James Steele: Here's how it fits in. Years ago, and for many, many years, the personal income tax in this country had graduated rates. So that you had multiple rates. And the more you made, the more you paid on that last segment of your income. And that's why things were so much different then than now! I mean right now people making, I think it's around $375k, $380k, that last segment of their income, well that top rate, 35%, is the same as somebody making $50 million dollars a year. That's what's different now, then what used to be back in the days of Eisenhower. In Eisenhower, you paid more and more as you went up and up, and in that category. You very often hear comments from Conservatives that there was a "discouragement to work." Well there's absolutely no evidence of that in terms of employment numbers. You will hear some person here or there say, "it's not worth my time because I'm going to pay this tax." But the real story was, people continued to work and they paid their taxes. That's why back in the '50s, you had your overall effective rate, 51% for the richest, and why now it's so low because the taxes have been progressively cut for years and years. So young people have no idea of how the rates used to be so different. And the amazing thing about them is that they were not discouraged. They were not discouraging the economic activity, but I mean we had some of the most robust economic times in this country's history in the '50s, '60s, and into the '70s, when rates were much, much higher than they are today.
Rob Kall: Right. Now I've already digressed from my plan. So I want to get back to it.
James Steele: Okay! [laughing]
Rob Kall: You talk about taxes in the book, but I want to start out by just asking you a basic overall question. The title of the book is "The Betrayal of the American Dream," and includes a drawing or a picture of the words on paper, "American Dream Hurt!," with holes in them, crumbling and falling apart. And I think it's a very apt metaphor, that graphic that you've created for the cover, or whoever has created it. So I want to ask you, what was your goal in writing this book? What did you hope to accomplish with it?
flickr image by OWScoverage
James Steele: We wanted to show what has.. [aside: I'm sorry we're not announcing ourselves. This is Jim Steele] We wanted to show in the book that what is happening to people, middle class people, is not some accident, that it is not some result of global economic forces which is the way very often a lot of the economists portray this stuff. The goal
of the book was to show that increasing economic strain that so many people are under, is really man-made. It's policies. You know, policies and taxes to trade, the de-regulation, had been implemented over the last few decades, that are really squeezing middle class Americans. The things that had either been enacted, or where Congress in some cases has refused to act to change things that were counter productive to their interests. So we never set out with like an abstract like what we're going to prove, but because we had written about the middle class, off and on, for many, many years we followed these issues for a long time. And we've been observing a lot of the economic numbers so we know, sort of generally knew what's happened. We hear from people that we've talked to in the past. I mean who among us doesn't know somebody whose kid has graduated from college, can't get a job, or back home living because there's no work out there. I mean who doesn't know somebody who's lost a pension, or had their employment trimmed and they've had to change their whole lifestyle. I mean who doesn't know a middle aged person who's lost a job. Maybe they found another one, but they're making two thirds of what they used to make. I mean everybody knows this has happened, and I think these, we're observing this, we were hearing from people about it, so we knew what's been in the works for a long time.
The second part of it was people progressively, or not 'progressively,' people were increasingly e-mailing us on our website over the last few years, "you've got to go back and look at what's happening in the American economy!" These are just average people. What's happening in their work, what's happening in their standard of living. And these letters, these e-mails were coming from all over the country, California, mid-West, East Coast. And that, coupled with what we had observed, and with some of the hypocrisy we saw there in politics, we thought it's time to go back and revisit a lot of these issues. So that was the goal as much as anything.
Rob Kall: And it looks like you've broken your book into analyzing the different ways that the middle class and the American Dream have been under assault, and undermined and eroded. De-regulation, globalization, free trade, and the loss, exporting of jobs outside the United States, the tax system that advantages the rich, multi-national corporations, the end of retirement, phantom jobs--not sure what that is. Can you kind of walk us through some of these. Starting with globalization, because that's one that frankly I believe is one of the biggest betrayals of America by both parties. It started with Bill Clinton signing the World Trade Organization agreement, as far as I knew, but maybe you can tell us more about it.
James Steele: Well, you're absolutely right on it. It actually went back before Clinton. It actually goes back to the '60s and '70s, particularly the '70s when we just basically threw open our doors and said to other countries "you can import here. And we'll charge you little, if anything, in terms of duties because we want to encourage your economies, because we want to develop, you know, with more products developed abroad." And it was part of a foreign policy. But a lot of it was a way to start tamping down wages to this country. Multi-national corporations early on realizing the opportunity for them if they were to start sending work abroad. You can bring it back in with little duties. Little tariffs. And everybody said... Here's what everybody said: and here was the betrayal! Everybody said, "Yes, some of our jobs will go offshore, but this will open up more opportunities here for us to export. And we will" some of the drudge jobs in manufacture will go offshore, but the smart ones will stay here, the higher end ones. And that's the evolution of the economy. We will" yeah they'll be some disruptions, but overall it's going to be best for the country!" That was the betrayal. That was the song that economists, politicians, corporate heads, all of them continued to sing that song. And that goes back decades now.
And it's just not true, because you can see it in what's happened to wages. I mean wages, manufacturing wages, are holding them stagnant for many years, and manufacturing wages in this country are lower than many, many countries around the globe. And yet people, a lot of people persist in this idea that high union wages drove these jobs offshore. That wasn't it at all. It was the opportunity to make more money because of those deals abroad. So that betrayed the people, and we think betrayed the country.
Donald Barlett: [aside: This is Don] You can actually.. Jim indicated the '70s were really the critical decade, and you can actually go back to 1975. That was the last year that this country had a trade surplus. And all anyone can talk about today is the budget deficit. But the budget deficit isn't costing us jobs, it's the trade deficit that cost us jobs. We have had thirty six, now into our thirty seventh consecutive year of trade deficits, which have resulted in the erosion of millions of jobs in this country. I mean last year, 2011, was three quarters of a trillion dollar trade deficit. And there is no focus on this at all. Nobody even talks about it and yet this deficit is the one that is resulting in the elimination of jobs. And it's not just the elimination of all the jobs that are being created, for the most part with certain exceptions, but for the most part, paying less money, in some cases a lot less money than the jobs that they're replacing. So what this means is, that you're going to have this ongoing thing in which people, the good paying jobs are going to disappear. They're going to be replaced more and more with lower paying jobs. That in turn affects the amount of income tax collected, which you know, affects the budget deficit, and more importantly affects social security. So the trade deficit really is at the heart of this country's economic problems, and no one wants to deal with it.
Rob Kall: Well, there's another aspect too, which is totally ignored, and that is, that for at least a hundred years a good portion of the expenses of the United States government was paid for by tariffs.
Donald Barlett: Right.
Rob Kall: Duty..