Editor: One of our bloggers, PSD, wrote the following in response to a discussion in the comments to the post that 1% of Americans own 90% of our wealth. We thought it was spot-on and decided to make it a post of its own.
“Perfectly Legal” by David Cay Johnston and “What’s the Matter With Kansas?” by Thomas Frank – great starting points on what’s f’ed up with our current tax system and why the wealthy have been able to sell a good chunk of the middle class on keeping things in their current atrocious state. I’ll lend either to anyone who’s interested, wouldn’t mind swinging by to pick them up, and promises to either return them or pass them on to someone else.
Class warfare isn’t about rich vs. poor, it’s about middle class vs. poor. The people who are truly rich don’t really care one way or another, they have enough for themselves and that’s all that matters. Look at Barron Hilton – he’s ran the hotel chain his family built into the ground but he’s got enough money that he’ll never run out and his kids don’t even have to bother trying to make anything of themselves ever. And if (shudder) they have kids, same deal.
It’s the middle class – especially the upper end that grosses something in the low six figures – that this teabagger shiz appeals to. They busted their asses in school (and probably have a mountain of student debt to show for it if they’re second-generation upper middle class and mom and dad made too much for them to get student aid but not enough to pay their way through college), they bust their asses at work, and they pay the biggest share of taxes as a percentage of income because they’re in a high bracket but don’t have enough sophistication to finance complex investment vehicles or stash their funds offshore like the truly wealthy.
The mindset of the (marginally) rational teabagger goes something like this: I could be rich. I work hard enough and make enough money to actually get ahead in life. But all these entitlement programs for the poor and the illegal aliens (for some reason they all have this fascination with the idea of an immigrant as a non-contributing freeloader) are pushing my taxes just high enough that I can’t put any money away to start building the kind of reserves that distinguish the upper class from the highest end of the working class.
They’re able to convince themselves that since their hard work brought them success, people that haven’t found success simply aren’t trying hard enough. They find it easy to discount outlying factors that might have given them opportunities that other people, even though they might work just as hard, might not have had. Maybe growing up in a suburban neighborhood got them sent to better schools, or having two parents at home meant they got some attention instead of having to learn the more basic skills of fending for oneself instead of studying algebra. Maybe Dad had some pull at the firm and they got hired on as a management trainee instead of a file clerk and climbed the ladder faster because they started a few rungs higher. I’m not even going to touch the issue of race or a myriad of other possibilities.
How do you change this perception, and bring a sense of responsibility for your fellow man to these kinds of people? That’s the big question, and if I had an answer I’d be gearing up for my presidential run in 2020, when I’ll be old enough to sign up. I think part of the solution is shifting the nation’s burden of taxation from the middle class to the wealthy elite.
An abysmal failure in getting to this end is the reduced tax rate on capital gains. Rich people don’t make money by working, they make money by investing. And if their gains off those investments are taxed at a significantly lower rate than the sweat of the working man, they’ll continue to get ahead, the middle class will continue to fall behind, and they’ll continue to look down at the poor they’re being forced to support instead of the rich who are quietly declining to pay their fair share.
Another sticking point with a lot like Joe the Plumber is ‘handouts,’ as if this tax money is going primarily to the poor.
Government handouts – is anyone naive enough to believe they primarily benefit the lower class? Unfortunately, that’s apparent.
Welfare is the main demon in the eyes of the anti-entitlement crowd. But it’s a relatively minor cost compared to other ‘handout’ programs that benefit everyone, or even primarily the rich. (I don’t have current exact figures in front of me and don’t feel like researching now, if anyone wants to argue numbers with me feel free to post yours up, or I might go looking for my own sources and some links to provide.)
Even welfare isn’t anything close to the free ride the ignorant make it out to be. There have been some excellent articles posted here recently (Lane Tobias’ are coming to mind) illustrating how many eligible recipients are discouraged from taking part in the system. And reforms enacted during the (gasp) Democratic regime of the ’90s have made it even harder to get a little help and have ensured that help doesn’t last.
Let’s look at other handouts – how about Social Security and Medicare? Anyone of a certain age can take advantage of these, except people in my generation, because we’re likely to run out of money by passing it all out to you geezers in the crowd before I get old myself (all the more reason to smoke myself into an early grave).
While it’s true that the poor rely on these benefits more heavily than the rich in that they have more meager pensions and investments to draw from (if they have any at all, and pensions are another thing going the way of the dodo and unlikely to be significant to anyone under 40 today), I don’t know of anything that precludes the middle or upper classes from taking advantage of this handout once they’re eligible.
How about farm subsidies? Something like 80% go to massive farms owned and controlled by corporations. When the teabaggers stir up outrage over farmers being paid to NOT plant crops, they’re really talking about big agribusiness, not Old McDonald the subsistence farmer who sells his crops at the local farmer’s market.
What about the bank bailouts? These are a hot topic lately, and one that hits close to home. Basically the government is giving the banks money there to shore up their books and protect against future losses on bad loans they’ve already written. The idea was to jump start lending, but after underwriting standards were so sloppy for so long (the criteria banks used to decide how likely you were to pay back the money you were borrowing), they’re tighter than a drum today and even people who are legitimately qualified to borrow are being turned away – that is, the few legit borrowers who are actually optimistic enough to want to borrow money to make any kind of investment in our country, given its current sorry state.
The bailouts are only the beginning – there’s also the federal funds rate, the interest that the Fed charges banks to borrow money. It’s been pretty much zero for a while now, meaning the banks could borrow money almost free and then lend it out to make 100% profit. But they’re not even doing that – they’re buying government bonds, where the government guarantees to pay them a fixed interest rate that’s considerably higher than the Fed rate.
So basically the government is giving the banks free money, which they’re then loaning back to the government and collecting a tidy profit for doing so. Who wants to take a gamble on Joe Homeowner when lending your money back to the guy that lent it to you is a guaranteed profit?
One more on banks, since the handful of people who’ve read my old rants know this is my forte – FDIC-assisted bank takeovers. To sum up a much longer rant (available at http://obrag.org/?p=6293 and guaranteed to cure insomnia), when the government decides to close down a bank, the FDIC will find a buyer on the sly before announcing the imminent closure, and cut a deal.
Most of these deals go something like this: the acquiring bank gets all the branch locations of the failed bank, all their customers, all their customers’ deposits, and all their good loans, for free. On the bad loans, the FDIC agrees to reimburse them for somewhere between 80-95% of any losses they suffer in the first few years after the takeover.
This in turn encourages the bank to flush out the losses as quickly as possible. And since the losses are basically all covered by someone else (you and me, because the insurance premiums banks pay the FDIC for coverage are passed on to us in the form of basement-level interest rates – checked what your savings account is paying lately?), there’s really no motivation not to lose money.
For the last few years I ran an operation that disposed of these bad loans, and did it pretty efficiently – figures show that after paying my employees’ salaries and benefits and operation costs, the bank was losing about $700,000 a month less than they would have through traditional means. When my company eventually was taken over and handed to another, what did they do? They laid everyone off, because they saved money in employee costs and could bill the extra losses that we were preventing to the American taxpayer.
Now that’s a handout, and it’s not going to the poor, though a lot of my former staff and their families are now navigating the maze to collect the kind of benefits that the teabaggers love to hate on.