Soak the Poor
At the end of last week, we received the simply shocking news, via a report from the non-partisan Congressional Budget Office, that Bush’s tax cuts benefit the wealthy far more than the middle class. According to this story from the Seattle PI, “Fully one-third of President Bush's tax cuts in the last three years have gone to people with the top 1 percent of income, who have earned an average of $1.2 million annually.” Furthermore, financial problems and budget cuts at the State level have resulted in higher taxes – mostly sales and other regressive taxes – that fall disproportionately on people at the lower end of the income bracket. Imagine that!
Needless to say, this was no secret to people on either side of the policy debate. The more-or-less official goal of Republican tax policy is to transfer the tax burden from unearned to earned income – that is, from the people who pay things like the capital gains tax and the inheritance tax, which affect only the very highest income individuals, to people who derive most of their income from salary and wages, primarily the middle- and working-class. This program is driven by a mixture of ideological enthusiasm for the most unforgiving free-market economic theory and pure greed of the “I got mine, sod you Jack” variety, and is embraced in its fullest dimensions only by a handful of very vocal extremists in places like the Club for Growth and the editorial page of the Wall Street Urinal.
Seen in its very best light, the goal of this policy is to unshackle the free market to drive innovation, economic growth and resource allocation with the highest degree of efficiency, and to align economic incentives (e.g. wealth) with the willingness to take risks, meet demand and adapt quickly to changing conditions. According to the theory, any time government intervenes in this process by imposing taxes (including tax incentives) or regulations, the efficiency of the market suffers and resources are misallocated, with all kinds of terrible consequences.
In the 19th century, the United States and Great Britain embraced these policies (known then as “liberal”) to a great extent, and indeed enjoyed a huge surge in industrial development, economic productivity, technological progress and other measures of national strength, including military. However, it became clear by the beginning of the 20th century that free market capitalism, whatever its considerable advantages, also brought with it some unfortunate consequences, including environmental degradation, huge disparities in wealth and social inequality, miserable working conditions, and a treacherous climate for consumers. And while the benefits of capitalism began to accrue more and more conspicuously to a smaller and smaller segment of the population, the consequences generated misery for enormous numbers of people, who despite their hard work and drive to get ahead, found it nearly impossible to advance faster than conditions could hold them down.
Inevitably, people began looking for solutions to the problems caused by capitalism. Some, like the Progressive reforms of the early 20th century, tried to fix the problems of the system without changing the basic workings of the system itself, through things like workplace standards, child labor laws, collective bargaining, minimum wage, overtime, product health and safety standards, fair advertising laws, and other reforms. These not only mitigated many of the worst problems of the market system, but also blunted the appeal of far more radical solutions such as Marxism and socialism.
It is the accepted historical view that the Progressives of the 1900s-10s and their successors in the 1930s and 40s wanted to reform capitalism out of a belief in the overall benefits of a market system (albeit a regulated one), in order to save it from the more destructive radicalism of the Marxists. This is an important point, as many conservatives knowingly or unknowingly confuse Progressives and Socialists, as if both were enemies of the free market in equal measure. While it is good propaganda for the Right to associate reformers with the manifest abuses of 20th century Communism, that view is both historically inaccurate and offensive to the legitimate aspirations of the American Progressive movement, both in the past and the present. Amazingly, this error persists to the present day.
In any case, the Progressive reforms were undeniably successful and popular, humane and productive. By ameliorating the worst conditions at the bottom of the economic system, regulated capitalism helped legitimate the greater rewards enjoyed by those at the top. Business, innovation, trade and commerce boomed, because Progressive reforms helped shore up the confidence and buying power of workers and consumers. Progressive taxation via the income tax (adopted during the 1910s) and the growth of government-funded social services tied the interests of the capitalist class to the well-being of the rest of the community, and enforced the idea that economic rewards entail responsibilities as well as luxury and power. Free market capitalism, for all its considerable virtues, lacks this ingredient of social responsibility, which is as important to human culture as economic prosperity. Societies that have one without the other diminish human potential. Only by keeping the two in balance can we achieve material progress with justice and dignity.
Unfortunately, some at the top of the economic ladder see their greater obligations as unfair, and constantly agitate to reduce their participation in the public institutions that make possible their continued prosperity and security. This short-sightedness, driven by greed or a misplaced sense of victimhood, draws such people into support of preposterous extreme ideologies such as economic libertarianism, which seems to seek a return to the pre-Progressive era of robber barons and sweat shops.
One would think that in a democracy, the appeal of a system that benefits everyone to a greater or lesser extent would outpoll the naked self-interest of a fortunate few. However, the far Right has hit on a successful formula known in the advertising business as “aspirational marketing” – that is, sell to people based on who they want to be, rather than who they are. In this case, right-wing fatcats have encountered far greater success by getting people to support a tax structure for rich people that you would want if you were rich, as opposed to one that you would want if you were middle-class or working-class, despite the fact that most people are, in fact, middle-class or working-class.
One has to admire the sheer political craft of this approach, which has smoked the “New Deal/Great Society” brand for the past 25 years. Unfortunately, economy policy that is based on encouraging mass delusion on the part of millions of hope-to-be-but-never-will-be millionaires is not the recipe for social stability or sustainable quality of life.
It’s no surprise that the Bush tax cuts benefit the wealthy, are exacerbating economic inequality, and have led to a sluggish jobless recovery while corporate profits are booming. That’s no mistake: they’re working as intended, and their supporters have to live with the occasionally embarrassing consequences. What remains to be seen is whether the majority of Americans can stop identifying unrealistically with the goals and aspirations of a prohibitively-wealthy and shamefully cynical economic elite long enough to reject policies that drive up their own taxes while draining away their quality of life.
12:33:37 PM 
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