Category: Economic issues

California, 1936

Right-wingers cracked up on right-wing propaganda make much of the fact that almost half (around 46 percent) of Americans pay no federal income tax. It is true. The Wall Street Journal often calls these people the “lucky duckies,” and all right-wingers just know that the lucky duckies are getting a free ride off the rest of us and that it’s the lucky duckies who are eating the lunch of the middle class. What right-wingers don’t know, though, because their propaganda machine doesn’t tell them the rest of the story, is that almost all of those lucky duckies are living at or below the poverty line (defined as an income of $23,350 or less for a family of four including two children). They pay a high proportion of their income in other taxes, but they don’t pay any federal income tax because their income is so low and they have dependents. The highest income for qualifying as one of these lucky duckies is $26,400 for a couple with two children. But many of these people make less than $15,000 a year. The reason that so many Americans pay no federal income tax is that poverty is so widespread — measured as either income or assets.

(By the way, in 2011, 78,000 taxpayers with incomes between $211,000 and $533,000 paid no federal income tax. Worse, 24,000 filers with incomes between $533,000 and $2.2 million paid no federal income tax. And not only that, but 3,000 filers with incomes above $2.2 million paid no federal income tax. What were we saying about lucky duckies? You can be sure that the Wall Street Journal hasn’t reported on these lucky duckies. And it is generally assumed by those who bother to think about it for a second that the reason Mitt Romney won’t release his tax returns is that he paid no federal income tax for one or more years.)

Americans, in their bottomless ignorance and eagerness to be deceived, hold extremely warped notions of just how poor the poor are and how rich the rich are. Middle-class Americans also have a been fooled into believing that they get a much larger piece of the pie than they actually get.

My old colleague Dan Froomkin, in the Huffington Post, reports today on a study by the Congressional Research Service that shows that half of Americans hold 1 percent of the nation’s wealth. The top 1 percent hold 34.5 percent, and the top 10 percent hold 74.5 percent.

A study in 2010 by academics from Harvard University and Duke University surveyed Americans on how Americans think wealth is distributed. On average, Americans thought that the richest 20 percent hold 59 percent of the wealth. The real number is closer to 84 percent. Americans were shown pie charts showing the distribution of wealth in different countries and were asked which country they would prefer to live in. They chose Sweden, where the top 20 percent control only 36 percent of the wealth. Distribution of wealth in the United States actually is similar to Latin American countries such as Nicaragua, Venezuela, and Guyana.

Each year since the late 1970s, the rich have been eating more and more of our lunch. There are two main ways they have done this. First, they have drastically changed taxation, so that the rich pay are now paying taxes at the lowest rate in 80 years, while increasing the tax burden on the middle class. Part of the reason the right-wing propaganda machine goes on and on so loudly about taxes is to obscure those facts. Second, they have been scooping up almost all the gains from increased productivity, as this chart shows:

The most important task of Fox News and the right-wing propaganda machine is to keep Americans ignorant of these basic facts. If you keep ’em angry at the lucky duckies, they won’t notice who actually is eating their lunch.

Another peculiarity of Americans is that they have the oddest tendency to identify with the rich, even when they’re barely getting by, falling farther behind each year, and are utterly dependent on the safety net — such things as Social Security and Medicare. It’s an excellent exercise in propaganda analysis, actually, to try to figure out how this is accomplished. I believe that the two biggest factors are television (including not only the propaganda channels but entertainment channels as well) and the “prosperity gospel” prevalent among evangelicals. This “gospel” teaches people that the poor are to be blamed for their situation, that god wants them to be rich, and that giving money to the church is the first step to prosperity. It also teaches them to love war and to hate anyone who isn’t just like them, but that’s a different rant. My point is that it’s as sorry a theology as has ever been devised, which is saying something, since there are so many sorry theologies out there. But it does pack ’em in on Sundays, because they love to hear that god wants them to be rich and to consume voraciously.

But this is nothing new. John Steinbeck was aware of it:

Note: I am aware (because I always try to diligently check my facts to avoid being corrected in a comment) that some have disputed this Steinbeck quote, but whether Steinbeck said those exact words or not, the observation is a true one.

Striking It Richer: Emmanuel Saez

Charts like the one above help make it clear why the right wing hates — and fears, and demonizes — progressive economic policies like those advanced by Franklin Roosevelt during the Great Depression. Those policies left us with plenty of rich people, but the rich could no longer take it all. That, of course, is how the American middle class arose after World War II. By the beginning of the Reagan era, the rich got the upper hand again and started taking it all back.

Emmanuel Saez has newly updated data showing that the top 1 percent captured 93 percent of the income gains in 2010.

And yet, thanks to the right-wing propaganda machine, white working Americans in the red states are kept in a state of deep ignorance and cheer for and vote for their continuing impoverishment and marginalization.

Update: The Huffington Post has a story on this today.

Timothy Geithner

Every now and then I read dozens of versions of so-called reporting on stories that are important to the establishment, just to marvel at the shallowness of the reporting and the shocking level of co-ordination among the mainstream “news” outlets. I went through this exercise this morning on stories about President Obama calling for reducing the corporate tax rate from 35 to 28 percent.

It doesn’t matter who you read — the New York Times, any of the smaller newspaper chains with Washington bureaus, or the web sites of cable news channels including Fox — all the stories followed the same formula and included the same establishment quotes. I did not find a single mainstream story that compared Obama’s proposed corporate tax rate to individual tax rates. Some stories mentioned that Obama wants to raise taxes on millionaires and leave tax rates the same for people making under $200,000, but I did not find a single story saying what those rates are.

What all these stories is avoiding is telling readers that the establishment wants higher tax rates for individuals than for corporations. As far as I can tell, Obama wants a tax rate of 30 percent for those making more than a million a year. As for those making less than $200,000, the current tax code for individuals taxes income above $171,551 at 33 percent. No one bothered to report this. Only those of us with memories greater than 18 hours can hold such inconvenient facts in our heads at the same time.

The other thing that all the mainstream tax stories have in common this morning is that they make some sort of lame comparison with Mitt Romney’s tax plan. All the stories say that the U.S. corporate tax rate is the highest in the “developed world” other than Japan. Some of the stories even say that many corporations pay less than the nominal tax rate.

When you analyze all this “reporting” for what it is — propaganda — this is the message that they clearly want us to get: They are setting the stage for lower corporate tax rates, regardless of what happens with the presidential election. And does any reality-based taxpaying American believe that tax loopholes for corporations and the super-rich will be closed, given the corruptness of the Congress and the lobbyists who own Congress?

The other thing that the establishment and the corporate media don’t want Americans to know is that, despite all the hoopla about corporate tax rates in the U.S. being high (which is not true because no corporation pays the nominal rate), the tax on capital gains is absurdly low — 15 percent. In other developed countries, the tax on capital gains ranges from 20 percent to 35 percent and even 50 percent. Most Americans probably don’t understand that it’s the capital gains tax that rich people pay. That’s why Mitt Romney’s tax rate is 13.9 percent. Never in my working life did I pay a tax rate anywhere near that low.

Only the DailyKos shows the usual left-wing concern with reality rather than establishment blather and misdirection:

As has been widely reported for years, the effective (read: actual) corporate tax rate is far lower than the 35 percent headline rate that gets all the bad press. Last year, Citizens for Tax Justice reported on the 280 most profitable Fortune 500 companies. Findings? Thanks to tax breaks and subsidies, the average effective tax rate over the three-year 2008-2010 period was 18.5 percent and the companies enjoyed subsidies of $222.7 billion. During at least one of the three years, 78 highly profitable companies paid zero taxes and 30 actually had a negative tax rate.

But that’s not the worst of it. In 2011, according to the Congressional Budget Office, the effective corporate tax rate fell to 12.1 percent, the lowest level in 40 years. This comes at time when corporate profits are at a 60-year high.

One source reported that Rush Limbaugh says that Obama plan for corporate tax rates would actually raise corporate taxes by closing loopholes, as though that’s bad.

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Update: A friend sent this link to a detailed and wonkish piece, published today, on tax policy. I am not in the least surprised that only a socialist organization is willing to do thorough, real-world reporting on tax policy. It’s very important to understand why this is so. Tax policy screws working people while favoring corporations and the rich. That’s only going to get worse, regardless of who wins the next election. The establishment media won’t report in any serious way on tax policy, because they serve the establishment. The right-wing media not only doesn’t report, but also distorts, because it serves the interests of corporations and the super-rich. So the only honest reporting about tax policy comes only from those who are getting screwed by tax policy.

Update 2: My old colleague Dan Froomkin now checks in on corporate taxes. Once again, only the left can be wonkish and thorough. Everyone else must keep on skipping — and help keep the American people the stupidest people in the developed world.

Ken, whom I regard as among the brightest and best-informed of his generation, has a concise and thoughtful post this morning in which he ponders the next steps in the evolution of his political views. I think I can guess what he was thinking about as he took the train back to Boston from Concord and a pilgrimage to Walden Pond. I considered adding a comment on his blog, but what I wanted to say is a little long for that. So…

1. Obama: I doubt that Obama and his machine understand the damage they have done and the price they will pay. They convinced millions of people, including young people, that if they worked to get Obama elected, things would change. But nothing changed. Obama governed just like a Republican. He tossed out a few rhetorical scraps from time to time to try to keep the wool over the eyes of those who had worked to elect him. But he also insulted us and boasted to right-wingers and corporatists about how he had betrayed his own base. Is the man so stupid that he thought he’d pay no price for that?

An analysis by the Nieman Foundation released on Oct. 3, when Occupy Wall Street was just beginning, seemed to conclude that the reason there had been no real protest from progressives was because, with the election of Obama, progressives thought that the mission had been accomplished. It took a while for the truth to sink in.

There are two important angles on that truth. The first and most obvious angle is that progressives were betrayed by Obama, that he used us to get elected, and then, to use Ken’s metaphor, cuckolded us. The second truth, and something about which I’m not sure Ken would agree with me since he speaks favorably of a third party, is that Obama’s election and subsequent betrayal shows that the 99 percent cannot just vote themselves out of this. It’s very important, I think, to acknowledge that truth and to do our best to understand why it is true. This truth, I believe, is so important that I am going to repeat it, in bold: We cannot vote our way out of this.

2. Voting won’t work. Reason 1: Once an elite succeeds in owning, corrupting, and controlling all the branches of the American system of democracy, it becomes almost impossible to “work within the system” to take the system back. That’s the whole point, of course, in owning, corrupting, and controlling the system. Votes no longer matter — only money matters. Once Congress becomes a pay-to-play system of hogs at the trough, only hogs at the trough can get elected. You don’t believe me? Try running for Congress and see how far you get. The courts not only back this up, the Supreme Court is actively looking for more precedents that it can use to strengthen the importance of money and weaken the importance of votes. Likewise, the White House is staffed by corporatists, many of them from Goldman Sachs. They don’t let people run for president unless they’re pre-approved by the establishment. Obama proved that.

3. Voting won’t work. Reason 2: The American people are lost in a sea of propaganda. The propaganda comes in two flavors: Right-wing propaganda, of the type produced by right-wing “think tanks” and dispensed by Fox News and Republican politicians; and establishment propaganda, which is pretty much everybody else. You only have to examine how the media fully cooperated with Bush/Cheney’s selling of the Iraq war to see how the mainstream media — corporate owned, of course — serves power, not truth. This is not going to change. In fact, it’s getting worse.

4. Voting won’t work. Reason 3: Though it might be possible with decades of work to build a third party that could win a national election against one of the two established parties, I think this is extremely unlikely. As a practical matter, all third parties do is split the vote and throw elections in the opposite of the intended direction. A third-party strategy not only won’t work, it would be absurdly counterproductive. And what’s to stop a third party from being co-opted by the establishment? A third party would be just as vulnerable to corruption in our pay-to-play system as the two established parties are.

Let’s do out best to crunch some numbers. About 25 percent of the American electorate are diagnosable right-wing authoritarians of the submissive type. (Please refer to the work of Bob Altemeyer for documentation of this replicable and replicated research.) They will believe whatever they are told and will vote however they are told. It’s this 25 percent that that ridiculous circus of Republican presidential candidates are playing to. The submissive right-wing authoritarians are ALWAYS going to align their votes with right-wing propaganda. Theirs are the cheapest, easiest votes to buy. Then, next we have the so-called “independents.” They make up another 20 to 25 percent of the electorate. Politicians speak of independents as though independents are some kind of elite voters above the “partisan” fray. But actually we know from statistical studies that “independents” are the most ignorant of the electorate, the least involved. They vote according to their whims. They’re the ones who are swayed by those dumb-as-rocks political ads that are all over television in the last days before an election.

So, around 50 percent of the American population are permanently blind and hopelessly stupid. They are so stupid, in fact, that elections prove over and over that they don’t even understand their own economic interests and that they’re totally capable of, even eager to, vote to increase their own poverty and marginalization. These are the 50 percent of the American people who sell their votes — cheap! — to the 1 percent.

That leaves about 50 percent of the American electorate who are capable of rational thinking. I say “capable” of rational thinking. But they also have moods. They can get caught up in backlashes. Sometimes they vote — or don’t vote — out of frustration. It was partly their frustration actually, and a backlash against Bush, that helped to get Obama elected in 2008. Who knows what kind of mood they’ll be in for the next election. And where the re-election of Obama is concerned, why does it matter much how rational people vote since Obama has governed for the 1 percent?

5. The Overton Window. Probably the biggest accomplishment of the Occupy Wall Street movement is that it has moved the Overton Window. The right-wing propaganda machine, with the co-operation of the establishment media, have moved the Overton Window so far to the right that Barack Obama, who has governed from the center-right, is called a “socialist” by the radicals to the right of him. The OWS movement has forced the establishment media to acknowledge that there are lots of progressive Americans — up to 50 percent, in fact — who have simply been pushed out of the conversation. Isn’t it amazing, really, that it took thousands of people in the streets to get the media to acknowledge that there are people in this country who want to talk about jobs and justice? But there is still a long way to go, because the Overton Window is still so far to the right that we can’t have a national conversation about global warming and the environment. And time is running out on that.

6. How the right wing won. They won because they’ve made a long-term project of it. They won because, for more than 30 years, they’ve been building a right-wing “think tank” and propaganda machine that can control right-wing and “independent” voters. The control of right-wing voters is done largely through alliances with the fundamentalist churches (they now call themselves “evangelical” — same thing). The conversion of the mainstream media from a truth-telling to a power-serving institution has served their cause. They have, through decades of brilliant work, transformed the system so that dollars, not votes, are the fundamental unit of government.

How can this situation be reversed? You’d think that it would not be difficult for approximately 50 percent of the American people to take the country back from a coalition of super-rich (1 percent), super right-wing authoritarians (25 percent), and super-stupid “independents” (24 percent). But it will be very difficult, because they are entrenched and can use all the power of government to preserve their power — up to and including those nifty new militarized, centrally coordinated local police forces that they were so eager to show off to us while they were breaking up OWS protests. And the rational 50 percent are not united and not in agreement about how to proceed.

I think the options fall into three categories.

Category 1: Revolution. Forget it. They have enough police power to put down a revolution while simultaneously fighting nine useless foreign wars. Until, at least, we all go bankrupt.

Category 2: Massive, unrelenting, non-violent civil disobedience. This could work, but it’s incredibly risky. Once confrontation begins, neither side, really, is truly in control of the outcome. Not to mention that they will be violent, even if the protesters are not. And yes they do, and will, use agents provocateurs.

Category 3: Long-term strategies involving education, organization, counter-propaganda, and coordinated economic pressure through boycotts, etc. Since the role of consumer is one of the two roles left to us, well coordinated consumer boycotts could be very effective. The other role left to us, of course, is taxpayer. But laws force us to pay taxes, while consumption is still mostly a choice. Pick a vulnerable company and take it down. Then another, and then another, until they get the message. There’s an important thing to keep in mind here: Our choices as consumers are far more powerful than our votes.

But there’s also a problem with category 3. Can we spend 30 years convincing the country that something must be done about global warming? Can we tell poor children who don’t have enough food at home and who have no hope for an education to wait 30 years? Are we going to let the 1 percent laugh all the way to the bank while we pay the taxes for another 30 years? Are we going to let our infrastructure fall apart for another 30 years? Let them scrape the top off mountains in West Virginia, or frack our water tables, for 30 more years? Impoverish students and crush them with debt for 30 more years? Offshore our factories for 30 more years and base our economy on banks and bubbles for 30 more years? Another 30 years in which the rich can ignore the law while the prisons are overflowing with poor people?

I’m just thinking aloud. But that, I think, is what the supporters of Occupy Wall Street need to spend the winter doing.