Preferential Option for the Super Rich

Preferential Option for the Super Rich August 26, 2010

If this country had a functioning media, they would never let Republicans away with screaming against government debt out of one side of their mouths, and calling for the extension of the Bush tax cuts to the rich out of the other. But we do not have a functioning media and they do get away with it. Remember, the Obama administration has agreed to extend the cuts to all but the top income groups. Extending it further turns out to be incredibly expensive and incredibly unfair.

It would cost $680 billion dollars over 10 year. This is far greater than the cost of extending unemployment benefits to those out of work, something the Republicans opposed vigorously (the unemployed do not fill their coffers). It gets worse. Nearly all of the benefit goes to the richest 1 percent, those making more than $500,000 a year. Even more than this, 55 percent of the benefit goes to a mere 120,000 people – the top one-tenth of 1 percent of all taxpayers. Doing the math, that comes to an average $3 million tax reduction to those lucky enough to sit at the helm of the income distribution. It is indeed the preferential option for the super rich. This would be troublesome at the best of times, but in the current economic climate when so many struggle to get by, it’s simply immoral.

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  • digbydolben

    MM, the American people don’t understand basic macroeconomics: their presumption has always been, since Reagan told them so, that the “super rich” take those windfalls and “build factories” with them, employ people, and that “a rising tide” would “lift” their “boats.” They don’t understand “junk bonds,” “outsourcing” or “derivatives.” With all their palaver about “school reform” (which I’ve been amusing myself, reading about, for the last few days, as I get ready to once again forsake American schoolteaching for the international circuit), you won’t hear ’em mention–not once–basic bookkeeping, budgeting, business economics and practices, as something that highschoolers MUST know, as a survival skill. If the hoi polloi understood that their favourite mosque-abhorring, “terrorist-baby”-preventing Republican politician ALSO wanted to return those hundreds of millions so they could be shipped abroad to build sweatshops in Malaysia, then they might, God forbid! be inclined to vote their “class interest.” It’s a good racket the rich have got going for themselves, here in the “land of the free and the home of the brave.” You won’t find such an easily gulled working class in “foreign parts.”

  • You are right there, Digby, Republicans act as if they understand economics while being utterly clueless. Their record speaks for themselves.

  • Somewhat unrelated to this post, I thought this fascinating:

    “We do things that are more socialist than Europe does, but we don’t call it that. We have some things left over from the New Deal that a lot of European social democracies aren’t even close to, like time-and-a-half for overtime and social security. The single biggest single-payer socialist medical system in the world is in the United States: Medicare. Untouchable. Defended by Republicans. But it’s more socialist than the German health care system. The problem with it is that it coexists with several other systems that are not socialist at all and just pay scandalous windfalls to private vendors.”

    Source: http://tinyurl.com/248hsfs

    I think the myth of the “classless society” in the U.S. comes from what Trotsky would call, “combined and uneven development”. At least in certain parts of the U.S., labor in one’s ancestry was done by slaves. That is why Marx wrote that “white labor would never be free as long as black labor is in chains”. On the other hand, you always had a “safety valve” of sorts in the large tracts of land that could be parcelled out to people to prevent them from becoming an urban proletariat. Racial divisions, nativism, and the “rural” culture of many parts of the U.S. prevented many from acquiring a form of class consciousness.

    On the other hand, the American middle class, that social manifestation of the “American dream” that Tea Partiers and Fox News seek to so militantly defend, was a product of government programs and interventionist policies as cited above. Social security, the G.I. Bill, and anti-trust laws were all heavily interventionist ways of quelling class conflict and redistributing wealth.

    The dirty little secret of capitalism and industrialization in most places is that it developed out of cronyism and heavy government intervention, even in the classically capitalist England (though Marx outlined this quite well at the end of the first volume of Capital). Wanting to go back to the “unfettered market” seems historically misinformed, and thumping Hayek just because he compliments your pet theories doesn’t make any of this less true. There has been no “pure market”, fair competition, and so forth for a very, very long time. Maybe back when grandmothers sold their produce at the market, but this is a far cry from the bourgeosie who rule the world today.

  • To be clear: Republicans fought a (I think misguided) battle to insist that extension of unemployment benefits be paid for out of bail-out money, rather than as an additional expenditure. They didn’t oppose extending unemployment benefits on principle.

    Honestly, this kind of thing is probably one of the biggest mentality dividing lines between progressives and conservatives. I find it very hard to get myself worked up about whether the top 120,000 earners in the country pay a per percentage points more or less in taxes — especially given that they already hire a number of full time accountants to make sure they pay as little tax as possible anyway.

    Far from seeing it as simply immoral not to tax them more, I can see little reason other than envy for me to get worked up insisting that someone who makes 100x more than me or more be taxed a few percentage points more. (I don’t get worked up about opposing it either.) It will hurt them little and help the rest of us not at all.

    At most, this gives everyone a nice symbolic battle to work through. Democrats get to imagine they are sticking it to the rich while helping the poor, and Republicans get to take advantage that the working middle class (who are their primary votin base) have the odd, though perhaps admirable tendency, not to want to do to others things they don’t want done to themselves.

  • digbydolben

    At most, this gives everyone a nice symbolic battle to work through.

    Cultural symbols happen to be important, Darwin. They set the tone for discussions that either demoralize or encourage or galvanize masses of any given population. And the demoralization that is affecting large groups of people in the West right now springs from the perception that, because the middle classes are disappearing, their children will never be able to “get ahead.”

    The callous indifference to this level of frustration of the affluent, mostly white, mostly Protestant bourgeoisie in these societies, as it is reflected the detached tone of their writing (like yours, here) contributes to the anger of the poor. It is heard as something like “Let them eat cake.”

  • I think that is naive, Darwin. Republicans support tax policy that benefits the very top of the income distribution (top income tax rates, estate tax) because that is their true base – the people who pay the piper, as opposed to the suckers shouting the slogans.

    You may argue that this is not worth worrying about, but I read Catholic social teaching and come to a different conclusion. What about a fair distribution of resources, a preferential option for the poor, solidarity with the least among us? The problem is that those who call themselves “conservative” draw a false dichotomy between private and state initiative in these areas.

  • Arturo, your reflection on healthcare is spot on. Medicare is a good old fashioned single payer government-run healthcare system, and (together with Medicaid and the VA) amount to around half of all healthcare spending. Ironically, the Obama reform will bring about universal health care using private insurers- the model of Germany, Netherlands, Switzerland, and many others. Irony of ironies, the people most opposed to this reform benefit from government care. And the places that are most vocal about attacking “big government” are the biggest recipients of federal largesse (the red states). I think the reason is simple – these folks don’t want their taxpayer money to be spent on people who don’t look like them. After all, this is the south we are talking about here…

  • I guess part of it is: I really don’t see that having the tax rate on the top few percent of the population be a few percent higher would actually do much to promote inequality. If anything, I think that the richest 5% tends to buy stability (and thus continued power for themselves) by subsidizing a larger government which makes the lowest 30% more complacent.

    I’m also a little unclear on the “paying the piper” theory — pretty much all the data I’ve seen shows that the highest earners are pretty heavily Democratic in their leanings. Heck, Ralph Nader even wrote his literary masterpiece about how Only The Super Rich Can Save Us.

  • Sorry, “to promote equality” not “to promote inequality”.

  • Liam

    Allowing the marginal tax rates on the uppermost level of income to return to the levels they were at during the 1990s boom (still far lower than obtained during the booms of the 1940s-1960s) is something even the author of the Laffer curve felt was something not worth fighting against.

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  • Micha Elyi

    You really do have a problem with coveting your neighbor’s goods, Morning’s Minion. Your attempt to enlist the State in cutting down those whom you envy doesn’t give you an exemption from the commandment.

    Nor is preventing the already higher taxation of those you envy, MM, from going even higher a “preferential option” of any kind. The people you look down upon as you pass them on the street aren’t giving you a “preferential option” by not stabbing you in the stomach.