October 24, 2008
Spreading the wealth-5: Class warfare against the poor
Why do so many have a reflexive aversion to paying taxes and think that any adjustments in the tax system to shift the burden away from the poorer and towards the richer is somehow unfair? This is because class warfare has been consistently waged against the poor for so long by both parties that we have come to think of it as the norm. But when attempts are made to redress this balance, the rich are quick to shout 'class warfare!' to distract attention from the fact that they are the masters of it.
One reason is that people have been conditioned to think that there is massive waste in government and that this waste is due to the poor taking advantage of government social programs. Of course there is waste and it should be eliminated. But the level of animosity that is expressed by the well-to-do against the poor seems to be based on something more visceral
I was at a social function recently and was listening to a couple who are very wealthy and live in a large house in a fancy neighborhood and send their children to private schools, and they were railing at how their taxes were going to benefit people whom they clearly thought of as being good-for-nothing. It was quite extraordinary. It never seemed to strike them that only a small fraction of their taxes was going towards any benefit to the poor. They seemed to be driven by a feeling that the poor were poor because they were no good and should therefore be punished and not 'rewarded' for their failures.
People have been taught to hate and despise the poor. They think that such people are shiftless free-loaders and resent their own money being used to seemingly benefit the 'undeserving poor', to use Alfred Doolittle's phrase, and who have done nothing to warrant any consideration. Taxes have become portrayed as a redistributive system to shift money and resources from worthy, hard-working individuals to lazy and less worthy individuals, rather than as a means to shift money from private individuals to the public good that in turn also provides benefits to those same private individuals that they could never obtain otherwise.
The reality is quite different. It is the rich who are the real free-loaders. I wrote before about how the tax system is rigged to siphon money from the poor to the rich and I will quote part of it again to show how this is done.
New legislation was passed in 1977 that reduced benefits and raised the payroll tax to its current value. As a result of the formula that was used, this initially increased revenues by small amounts but eventually the surpluses became large enough that between 1983 and 2003, while the sum of the government deficits for those twenty years (i.e., the excess of expenditure over revenues for those years alone) was $5.4 trillion, the addition to the national debt (i.e., the total accumulated amount of all deficits over all time) was 'only' $3.6 trillion. The $1.8 trillion difference was due to the fact that the Social Security account was running up huge annual surpluses. (David Cay Johnson, Perfectly Legal: The covert system to rig our tax system to benefit the super rich – and cheat everybody else (2003), p. 123)
This Social Security surplus was used to create a false sense of the country being flush with money and this enabled Ronald Reagan in 1981 to push through his tax cuts for the rich. The Social Security surplus was used to hide the true costs of the massive tax giveaway to wealthy people.
In 1983 there was glitch in that Social Security ran a small deficit due to the fact that 10 million people were then out of work and thus payroll tax revenues were down. While most people felt that this was a short-term problem that would go away when the economy revived, others like Wall Street favorite Alan Greenspan (then chairman of the Federal Reserve Board) panicked people into thinking that Social Security was in crisis and Congress again passed new rules reducing benefits and raising the retirement age in the future. This resulted in Social Security starting to run up surpluses again.
The siphoning away of the Social Security surplus to benefit the rich was repeated during the George W. Bush administration. The federal government was running a total budget surplus at the time that he came into office in 2000, and again this was largely due to the Social Security surplus. In fact, between 1999 and 2002, Social Security revenues exceeded expenditures by $640 billion. Bush used this surplus to hide the true cost of the huge 'temporary' tax cuts for the rich pushed through by him in 2001. More than half of the $1.3 trillion that those tax cuts cost the government went to the richest 1% of the population. (Johnson, p. 127)
Remember that the social security payroll tax is a regressive tax whose burden falls disproportionately on the poor and middle class because everyone pays a flat rate on all their earnings up to around $100,000 and nothing on incomes above that limit. Hence the more income you earn above that limit, the lower your tax rate is. But the tax cuts disproportionately benefited the rich.
Why didn't people scream with outrage at this reverse Robin Hood action by the government? Because there is this curious phenomenon of the middle class thinking of themselves as closer somehow to the millionaires than to the poor, although they are often just one paycheck, or worse a pink slip, away from joining the ranks of the poor and the homeless and the destitute, while their chances of becoming one of the rich are almost negligible.
People seem to think that life is like American Idol, that one day through some fortunate combination of luck and effort they will become wildly rich. True, it might happen and does happen to a very small number of people. But to bank on it is as unrealistic as the expectations of a child who abandons his studies in order to practice basketball thinking that he will make it to the NBA just because Le Bron James did. The odds are totally against you. Furthermore, while there is no virtue in being poor, being rich does not necessarily bring with it the psychic rewards and pleasures that make life truly worth living.
As long as this illusion that their interests are closer to those of the very wealth than to the poor is allowed to continue, the middle class (and even segments of the poor) will continue to be suckers exploited by the rich.
POST SCRIPT: The really real America
Jason Jones visits Wasilla to see exactly what the really 'real' America looks like and the extensive executive experience that being the mayor of that town provided Sarah Palin.