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Class Warfare and the New Gilded Age

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During the 2000 campaign, George W. Bush and many conservative commentators attacked Al Gore for engaging in "class warfare" after Gore promised to help the little guy and criticized Bush for favoring the rich. Four years later, the Republicans, using a page from the same playbook, attacked John Kerry and John Edwards for being populist class warriors because of their talk of Two Americas.

In this year's campaign, there's a big difference, at least so far. John Edwards, Hillary Clinton and Barack Obama have all used robustly populist language about the problems facing America's have-nots, but this year the attacks for engaging in class warfare have largely disappeared.

The reason for this may well be that the news media, political commentators and even many Republicans have come to recognize that income inequality has grown far worse and that many Americans are angry about the widening gap between those at the top and everyone else.

In recent years, the statistics regarding income disparity in America have been startling. After-tax annual income for the bottom fifth of American households inched up just 6 percent form 1979 to 2005, according to the Congressional Budget Office. During that time, income for the middle fifth of households grew by a modest 21 percent, with much of that gain caused by women in many households working more hours. Over that same period, income for the top fifth of households jumped by an impressive 80 percent, while income for the top 1 percent more than tripled, soaring by 228 percent.

The highest-earning fifth of households received 51.6 percent of the nation's after-tax income in 2005, meaning that the income of the top fifth exceeded that of the bottom four-fifths. As for the top 1 percent of households, they received more after-tax income than the bottom 40 percent, according to the Congressional Budget Office. A study that Thomas Piketty and Emmanuel Saez did based on federal tax returns found that the top 1 percent of households, averaging $1.1 million in annual income, received nearly 22 percent of all reported income in 2005, up from 9 percent in 1980. That income shift helped create the greatest level of inequality since the Roaring Twenties.

Lawrence Summers, the former Harvard president and Treasury Secretary, found that were it not for this increased inequality the bottom 80 percent of Americans would be doing considerably better. If the distribution of income today were the same as in 1979, Summers said, assuming the same level of economic growth since then, income of the bottom 80 percent of Americans would be about $670 billion more a year--or about $8,000 per family. For many households in the bottom half, this would mean a welcome 20 to 30 percent increase in income, perhaps the boost needed to avoid foreclosure.

An objective outsider who laid fresh eyes on America's economic scene, a twenty-first century Tocqueville, would probably think that the federal government would be eager to use tax policy to offset these widening disparities.But the tax cuts that President Bush and Congress enacted since 2000 have in many ways aggravated the disparities, according to statistics from the Tax Policy Center, a respected, nonpartisan research group. Those tax cuts gave $20 on average to the bottom 20 percent of American households, $744 on average to the middle fifth, and $118,477 to those with income or more than $1 million annually.

One can see the economic divide widen in another way. The average income for the top 1 percent of households was ten times that for the middle fifth in 1979. By 2005, those in the top 1 percent earned 21 times as much as those in the middle. Income for the top 1 percent of households averaged 70 times that of households in the bottom fifth, the greatest gap on record, up from 23 times as much in 1979.

At the pinnacle of the inequality pyramid are the nation's CEOs. American corporations may be tightfisted about raises for most workers, but they paid their chief executives $10.5 million on average in 2005, including salary, bonuses and stock options. That was quadruple their pay a dozen years earlier. This means the typical CEO earns 369 times as much as the average worker, up from 131 times in 1993 and 36 times in 1976.

Reducing inequality won't be easy, but according to many economists, there are numerous measures that would help, among them increasing taxes on the richest Americans, increasing the earned income tax credit, ensuring greater educational opportunities to those at the bottom, making it easier to unionize low-wage workers and doing more to preserve manufacturing industries that pay middle-class wages.

When I give speeches about my new book, The Big Squeeze, Tough Times for the American Worker, (see stevengreenhouse.com), I often ask the audience, "Was it Jesse Jackson, Ralph Nader or John Edwards who said the following?"

"The average American went exactly nowhere on the economic scale" over the past two decades. "He's been on a treadmill, while the superrich have been on a spaceship." The person who actually said that was Warren Buffett, now America's richest person.

Buffett, known as the Oracle of Omaha, had another surprising insight: "There's class warfare all right, but it's my class, the rich class, that's making war and we're winning."

What is little understood is that those who accuse others of class warfare as they seek to silence anyone who criticizes America's worsening income inequality are slyly engaging in a form of class warfare themselves--with the aim of defending the interests of those at the very top of the income pyramid.


119 Comments

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"We make money the old fashioned way; we earn it."

Until the American worker realizes that they -- our rich and famous plutocrats -- don't, that they make their money by manipulating finance capitalism, nothing will change.

The Clinton's got rich because many, many people are willing to pay a fortune to listen to Bill's bullshit. Kerry and Gore are beneficiaries of inherited wealth. Edwards got rich as a class-action lawyer.

Meanwhile you don't have a word to say about all the tech billionaires who've given the world so much, or the Hollywood and sports stars, or the thousands of successful inventors and small-business entrepreneurs, or even the Walmart owners.

Naturally, none of these people squirrel their money away in mattresses. They invest it as wisely as they can with the help of "manipulators" as you so contemptuously put it.

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I'll give you the few thousand entrepreneurial outliers, offensiveto you, just as long as you'll give me the several million rent seekers and financial manipulators*.

* Can't wait to hear your "Stanley O'Neill made his money the hard way -- he earned it" argument.

@ Ellen

I think you've got at least part of it right. There aren't that many original thinkers and few of those are tough entrepreneurs.

Ever been in the business of building or renting? It's not as easy as you might think. The unhappy fact is there are lots of terrible renters - incapable of paying their rent, incapable to taking care of the property they are allowed to use, and certainly incapable of building anything for themselves.

As for financial manipulators. Investing money is not easy, even when you are knowledgeable and honest. You don't just sit back and receive the rewards - unless you have so much that you can afford to stay with only the safest...and then you're going to watch your capital slowly disappear.

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Why should income earned through that investment be taxed at a lower rate than income earned through labor? They are both necessary to the economy but we show that we value speculation over production by taxing speculation more lightly. This exasebates the short term menatality of investors and encourages the boom and bust cycle.

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Please note that rent seeking I referred to doesn't have much to do with "the business of building or renting" you're arguing for.

@ larry geater
I didn't make any argument about how taxes should be apportioned between labor and income. Offhand, my position would be that it depends on the situation.

@Ellen
Duly noted.

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You have argued in favor of the current distribution of wealt and that disparity in taxation is the cause of our current situation.

@larry geater
The cause of that dispartity is unequal distribution of talents, intelligence, capacity for hard work, luck, family history.
The remedy for that proposed by progressive is confiscatory taxation. I've been arguing - strongly - against that.

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Offensivetoyou says;

"The remedy for that proposed by progressive is confiscatory taxation. I've been arguing - strongly - against that."

Aren't all taxes "confiscatory"?

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I am not arguing that outcomes should be equal. I am arguing that they are excesively unequal. The difference you list are part of the reason there are differences in outcome, inhertance and luck play a large part as well. But they do not account for the magnitude of those differences. The magnitude of those differences result from our regressive taxation system and the scrapping of reasonable regulation of the markets. The argument is not that the CEO should make the same thing as a floor worker. The argument is that 40 times as much is enough. 400 times as much is excessive (and is an unsustainable historical and political anomoly BTW).

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Larry,

the biggest problem concerning the distribution of wealth in this country is the disproportionate influence that disproportionate wealth can buy from the Government.

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It only buys disproportiante influence when the population is docile and uninfrormed. When we pay attention and vote (as we do when things are bad) we can offset that influence with our numbers.

@larry geater

We're closer than I thought. Perhaps we might even reach some sort of understanding. But the architecture of this site makes it too difficult to have a real conversation. My posts are now disappearing, or appearing in unexpected places.

So I give up. Let me conclude by saying that I disagree with you as to causes. The cause of the current disparities is the same as the cause of the original guilded Age; unexpected opportunities in areas not accessable to government regulation, opportunities which can be exploited by the intelligenct, the agile, the ambitious, long before ponderous government can react.

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offensivetoyou says;

"unexpected opportunities in areas not accessable to government regulation, opportunities which can be exploited by the intelligenct, the agile, the ambitious, long before ponderous government can react."

Sounds like the ENRON gang.

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offensivetoyou says:

"The cause of the current disparities is the same as the cause of the original guilded Age; unexpected opportunities in areas not accessable to government regulation, opportunities which can be exploited by the intelligenct, the agile, the ambitious, long before ponderous government can react."

Offensive, "long ponderous government" and their "government regulations' don't come into existance in a vacuum. Government regulations come in existance to fill a void, a need, usually after a scandal like the S&L rip off, or an airplane goes down and its discovered the managers cut corners to increase the bottom line,
the Ford Pinto, pharmaceuticals that haven't been thoroughly tested, unsafe food or other products, toxic waste dumps...and the list goes on, all giving birth to government regulations.

There's no doubt that the "ponderous government" will come along with a regulation or two after those people you mentioned, "intelligenct, the agile, the ambitious," get to work for a while.


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@Offensive:

Meanwhile you don't have a word to say about all the tech billionaires who've given the world so much, or the Hollywood and sports stars, or the thousands of successful inventors and small-business entrepreneurs, or even the Walmart owners.

You are not paying attention, speaking from a position of (apparent) willful ignorance.

The greatest mass of technical work, and its contribution to the economy's performance, is not built personally by the few tech billionaires. The majority of the stuff that makes it happen come from a large number of truly brilliant, creative people who work every day. These people usually make a reasonable middle class income, but essentially none of them reap the "billions" of which you speak.

Much is made of the value of the few who really made tons of money: The Googles, the Microsofts, the H-P's, and by creative use of technology to control inventory turns etc, the Waltons.

Such people had good ideas, and the wherewithal to guide the overall form of their implementation. But in EVERY SINGLE CASE, the implementation was done by many many people, applying their own creativity and muscle to the processes that made these companies so rich.

To finish, I wonder whether you have a clue about the thousands of brilliantly creative people who contributed their ideas and work openly, for the world to use without seeking big bucks for it. I'm thinking not, since those people violate your most precious principles by failing to transform their brilliance directly into massive personal wealth.

Here are just a few of their projects, in no particular order (merely the list that comes immediately to mind):

Gnu Compiler Collection
Linux kernel
OpenBSD kernel
Apache web server
Mozilla browser (after Microsoft destroyed Netscape)
MySql relational database
Postgres relational database
Koffice
Gnome desktop environment
KDE deskto environment
hundreds of system utilities
Network management systems

People who work in the Microsoft ecosystem don't usually see the huge ferment of engineering that supports the world's communication infrastructure. A substantial fraction of that infrastructure is produced in an openly collaborative (though *extremely* competitive) development environment.

The point of this story is simple enough even for an Offensivetoyou: Life is a team sport, and it's about time people behaved accordingly.

@ lenski

I know quite a few of those brilliant workers. They are well compensated. Usually very well compensated. They do not have IQs of 85 or less. They have a terrific, and I mean terrific, work ethic.

Those who voluntarily contribute their skills to collaborative efforts which are distributed freely do so voluntarily (obviously) and are not prevented from doing so (also obviously).

So what's your point?

I think his point is that you are a flaming asshole. And if that is indeed his point, I am in total agreement.

FOAD.

@ The Old Grouch

Hey monitor, are you asleep? Because this post is as vulgar as can be and contributes absolutely nothing in the way of analysis.

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offensivetoyou says:

"@ The Old Grouch

Hey monitor, are you asleep? Because this post is as vulgar as can be and contributes absolutely nothing in the way of analysis."

offensivetoyou says:
"
The Clinton's got rich because many, many people are willing to pay a fortune to listen to Bill's bullshit."

Offensivetoyou to MarkG8

"This suggests your confusion was not an aberation but an indicator of a general mental condition."

Offensivetoyou to Marquis de Sea;

"I'd trade a few of him for virtually all the progressives in the country. You worthless rabble don't deserve any of its opportunities."

Offensiveto you to @ serafinapekkala, Marquis de SeaToShiningSea

"I'll bet you think you've made clever rebuttals."

Offensivetoyou to @libertine

"I'd care more about your opinions if you could read with understanding...but you can't and I don't."

Offensivetoyou, I think you're right, the monitor is asleep.

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Life is a team sport...

Inasmuch as there are often people who are standout performers and clearly earn greater influence, better access to personal resources, their best capacity for earning is supported by their teammates. Always, 100.00 percent of the time.

My point oh obtuse one, is that it takes the entire team to achieve the strategic goal, and that the other teammates are unlikely to be motivated to move forward when they are starving.

To repeat:

Keep the goose alive by feeding it, rather than starving it and wondering why it stops delivering. Stop flogging the emaciated and hungry goose, demanding the golden eggs that you know it could deliver if only it were properly motivated.

And to bring this back to the point: Educated students not overburdened by debt are far more likely to focus on the task at hand than those who are scrimping and stressing over how to pay rent, school loans, food and transport, all in the context of wondering how they will avoid being ripped off because they cannot afford to live in a safe neighborhood.

@ lenski

Your analogy is not completely apt but it's accurate enough so that I'll stick with it. Team members are supposed to contribute something worthwhile. Those who don't are dismissed, kicked off, booted out. It happens all the time. Usually those who suffer such a fate are not happy about it, and are forced to lead lesser lives. It happens in sports and it happens in life.

What to do about it is an unsolved problem. Usually guys like you are quite generous in contributing the resources of others, much less so in contributing your own.

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What to do about it is an unsolved problem. Usually guys like you are quite generous in contributing the resources of others, much less so in contributing your own.

Until very recently, I was in exactly that position and was perfectly happy paying people what their work was worth.

You are a liar, both to yourself and to those around you.

In general, what people here and elsewhere suggest is a simple deal:

1) Be paid what one's work is worth

2) Be able to survive on it.

It does not include

3) Being paid multiple times what one's work is worth, merely because their IQ is higher and they have learned to manipulate the system to their benefit.

The current huge disparity between particular classes of work is a perfect example of idea number (3) above.

@ lenski

There'll always be arguments about what work is worth. So far, the market provides the best answer.

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But the market does not exist in a vacume. For most of the twentieth century, and still in Europe and Japan, the average CEO made 40 times what the average worker made. Now in this nation the average CEO makes 400 tiomes as much. Why is that? It is because we have Taxation and regulatory policy that leads to that disparity. We could cange some tax policy by shifting some of the tax burden that is currently placed on wages to capital gains for example or by trating all income the same and get back to that reasonable compensation disparity that allowed for the great rise of our working class that happened in the post war years.

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Offensive,


I'm sure McCain is investing his wife's millions wisely. And I'll bet Bush's family wouldn't let him near their fortune. By the way, how did Bush do as an independent oil man?

Offensive,

that you attack Democrats for what you see as less than admirable qualities while ignoring the same 'misdeeds' in your own family reduces you to not much more than a Rush Limbaugh dittohead.

@ JohnW

Try to understand instead of distorting by use of selective editing.

And

Try to understand that I am not a Republican, or a Conservative despite finding Free Republic far more reasonable than TPMCafe. George Bush and people like him run as representatives of unregulated, laissez-faire capitalism (as any person of normal intelligence should understand). Therefore one cannot criticize them in the same way as those who run as populists but are, in life, anything but.

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Offensivetoyou says:

"@ JohnW
Try to understand instead of distorting by use of selective editing."

Nothing is distorted, of course its selective editing, its the way to show how you see other's insults but not your own. I selected the insults in your posts to make my point.

Whether you're a republican or not, you still chose 5 Democrats to make a point when it would have been just as easy to add a Republican or two who were guilty of the same charge.

And you talk about being "selective"?

@JohnW

My insults almost always follow a detailed analysis, and are almost never vulgar. That was not true of The Old Grouch.

The point was that these guys were living off wealth they didn't earn, or earned in ways not normally classed as productive. The Democrats criticize such behavior. Therefore it is fair to label them hypocrites. The Republicans don't. Therefore they must be criticized on different grounds.

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Offensivetoyou says:

"My insults almost always follow a detailed analysis, and are almost never vulgar. That was not true of The Old Grouch."

heh, heh, heh.

@ JohnW

heh, heh, heh

Ever meet a guy who tells you the same joke over and over again? Think about it.

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offensivetoyou asks;

"Ever meet a guy who tells you the same joke over and over again? Think about it."


No, but obviously you did, tell me about him.

heh, heh, heh.

Re: Kerry and Gore are beneficiaries of inherited wealth.

So was FDR. Ditto, JFK. So what?


John: Cindy, I need a cool million or so to run my presidential campaign.

Cindy: I know my darling, but do I really look fat in this Christian Dior dress?

John: No, sweetie, you're so pretty....and rich!

Cindy: Am I more pretty than rich?

John: Yes, you are so BEAUTIFUL, how many times do I have say it...... please, I am running for POTUS, you know….

Cindy: More pretty than your mangled up ex?