrel spending is another example. Government is in need of reform. You and your neighbor do have some shared concerns.
On the former topic, you mention to your neighbor that federal government spending during the Great Depression did lead to large budget deficits. Key to understanding why such deficits did not collapse the economy, bring the great Republic to an end and lead to anarchy is that equitable taxation rates (meaning the rich paid their fair share, without myriad tax loopholes) during WWII, through the 1950s (under Ike, a republican) until 1964. This provided the government with revenue needed to manage the deficits and the debt, yet allowed the rich to live comfortably, the economy to prosper and weather three recessions, and the middle class to flourish. Union membership peaked around 1956, and subsequent studies showed that business productivity increased as more companies employed unionized workers. Conventional conservative thinking (it certainly wasn't wisdom) held that productivity would stagnate and profits would decline as the union workforce drove up wages and closed ranks to protect substandard employees.
What management failed to realize was that union battles to secure living wages and workplace safety standards encouraged workers to be productive. As the opportunity to participate in the free market and purchase consumer goods became less a dream and more a reality, workers, driven by the same self-interest as the entrepreneurs who started the company, saw the means to securing a more desirable living standard and jumped at it. Workers, stated bluntly, are not an unruly mob who need to be controlled by anti-union, right-to-work laws in order to suppress their socialist tendencies. They are every bit as capitalist as the owner. They do often differ from most owners, management-types, and top level entrepreneurs though, in their innate level of sympathy, empathy and humanity. They understand such elementary concepts as shared responsibility, collaboration, and negotiation. Possession of these qualities has been shown to have an inverse relationship to income level.
Every bit as important was the existence of a shared set of values that prevailed over political differences. The United States had to devote monumental amounts of resources, i.e., land, labor, capital and entrepreneurial ability (An economist would frame it so.) to recover from the Great Depression (Who caused that?), then to fighting Fascist, National Socialist and militarist regimes in Europe and the Pacific. Soon after, the nation had to promote and fund an ideological argument, and a real offensive and defensive struggle, against faux-socialist (in reality, expansionist, totalitarian and oligarchic) regimes in the USSR, China and their satellite nations. How ironic it is then that corporate influence in the republican party has reached oligarchic levels, with the result that the internal security of the nation is in peril. The U.S. government has been hobbled by deregulation and underfunded by regressive tax rates (rich-republican political victories), and cannot protect its citizens from corporate malfeasance. Well, actually, the government has been “fine-tuned” by wealthy and corporate America to protect a select few citizens: you guessed it, the monied elite.
That shared set of values also once functioned to shame and muzzle those wealthy Americans who complained about the tax rates, who showed remarkable ignorance that it was the regulated free market economy in the United States that allowed them to acquire affluence, and that a strong Federal government protected their ownership of said affluence, through the legal system and due process. Public intolerance of scandalous greed and avarice found its voice in the derisive names for selfish capitalists: “War Profiteers!” was an insult. Arthur Miller excoriated them in his play, All My Sons. Disgust for narcissistic greed is also voiced by the characters in David O'Selznick's movie, Since You Went Away. Public shaming of raw greed is one of the few virtues of our Puritan heritage. Had those wealthy Americans been citizens of the USSR or China and dared to complain about tax rates, imprisonment, torture and execution were probable results. Then too, their assets would simply have been seized by those totalitarian governments and misused to enrich the ruling elite. (In a frightening twist, the American middle class has for decades been robbed by the rich, our de facto ruling elite!)
That shared set of values helped us win World War II. It helped us weather decades of Cold War. Americans have talked to each other since that time and recognized their blindness in realms such as social justice, their racial and gender prejudices, their lack of environmental stewardship, even the injustices and crimes they have committed against each other, or those they have witnessed and remained silent about. Americans have chosen a Civil Rights Act, Medicare and Medicaid, The Americans With Disabilities Act, a Clean Water Act, a Clean Air Act, an Endangered Species Act. They have fought and continue to fight to end segregation, end employment and housing discrimination, they fight for the rights of more and more overlooked and ignored citizens to participate in the free market economy and to live above mere poverty, but they redefine more fully and equitably what it means to be American only when they talk to each other. In the United States, the power to listen is undervalued.
It must be pointed out that these post war changes, be they a raising of social consciousness, be they legislative, be they a broadening of liberty and justice, be they an expansion of equity to include a larger number of citizens, have all failed to collapse the economy. Increased equity for U.S. citizens has not precipitated any kind of Communist overthrow and the seizure of all private property. Unionizing has also failed to end free-marketeering in the United States, despite the exaggerated blatherings of conservative, fact-free demagogues.
Here it can prove timely to mention to your neighbor the paradigm shift that happened under Reagan. Deregulation and regressive tax policies led to growing Federal budget deficits, with no coherent plan advanced to address them, and also to speculation, bubble markets and scandals in the financial world. The economy acted strong through most of the nineties, then its true fragility was revealed. Advocates of supply-side economics disingenuously held their tongues when questioned about the durability of the economy. This is when government budget deficits can threaten the Democratic Republic. The current rich-republican plan has the middle class funding state government out of deficit through a policy of disenfranchisement. Republican-dominated state legislatures will simply steal the money. Oh, to be sure, it will be disguised budget cutting through such absurd and irrational methods as busting public sector unions, those greedy state employees who have the gall to bargain collectively and live in the middle class. The cowardly republican legislator-puppets will cut tax rates to big business and force local and municipal governments to do the dirty work of cutting services to balance their own budgets. Smell something rotten? That's the corpse of the Wisconsin economy, putrefying. They can smell it in Washington, DC when the prevailing political wind blows.
Your neighbor might interrupt here to ask, “Wait a minute. What evidence do you have that this shift happened with Reagan, and that supply-side economics is dysfunctional?”
Time to pull out the Lorenz Curve.
Conservative economists and ideologues hate facts and data that refute the ideology they attempt to support with supply-side-biased data. Disingenuously, they begin with an irrational, unquestioned, infantile belief, then cherry-pick data to support it. The Lorenz Curve throws a monkey wrench into such efforts. When used as a graph of income distribution in the United States, what it shows will make your republican neighbor angry. Not at you; at supply-side economic theory.
If every household in the U.S. earned the same amount of income, the graph would show only the blue line. It is not, however, a desirable state in a regulated free-market economy. If every worker earned the same amount of money, more strenuous jobs would go unfilled. Adam Smith's notion of the entrepreneur acting in self interest would no longer apply. Keep in mind that a worker/wage earner is motivated by self-interest. They are taking a risk by trading their skills, labor and time for wages and benefits in a regulated free market.
The red line represents more accurately the distribution of income in the U.S. economy. More skilled workers, more highly educated workers with specialized skills, and entrepreneurs whose income is derived more from capital gains than from salaries and benefits will garner a higher percentage of total available income than other wage earners. Some bowing of the red line is normal in a regulated free market economy. A close look at it confirms that income distribution is in fact biased toward a small group of economically privileged Americans. Some have earned their affluence through hard work, applied education, talent and merit. Others have instead earned it through despicable means such as tilting the playing field in their favor. The criminally low capital gains tax rate is an example. The farther that red line bows away from the blue line, the greater the disparity in income distribution.
Guess what: When you graph income distribution since supply-side economics got a choke hold on the economy, the successive Lorenz curves bow farther and farther away from the line of equality. A Lorenz Curve derived from 2006 Bureau of the Census data reveals that households in the top fifth took home 50.5% of total income. By comparison, households in the bottom fifth took home just 3.4% of total income.
The disparity in income distribution was less shocking in 1968, where the top fifth took home 40.5% of total income and the bottom fifth took home 5.6%.
Here your neighbor may be especially interested to know what powered this trend toward increasing income disparity. Reagan dramatically slashed income tax rates and, critically, capital gains tax rates for a special class of U.S. Citizen: the ones who are “more equal than others,” to quote a notable pig. To add insult to injury, payroll tax rates were increased, effectively slashing the the incomes of the middle class, the working class and the working poor.
At this time, the Park Avenue playboys and their trophy wives began to complain. Looking out their picture windows into Central Park, they saw a warren of “cardboard condos” spoiling the view: the homeless were moving in.
With the capital gains tax rate hacked, wealthy Pig-citizens reaped huge capital gains through the 1980s and 1990s. Meanwhile, about 75% of Americans pay more in payroll taxes than they do in personal income taxes. The capital gains tax rate stands at a paltry 15%. Many middle class taxpayers pay a higher percentage in income tax than the wealthy pay in capital gains tax!!
You and your neighbor nod: this tax system is corrupt. You both suffer under it.
But we're not finished: through those same two decades in which the elite Pig-citizens wallowed in a money-filled sty, the average hourly wage fell by more than ten percent. Corporations involved in manufacturing laid off hundreds of thousands of fairly-paid workers (These were family-supporting jobs.) and moved their jobs overseas into cheaper, more desperate labor markets. Most dislocated U.S. workers could only find lower paying, non-union jobs in the service sector.
Your neighbor now has a new target on which to vent his justifiable anger. There's more.
Corporate apologists whine that unions drove up labor costs to the point at which American companies were forced to move production facilities overseas to remain competitive in an increasingly global economy. At first flush, this seems a valid argument. It also appears to reinforce the view fostered by Big Money that unions, which are in effect a competing power center, were to blame for rising income disparity and a shrinking middle class. Federal Government agencies and the Legislative and Executive branches did little to protect the worker from the corporate relocation of manufacturing facilities.
If the public sector had tried to outsource labor overseas, the cries of treason would have triggered a political earthquake. Somehow, unpatriotic behavior among corporate executives escapes public condemnation these days. It was not always so.
The Corporation-as-hands-tied-victim-had-no-choice-in-this-cutthroat-Free-Market-Global-Economy argument falls apart when you discover the monumental short-sightedness and blissful ignorance that American corporate executives displayed in understanding the very free market forces they were supposedly expected to exploit. Chrysler management will now please step into the shooting gallery.
Left unquestioned by most economists, economic policy analysts, auto industry watchdogs and the public is the existence of the big three. Only three, is the point. Americans know this phrase means the big three auto makers, Ford, GM and Chrysler, companies that once exemplified American industrial muscle. Big, yes, but clumsy, slow and dull-witted, which is also an apt description of their management. All three were caught flat footed by the oil embargo of the early 1970s, and painfully slow to respond with vehicles that acknowledged a quiet, new, creeping reality: The U.S. had an addiction to imported oil. In the late 1970s, Chrysler bungled itself into insolvency rushing the Dodge Aspen and Plymouth Volare to dealers, with the result that early buyers were de facto product testers. Recalls crippled Chrysler financially, and Chairman Iacoca approached Congress to ask for a loan guarantee. Ah, the public sector to the rescue, again. That much maligned, can't-do-anything-right, country-comes-first public sector. Corporate America loves to hate it, even when the public sector bails out their sorry, pompous asses.
In the U.S., no such discussion on the merits of an auto industry oligarchy ever ensued, save among economic theorists. At a casual glance, the big three looked to be a long-term money train. Climb aboard! Had our country been run more like some of the European Social-Democracies, a more fiscally sound auto industry, integrated into the needs of the country yet still privately held and properly regulated (In Germany, VW stands as an impressive example.), would have been globally competitive, and never come remotely near collapse, TWICE, mind you, in the case of Chrysler. Citizens in said European country would have, individually, collectively and through their representatives in government, weighed in on the merits of the near oligarchy. The debate would have been publicized and held, the questions asked. Corporate-types would not have had veto power over public good, and their competence would have been questioned for putting shareholders above the economic and political system that allowed them to prosper.
Note that by this time though, American CEOs had carved out a new role for themselves: celebrity entrepreneur. No longer truly tied to the fortunes of the monolithic companies they ran, their huge salaries, stock options, bonuses and golden parachutes insulated them from the need to forecast future trends, pay attention to developments in related industries, hawk genuine product innovation or engage in deep thinking and planning. In short, they no longer had to be dedicated, loyal, capable leaders. These are the habits of a long-term employee, one dedicated to the well-being of the organization. American CEOs had taken a page from the rule book used by professional athletes and entertainers. They marketed themselves to the highest bidder.
Not loyal to any entity other than their own bottom line, CEOs now hop from corporation to corporation. Madly enough, corporations outbid each other vying for these narcissists; companies now flaunt these peacock-figureheads as status symbols in a bizarre twist on the mutual admiration society.
Your neighbor agrees: there are loonies at the helm. The rich are very poor judges of how the nation's resources are best allocated.
Annoyed that the public sector does not cater to their whims, the monied elite have purchased political control in the U.S. House of Representatives and in many state legislatures. Their puppets have moved to destroy the power of public sector unions, though this act has no positive effect on the state budget deficits. Republican power-puppets have no clue how to balance their government budgets, but they have been spoon fed supply-side kool-aid and told that expanding corporate welfare is key to fiscal solvency. And like puppets, their mouths move and they burp any incoherent oink the Pig-citizens want to broadcast.
Pogo once intoned, “We have met the enemy, and he is us.” Apathetic citizens must own the blame for electing the clowns, buffoons, narcissists, sociopaths and megalomaniacs who pass for the vast majority of the current republican legislators. But you and your neighbor have the power of recall, the power of activism, the recognition of a common threat to the security of our nation, and the courage to talk to each other. The Pig-citizen and the puppet-legislator he purchased are the common enemy.
There is more to reveal about the idiocies of corporatocracy. The lunacy of private sector health insurance is on the spit.
In the next blog, we'll dissect a corporate lobbyist and search for evidence of...well...something...anything!
Lorenz Curve graphic copyright Robert Schenk from his article at http://ingrimayne.com/econ/AllocatingRationing/MeasuringIncomeDist.html
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