Class Warfare, My A__!

September 19th, 2011 at 12:23 pm

There’s an old trick in politics: if you’re winning a fight and the other side tries to do something about it, deny there’s any fight at all.

“Class warfare!” is the big pushback talking point of the R’s in response to President Obama’s call for a balanced deficit reduction plan that calls for more revenue from those who are a) doing the best and b) still benefitting from the highend Bush cuts.

But the fact is—as the figures show—what growth we’ve achieved in recent years has almost exclusively gone to those at the top of the income scale.  As the recent Census report revealed, median household income peaked in 1999, went nowhere in the 2000s, and tanked further in the great recession.  At $49,500, this metric of middle-class income is now $4,000 below its 1999 peak (2010 dollars).

Now, I’m not crazy about the vernacular of class warfare—it’s too reductionist and doesn’t explain much of what’s going on.  But if you want to call developments like these–deregulation, supply-side tax cuts, anti-unionism, cuts in government supports and investments, globalization over domestic investment, anti-Keynesianism—class warfare, and you’ve got a point, then one side is winning.

And guess what?  It’s the side that doesn’t want you to talk about it.

[Update: Commenter CS had the bright idea to add a figure (the middle one below) on the share of income going to the top 1% and the top 0.1% (that's the top tenth of the top 1%) with data going all the way back to 1913!--like I said, if there's a class war, it's an awfully dramatic picture of who's winning.]

[The figure above shows real after-tax income gains through 2007, the most recent year in this series...the great recession certainly whacked high incomes as well, but data on corporate profits through the middle of this year suggest they've more than recovered, while wage trends show continued weakness.]

[Source: Piketty and Saez; these data show the share of income, including realized capital gains (which play a significant role in the growth of inequality) for the top 1% and the top tenth of the top 1% (avg income, $3.2 million in 2008) going all the way back to 1913!  And today's levels of income inequality are the highest on record since the late 1920s...and we all recall how that worked out...right?] 

[This one has the median in there, showing the flat and falling real trend since the latter 1990s.]

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21 comments in reply to "Class Warfare, My A__!"

  1. Tyler says:

    I don’t understand how raising taxes on the rich will help the poor.


    • fyzzics says:

      We have a serious budget shortfall, and serious debt that must be managed. That means less money must be spent, or more money collected by the government, or both. If more money is not collected from the rich, who can afford it, then that money must be extracted from the poor (and middle class, of course) either through increased taxes or decreased services (like cuts in Medicare, Social Security, Medicaid). The problem for the poor and middle class is that they don’t have the monetary clout (political donations and lobbying) that the wealthy individuals and corporations do.

      The point of this article is that, having collected the lion’s share of the gains over the past decade, the wealthy can, and should, pay a larger share back to get us out of the hole we are in.


      • Tyler says:

        A nation with monetary sovereignty (such as ours) cannot go broke.

        Just imagine you had bottomless pockets. That is the United States government.


      • foosion says:

        Shorter answer: if we don’t raise taxes on the rich, we’ll have to cut spending that benefits the poor. Cutting spending will hurt the poor a lot more than raising taxes will hurt the rich.


    • jhaygood says:

      raising taxes (revenues) would allow the US to continue to maintain roads, infrastructure, police, fire protection, schools, unemployment insurance, assistance programs, libraries, retraining programs, incentives to new businesses, and on and on. and moving that money into the economy and promoting growth will help us over time to address deficit issues too.


    • PolicySage says:

      Tyler,
      We have two major problems at present, one mid-term, the other short-term.

      The mid-term problem is to control the Republican-inspired deficit. We cannot do this by cutting up the social safety net any more than we have; it must, therefore, by simple math, be done by increasing revenues, and the only people who have any money are the ones in the upper few percentiles. So to solve the mid-term problem, we have to raise revenues on those with incomes in the very top brackets.

      The short-term problem is vast unemployment and underemployment, which requires federal government action as the “spender of last resort.”

      Obama’s new plan is set to resolve these two problems by increasing revenues for the brackets that can afford it, and reducing the pressures to wreck the vestiges of the social safety net (which R’s want to destroy – “let him die, let him die”) and by providing millions of useful new jobs where society most needs them.

      Hope that helps!


    • Anthony Miller says:

      Are you FOX viewer? The programs design to help the poor in an economic cycle like we are in right now will be severely hurt if you only cut spending and do not find ways to raise revenue.


      • Tyler says:

        I don’t think we should cut spending, and I support a progressive tax code.

        “… a big deficit-reduction program would destroy the economy, or what remains of it, two years into the Great Crisis.” – James Galbraith


  2. David says:

    The Republicans have been engaging in class warfare since Reagan. Its about time that the Dems should fight back — and they should proudly say that “Yes, we are finally taking up our side of the battle!”


  3. Anon says:

    This is a really nice graphic but it fails to tell the whole story. The first, but unspoken, point is that all sectors saw income increases regardless of where they fell in the income scale. This is a good thing achieved under periods of varying parties controlling the White House. More importantly though, it does not show how the areas of the greatest growth also pay more in taxes because of it. It is widely held that the top fifty percent of income earners pay nearly 100% of all income tax and the top 1% pays almost 40%. A corollary could be that the bottom 50% pays next to nothing in taxes and have still see their incomes increase. So to say that, just because those who have worked hard, taken on more resposibility, and ashieved more, should also see their taxes go up even further while the rest do not share the burden, is not arguably class warfare is surprising.


    • D. C. Sessions says:

      Anon argues that the upper 50% pay all of the taxes, and that’s not fair. I know I wake up every morning envying the “lucky duckies” who make less than half of what I do for their not paying any income taxes. I wish I, too, could live their carefree lifestyle as I watch them on street corners with their cardboard signs in the balmy Phoenix summer.

      However, alas, no such luck. I’m stuck with a mortgage, car payments, a job that sucks up my time, home maintenance, Bursar’s bills, and to add insult to injury: income taxes!


    • general c. san desist says:

      The Federalist No. 36 on Taxation…and (taxation) must naturally tend to make a fixed point of policy in the national administration to go as far as may be practicable in making the luxury of the rich tributary to the public treasury, in order to diminish the necessity of those impositions which might create dissatisfaction in the poorer and more numerous classes of the society. Happy it is when the interest which the government has in the preservation of its own power, coincides with a proper distribution of the public burdens, and tends to guard the least wealthy part of the community from oppression!

      The summation of the Conservative Brotherhood view on capital & labor is thus…it is merely a question between standing idle or accepting the rate of pay that must be accepted when workmen find that it is useless to fight the laws of political economy…New York Daily Graphic, December 6, 1873


    • sven says:

      You claim that JB has been misleading. Let us look at your own arguments.

      “…all sectors saw income increases regardless of where they fell on the income scale.”

      It is clear from this statement that you did not read this post in detail. The first graphic has as its end date 2007. The following graphic, which extends to 2010, makes it clear that incomes at the 20th percentile have not seen any increases (adjusted for inflation) since 1973.

      “It is widely held that the top fifty percent of income earners pay nearly 100% of all income tax and the top 1% pays almost 40%.A corollary could be that the bottom 50% pays next to nothing in taxes and have still see their incomes increase.”

      By limiting the discussion to income taxes you have profoundly misrepresented the tax burden in this country. In addition to federal income taxes there are a vast array of other taxes which every American pays. Unlike federal income taxes, the great majority of these other taxes are highly regressive. This means that individuals with lower incomes actually pay a higher share of income in these taxes than wealthier individuals. If you want to discuss who pays taxes in this country you would find that the burden is progressive but only slightly.

      http://economix.blogs.nytimes.com/2009/04/13/just-how-progressive-is-the-tax-system/

      “that those who have worked hard (…)should also see their taxes go up even further”

      The wealthy have benefited from enormous tax cuts over the previous three decades. Far from bearing an increasing personal burden, their individual share (as a % of income) has plummeted in recent years. Higher marginal tax rates on the wealthy would in fact be a return to historical norms not some aberration.



  4. Tom says:

    This was discussed a few months ago, but even the 95% increase for the top quintile is misleading, as most of that is a result of the gains in the top percentiles; I believe that the 81st-95th percentile gains are much closer to the 4th quintile than to 95%.

    Anon who says those one the bottom should be happy because their income has gone up a little is all wet. For one, their share of national income has gone down. For two, their income gains are far below their productivity gains. The income that they should have gotten from increasing productivity has been effectively stolen from them.


    • D. C. Sessions says:

      Have their hourly incomes reflected their productivity gains at all? Or has their income increased due exclusively to increased hours worked?


  5. general c. san desist says:

    …seems Roosevelt attempted the same results through the Wealth Tax Act of 1935, which in its final form, was dismal in achieving the desired outcome. It erased the distinction between big & small business, did not progressively redistribute wealth & did little in capturing the targeted revenue.

    The wealthy had to wait until the war years for serious change in the distribution of income…something the Republican Congress refused to do in these war years.

    The supply side argument has taken that 3 hour cruise to Murphy’s Island…oops, Gilligan’s. I hear it is sparsely populated.


  6. Paul J says:

    When you break down the numbers by presidential administrations, and consider whether an income group’s income grew at a greater or lesser percentage than GDP grew as a whole, we find that even the 95th percentile did not do as well as the economy as a whole during the Bush 43 years. GDP grew 8.7% (inflation-adjusted) from 2001 t0 2008, while the 95th percentage saw their wages increase 7.7% (also inflation-adjusted) during those years. Meanwhile, every income group from the 95th percentile saw better income growth during the Clinton years than during the Bush 43 years.

    http://95pctleftbehind.blogspot.com/2011/09/ninety-five-percent-left-behind.html

    For Republicans, one gets the feeling this is not a bug, but a feature.


  7. PolicySage says:

    Jared, How about adding a column for the top tenth of one-percent, or would that help?


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