“We Have Met the Enemy . . .”
I have long puzzled over the difficulty we have had talking about the causes of increased inequality. Those in favor of current distributions have managed to control the terms of discussion. Their basic strategy has been to blame everything on impersonal forces that just can’t be controlled. The common plea is that “Globalization made us to it.” Or that corporations simply must pay CEO’s utterly obscene salaries to hire the great talents that they need. Or that taxes must be kept low to induce “job creators” to create jobs.
Nonsense. All nonsense.
In 1990 Kevin Phillips, a one-time high level Republican advisor who helped craft Nixon’s “Southern Strategy” in 1968 and wrote The Emerging Republican Majority, published a book entitled The Politics of Rich and Poor. The subject of his book, he said, was “the new political economics, intensifying inequality and pain for the poor, the unprecedented growth of upper-bracket wealth, the surprisingly related growth of federal debt, global economic realignment, foreigners gobbling up large chunks of America, the meaninglessness of being a millionaire in an era with nearly a hundred thousand ‘decamillionaires.” (p. xxii).
Phillips does not connect these changes to impersonal forces. He credits them to the policies associated with the Reagan administrations. He duly notes that some of these developments were international, yet he insists that “by 1988 many of the new patterns of wealth during the 1980s . . . could be traced to specific approaches followed by the new administration after January 1981.”
In his fourth chapter Phillips does trace the new patterns to specific actions by the federal government. He discusses four basic categories of change:
- Tax-Bracket Reductions. The top income tax rates were cut from 70% to 28%, capital gains rate, which had dropped from 49% to 28% in 1978, was further cut to 20%. For a period in the mid-1980s the top rate for incomes between $70,000 and $150,000 was 33% while everything over $150,000 was taxed at only 28%! Meanwhile the Social Security Tax rate rose from 6% to 7.5%.
- Budget Policy. In simple terms, domestic spending was cut while defense spending (which fed huge profits to owners of defense related industries) was increased dramatically.
- Deregulation. Deregulation had begun in the Carter years with the deregulation of transportation—airlines, railroads, truckers—and selective deregulation made good sense. Fired by a latter-day faith in laissez faire government, however, the Reagan administrations deregulated with reckless abandon. Deregulation in the financial markets were especially effective at redistributing income from the poor to the rich.
- Money and Debt. Fiscal and monetary policies were managed to shift income and wealth from the bulk of the population to the top and tippy-top few.
In other words, we did it to ourselves.
The crucial moral, therefore, is that we can undo it.
Unless, that is, that so much power has concentrated in so few hands that the democratic process has ceased to work and we are now a de facto plutocracy rather than a democracy.