It's a 30-year sneak attack in America's class war

October 19, 2008|By DAN RODRICKS | DAN RODRICKS,dan.rodricks@baltsun.com

Maintaining a tradition that has been around since at least the Reagan Revolution, John McCain the other night ridiculed the idea of "spreading the wealth" and accused Barack Obama of playing "class warfare."

This is the tired Republican knee-jerk that occurs whenever someone in the room - Democrat or independent, academic researcher or nonpartisan think-tank thinker - raises the unsettling issue of income disparity in the United States. Republicans throw the "class warfare" flag whenever somebody gets too close to the story of America in the nearly 30 years since Ronald Reagan brought us trickle-down economics.

And the story is this: Most of the money in this nation during that time has trickled up, not down, and the disparity between the wealthiest 5 percent of citizens and the poorest 5 percent has never been wider. People in the middle haven't done much better than those just below them.

There are two prime reasons for the anger among Americans over the Wall Street meltdown and the ensuing federal bailout: Government at all levels allowed the free markets to build a time bomb of complex and grossly expensive problems that taxpayers are now on the hook to fix, and a million men in suits made fortunes off the smoke-and-mirrors promise of easy credit and ever-rising asset values.

Americans are losing their homes, and no one appears to be headed to jail. It is assumed that the million men in suits will come out of this just fine; their portfolios may have suffered, but they are well-insulated - better than the rest of us - for the long recessionary winter ahead.

"It looks to a lot of people that the primary beneficiaries of this government action will be the people who created it in the first place," says Michael Reisch, who just became the first Daniel Thursz professor of social justice at the University of Maryland School of Social Work, returning there after being away to teach at three other universities since 1986.

The cause of current citizen anger is not limited to the current economic mess. It's the boil-over from a long period in which working people saw virtually no growth in income or wealth while a financial elite grew fatter. If you're not angry, you haven't been paying attention. Unless you've been in the privileged fifth at the top of the American income scale, you've been getting the gooey end of the stick handed to you for years.

Pardon me while I indulge in a little class warfare, with the help of research from the nonpartisan Center on Budget and Policy Priorities in Washington. Here are some facts from the CBPP's spring report: In the past decade, incomes have declined by 2.5 percent among the bottom fifth of American families while increasing by 9.1 percent among the top fifth.

On average, incomes have grown by just 1.3 percent among the middle fifth of families during the same period.

In the late 1980s, there was only one state - Louisiana - that had the following distinction: The top 20 percent of its families enjoyed seven times the average annual income as the bottom 20 percent of its families. No other state had such a gap. Today there are 22 states where it can be found. (Maryland has made the CBPP's Top 10 in income disparity growth since the 1980s.)

"In the United States as a whole, the poorest fifth of families have an average income of $18,120, while the top fifth of families have an average income of $132,130," the report said.

Even more specifically, when looking at the top 5 percent of families versus the bottom 5 percent, the CBPP found a ratio of 12 to 1 in income. Since the 1980s, average incomes in New York grew by $108,000 among the top 5 percent but by less than $1,000 among the bottom 20. What explains this? Wise investments? Daring? Ambition? Hard work?

Maybe. But the general answer, the one that covers everyone, is tax policy. Ronald Reagan and, two decades later, George W. Bush gave the wealthiest Americans tax cuts, believing this would stimulate the economy and benefit all. It was a fraud. If there was growth, it was in personal income of people already doing quite well.

When Bill Clinton was president, the trend was the same.

"During the height of the Clinton years," Reisch said, "the inequality in income was still widening even as average household incomes rose a bit."

Since the late 1980s, the CBPP report said, "the richest fifth of families enjoyed larger average income gains each year ($2,060, after adjusting for inflation) than the poorest fifth of families have experienced during the entire two decades ($1,814). ... The federal tax cuts of the early 2000s, which were targeted primarily on wealthy families, helped widen the income gap between the wealthiest families and those with low and moderate incomes."

Add a layer of issues from the job market of the last 20 years - stagnant wages, incessant cost-cutting and work-force reductions to show bigger profit margins to the million men in suits on Wall Street - and you have the story of America that makes Republicans uncomfortable.

Bring up, as Obama does, raising taxes among the wealthiest Americans, those who make $250,000 or more a year, and John "I think I own seven houses" McCain throws the red flag. "Class warfare," he says. You see that, America? The Democrats want to redistribute the wealth! Take from the rich and give to the poor. That's socialism!

Don't be fooled by this tired complaint. It's a cover for the story that makes the Reagan worshipers and the dwindling number of Bush loyalists uncomfortable. Look at the numbers and follow the money. The money trickled up, it didn't trickle down. If there was class warfare, the wealthiest class won.

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