Mourning in America: Death of the Middle Class

Original Link: http://blog.aflcio.org/2010/11/16/mourning-in-america-death-of-the-middle-class/

By Leo W. Gerard

The deficit commission report issued last week is another Saturday night special pressed to the temple of the American middle class.

“Turn over your money and your benefits or your country will die,” the report screams at workers. “You want your country to go bankrupt? No? Then you gotta delay retirement, get less from Social Security, pay more for health insurance and lose your precious few income tax breaks like the one that helps pay your mortgage while the banker is breathing down your neck right now.”

For 30 years, rich conservatives have successfully threatened the American middle class this way, ever since that rich, conservative Ronald Reagan converted the White House into a castle.


The result is a country with greater income inequality than during the age of corporate robber barons at the turn of the 20th century. It is a country whose 21st century robber barons, the richest 1 percent of Americans, take nearly one-quarter of all income and demand that politicians relieve them of their obligations. The rich—hedge fund owners who rake in billions, Wall Street banksters handed bonuses in the millions, CEOs paid eight-figure golden parachutes after they mess up—insist that politicians place government debt burdens on the middle class, the unemployed, the elderly, the struggling young, people whose income has stagnated for three decades.

The co-chairmen of the deficit commission complied with that mandate from the flush when they recommended the middle class bear the brunt of the cost of reducing the deficit. Simultaneously, conservatives in Congress are acquiescing by insisting on extending tax breaks for the nation’s wealthiest. Those are the very tax breaks that contributed dramatically to creating the debt—the one that the deficit commission now wants heaped on workers’ backs.

This will be the death of the nation’s strength—its successful working class. Without the slightest regret or hesitation, the rich are killing the great American middle, rendering it a casualty of their shirked social responsibilities. Their campaign has been abetted by Republicans since Ronald Reagan. The Gipper contended slashing taxes for the wealthy would increase revenues for the government. Republican George H.W. Bush rightly ridiculed Reaganomics as voodoo.

In the GOP years between the beginning of Reagan in 1981 and the end of Bush II in 2009, the federal deficit exploded as Republican presidents failed to control spending and repeatedly cut taxes for the rich.

Reagan reduced the rate on the richest first down to 50 percent, then to 28 percent. The resulting budget deficit converted the United States from the world’s largest international creditor to its largest debtor. And now, the deficit commission sends the bulk of the bill for voodoo economics to the middle class, not the rich.

While Reagan gave the rich those breaks, income inequality increased. The share of total income taken by the richest 5 percent grew from 16.5 percent, the year before he took office, to 18.3 percent, the year before he left. In that same time, the share of total income that went to the poorest 20 percent of households fell from 4.2 percent to 3.8 percent.

Democrat Bill Clinton fulfilled a campaign promise by increasing taxes on the rich—to a 39.6 percent marginal rate. He balanced the federal budget and left Bush II with a surplus.

Then Bush II squandered it. He gave the rich more tax breaks, accumulated debts larger than all those created by previous presidents combined and worsened income inequality. During his administration, from 2002 to 2007, the pretax income of the richest 1 percent increased 10 percent every year. Over that same period, the median income for working Americans declined and the poverty rate rose.

From Reagan through Bush II, more than four-fifths of the total increase in U.S. income went to the richest 1 percent. Hedge fund owners, whose income is literally in the billions, pay income taxes at 15 percent – lower than the rate paid by their secretaries, who earn far less in a year than any of the top 10 hedgers do in half an hour.

Wall Street recklessness crashed the U.S. economy, throwing millions of middle income earners out of their jobs and their homes. The banksters went to Washington and got politicians to hand them bailout billions, and now those Wall Streeters plan to increase their bonuses — while unemployment remains stuck at 9.6 percent in the Main Street economy.

It is those guys, bankers grabbing year end bonuses totaling two and three times what middle class earners get for a year’s labor; it is the five-home wealthy demanding that the foreclosed-on middle class suffer for the deficit. The rich, who have received the greatest benefits from this society, have no intention of paying their share of this national responsibility.

The deficit, the Social Security shortfall, difficulties with Medicare – they could all be solved if the nation returned to taxing policies that existed under Republican President Gen. Dwight D. Eisenhower, when the rate on top earners was 91 percent. That was not even the high point. In the mid-1940s it was 94 percent. Generally it fluctuated between 81 percent in 1940 and 70 percent when Reagan began slashing it in 1981.

Those rates may sound confiscatory now, but it’s not like the rich actually paid them after they subtracted out all of their exemptions, deductions, loopholes, special deals, tricks and wiles.

The dozen years in the 1950s and 1960s when the rate on the richest officially was 91 percent is a time considered by many Americans to be among the nation’s greatest for the middle class, a period when American workers could afford to buy homes, send their kids to college and travel across American on vacation.

There’s no talk of that now. Raising taxes on the rich now is considered ludicrous. Ridiculous. The whole Social Security shortfall could be solved if the rich paid taxes on their entire incomes, not just the first $110,000, a break that means the wealthy pay a smaller percentage if their income toward Social Security than the impoverished. But the deficit commission didn’t propose that.

No, the rich have succeeded in eliminating as a possibility their paying an increased tax share. Now, the only consideration is cutting their taxes. They didn’t hold an actual Saturday night special to anyone’s head. The rich are snake oil salesmen slick, Bernie Madoff-style schemers. They sold voodoo economics to America, and now they’re intent on making the middle class pay for what that policy has wrought in deficits.

Reagan’s re-election ad was wrong. He didn’t institute “Morning in America.” It was mourning for the once great American middle class.