The Needy Rich and the Unwashed Masses

By Batocchio

The New York Times magazine recently ran a lengthy piece on Obama's economic approach by David Leonhardt. I'll be interested to read more reactions, but it certainly comes off much better than some of McCain's offerings, and at the very least a President Obama would not sit in absolute silence as his Treasury Secretary talked to him, as The Price of Loyalty reports Bush regularly did with Paul O'Neill.

Meanwhile, NPR's Marketplace on Friday featured an interesting segment related to DDay, Digby and Tristero posts last week:

STEVE HENN: No matter how many houses McCain or Obama own, they're both in the top 1 percent of American income earners. That means they're rich, right?

Well, rich is relative. Robert Frank is the author of "Richistan" and blogs on wealth for the Wall Street Journal. Frank divides the wealthy into upper Richistan, which includes the McCains and anyone worth more than $100 million. Middle Richistan starts at about $10 million. And then come the merely affluent.

ROBERT FRANK: Which in the world of Richistan is the worst kind of pejorative insult you could ever call anybody.

The Obamas recently became affluent.

FRANK: Yes, yes, but they are not McCains.

Plus, neither Old Money respectability nor social approval can just be bought. Why, it seems like just yesterday that millionaire pundits joined with millionaire candidates in chiding another (merely affluent) millionaire candidate for lacking the common touch and using the word "bitter."

Of course, the real issue is what the candidates' economic policies will do. As is often pointed out, the wealthy Franklin Delano Roosevelt's policies did a tremendous amount to help the poor and to create a strong middle class in America. But it's also important to remember that for his troubles, he was denounced as a traitor to his class by the rich and powerful. That line of attack doesn't play as well today, so instead Karl Rove, the man who offered us the most disastrous pedigree-over-merit candidate in American history, trots out from the veranda and with a straight face denounces Barack Obama as a country club elitist. (No racial ironies or subtext to that either, no sirree!) Rove's gambit, along with all the unpatriotic, elitist, sissy smears, is part of a conservative shell game William Buckley and Nixon helped perfect. The pitch is that the real enemy isn't socioeconomic elites, those rich individuals in gated communities, powerful corporations, and other oligarchs, instead it's those cultural elites like that snooty egghead professor who looks down on the movies you watch. The strategy has proven extremely effective, and as Brad at Sadly, No has pointed out, never underestimate the power of spite. Times may be tough, but if there's one thing America excels at, it's displaced anger, and there's nothing worse then letting a guy who's awfully uppity presumptuous succeed.

I'm often reminded of a passage from Johann Hari's great piece on the 2007 National Review cruise:

There is something strange about this discussion, and it takes me a few moments to realize exactly what it is. All the tropes conservatives usually deny in public--that Iraq is another Vietnam, that Bush is fighting a class war on behalf of the rich--are embraced on this shining ship in the middle of the ocean. Yes, they concede, we are fighting another Vietnam; and this time we won't let the weak-kneed liberals lose it. "It's customary to say we lost the Vietnam war, but who's 'we'?" Dinesh D'Souza asks angrily. "The left won by demanding America's humiliation." On this ship, there are no Viet Cong, no three million dead. There is only liberal treachery. Yes, D'Souza says, in a swift shift to domestic politics, "of course" Republican politics is "about class. Republicans are the party of winners, Democrats are the party of losers."

Here is George Bush's compassionate conservatism in all its glory; liberals are worthy of contempt on several fronts, and the poor clearly lack moral character and deserve their lot. (The stab-in-the-back belief is another issue, covered previously.)

To the degree there's class warfare, it ain't coming from peasants with pitchforks or a vengeful middle class, and it doesn't get much coverage. Most Americans probably didn't hear in 2006 that 18 families, including the Waltons, were behind efforts to eliminate the estate tax, which would “collectively net them a windfall of $71.6 billion.” Most haven't heard the charges in David Cay Johnston's book Free Lunch, which chronicles how "government subsidies and new regulations have quietly funneled money from the poor and the middle class to the rich and politically connected." Most recently, there's Thomas Frank in The Wrecking Crew, exploring similar territory.

It's quite rare to hear much about wealth inequity in America, let alone how much it grew under Reagan and now Bush the younger. One of the best pieces I've read on the subject remains Paul Krugman's November 2006 article, "The Great Wealth Transfer":

The number of Americans in poverty has risen even in the face of an official economic recovery, as has the number of Americans without health insurance. Most Americans are little, if any, better off than they were last year and definitely worse off than they were in 2000.

But how is this possible? The economic pie is getting bigger -- how can it be true that most Americans are getting smaller slices? The answer, of course, is that a few people are getting much, much bigger slices. Although wages have stagnated since Bush took office, corporate profits have doubled. The gap between the nation's CEOs and average workers is now ten times greater than it was a generation ago. And while Bush's tax cuts shaved only a few hundred dollars off the tax bills of most Americans, they saved the richest one percent more than $44,000 on average. In fact, once all of Bush's tax cuts take effect, it is estimated that those with incomes of more than $200,000 a year -- the richest five percent of the population -- will pocket almost half of the money. Those who make less than $75,000 a year -- eighty percent of America -- will receive barely a quarter of the cuts. In the Bush era, economic inequality is on the rise…

The widening gulf between workers and executives is part of a stunning increase in inequality throughout the U.S. economy during the past thirty years. To get a sense of just how dramatic that shift has been, imagine a line of 1,000 people who represent the entire population of America. They are standing in ascending order of income, with the poorest person on the left and the richest person on the right. And their height is proportional to their income -- the richer they are, the taller they are.

Start with 1973. If you assume that a height of six feet represents the average income in that year, the person on the far left side of the line -- representing those Americans living in extreme poverty -- is only sixteen inches tall. By the time you get to the guy at the extreme right, he towers over the line at more than 113 feet.

Now take 2005. The average height has grown from six feet to eight feet, reflecting the modest growth in average incomes over the past generation. And the poorest people on the left side of the line have grown at about the same rate as those near the middle -- the gap between the middle class and the poor, in other words, hasn't changed. But people to the right must have been taking some kind of extreme steroids: The guy at the end of the line is now 560 feet tall, almost five times taller than his 1973 counterpart.

That wealth transfer gambit has been going on for a long time. Several years back, I saw James Whitmore reprise his Will Rogers show and was amazed to hear him mocking the same "trickle down" arguments we heard under Reagan and still hear today, even if the rhetoric's changed a little. Will Rogers had their number back in the 30s:

The Hoover theory for relief was to provide welfare by “percolation.” Money given to those at the top would “trickle down” to the needy. Rogers was not sure that finance followed physical laws. He thought Hoover was making a false analogy. Hoover was an engineer and knew that water flowed downhill. “But he didn’t know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night anyhow. But it will at least have passed through the poor fellow’s hands” (WA, Vol. 5, 207).

All one had to do was look at what happened to the money loaned to the railroads and smaller banks. They had not used it to create jobs. Instead, they paid off their loans to the New York banks. “So the money went uphill instead of down. You can drop a bag of gold in Death Valley, which is below sea level, and before Saturday it will be home to papa J. P. [Morgan]” (DT, Vol. 3, 271).

I believe it was Al Franken who quipped on the Hoover Institution, that at least liberals don't found institutions named after their failed presidents and their failed policies. Of course, the Hoover Institution and pretty much every conservative think tank has little interest in good governance – they're all for those "failed policies" that don't do well for the country as a whole, because those policies succeed splendidly for the select few who write their checks.

Next week's Republican National Convention, the presidential debates, and general election coverage are likely to witness some familiar patterns on economic discussions.

Republicans will attack Democrats for raising taxes. They won't bother to mention that, for example, Obama's plan lowers taxes for the middle class and only raises taxes on the rich, or that McCain will be giving his biggest tax breaks to the rich. They will make the false claim that cutting taxes always raises revenues. They will target social programs and push for more corporate handouts. All this is in keeping with the long standing Republican precept: Every problem in America can be solved if we simply give even more money and power to the already obscenely rich and powerful.

Meanwhile, when the press do step in, they may acknowledge things are bad, but typically they'll ignore false statements by the GOP, muddy the issue or even outright parrot the Republicans. For examples, check out Bob Somerby on the media's "Reagan Rules" prohibiting calling out Republicans on "cutting taxes always raises revenues" and similar nonsense, Crooks and Liars on Charlie Gibson's misleading capital gains tax debate question, and Jamison Foser on Wolf Blitzer and misleading discussions on economics by the media as a whole. (That line about the press being John McCain's base was right in more ways than one.)

At this point, most Americans know things aren't great, even if they don't know the details of how precisely they've been screwed over. While I'd like to see the Democrats covering other issues as well, such as Iraq, human rights and the overall corruption of the Bush administration, it's important for the Democrats to keep hitting economic issues, and they'd be wise to continue to personalize those issues and give them a human face. It shouldn't be hard. The Democrats won't win over the hardcore Bush supporters, but they can potentially win over many swing voters. (It bears mentioning that there are conservatives who realize they'd be better off economically under the Democrats, but just consider social issues more important. The National Review crowd obviously prefers Republican economics, but there are less affluent Republicans who do as well. But there's far, far more to be said and that's been said on the liberal-conservative divide on principles and worldview versus condescension and spite.)

Paul Krugman's book The Conscience of a Liberal makes a compelling case for the practical benefits of liberal economic policies in addition to their moral aspect. There's another great way to discuss this:

In All Together Now, Jared Bernstein, a senior economist at the Economic Policy Institute, offers a trenchant critique of the economic, political and moral shortcomings of conservative social and economic policy that he dubs YOYO, or “you’re on your own.” He wittily contrasts them a progressive strategy that recognizes that “we’re in this together,”: WITT.

John McCain is certainly no FDR. If Obama's elected, there's still the question of how much he'll be, either. Whether it's this election or a future one, the challenge will be to push the president, and Congress, in a liberal direction. Rick Perlstein has outlined "A Liberal Shock Doctrine" with precisely that in mind, because institutional inertia is a mighty obstacle to progress.

You wanna talk a liberal-conservative, or middle class-rich divide? I think two videos sum it up. Via Blue Gal, FranIAm recently posted Mario Cuomo's 1984 convention speech:

Meanwhile (via Marketplace again), I hear barbeque and doughnuts are much tastier when they come in special wrapping paper: