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Revolt of the Rich: Have Our Financial Elites Already Seceded from America?

By   Follow Me on Twitter     Message Richard Clark     Permalink
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What follows here is an abridgement of an amazing and shockingly perceptive article by former Republican Mike Lofgren that appeared in the August 27, 2012 issue of The American Conservative magazine.

"What I mean by this secession is a withdrawal into enclaves, an internal immigration, whereby the rich disconnect themselves from the civic life of the nation and from any concern about its wellbeing except as a place to extract loot.

Our plutocracy now lives like the British in colonial India:   in the place and ruling it, but not of it.   If one can afford private security, public safety is of no concern;   if one owns a Gulfstream jet, crumbling bridges cause less apprehension -- and viable public transportation doesn't even show up on the radar screen.   With private doctors on call and a chartered plane to get to the Mayo Clinic, why worry about Medicare?

In both world wars, even a Harvard man or a New York socialite might know the weight of an army pack.   Now the military is for suckers from the laboring classes whose subprime mortgages you just sliced into CDOs and sold to gullible investors in order to buy your second Bentley or rustle up the cash to get Rod Stewart to perform at your birthday party.   The sentiment among the super-rich towards the rest of America is often one of contempt rather than noblesse.

Stephen Schwarzman, the hedge fund billionaire CEO of the Blackstone Group who hired Rod Stewart for his $5-million birthday party, believes it is the rabble who are socially irresponsible.   Speaking about low-income citizens who pay no income tax, he says: "You have to have skin in the game.   I'm not saying how much people should do.   But we should all be part of the system."

But millions of Americans who do not pay federal income taxes do pay federal payroll taxes.   These taxes are regressive, and the dirty little secret is that over the last several decades they have made up an ever greater share of federal revenues.   In 1950, payroll and other federal retirement contributions constituted 10.9% of all federal revenues.   By 2007, the last "normal" economic year before federal revenues began falling, they made up 33.9%.   By contrast, corporate income taxes were 26.4% of federal revenues in 1950.   By 2007 they had fallen to 14.4%.   So who has skin in the game?

While there is plenty to criticize the incumbent president for, notably his broadening and deepening of President George W. Bush's extra-constitutional surveillance state, under President Obama the overall federal tax burden has not been raised, it has been lowered.   Approximately half the deficit impact of the stimulus bill was the result of tax-cut provisions.   The temporary payroll-tax cut and other miscellaneous tax-cut provisions make up the rest of the cuts we have seen in the last three and a half years.   Yet for the president's heresy of advocating that billionaires who receive the bulk of their income from capital gains should pay taxes at the same rate as the rest of us, Schwarzman said this about Obama:   "It's a war.   It's like when Hitler invaded Poland in 1939."  

For a hedge-fund billionaire to defend his extraordinary tax privileges vis-a-vis the rest of the citizenry in such a manner shows an extraordinary capacity to be out-of-touch.   He lives in a world apart, psychologically as well as in the flesh.

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Schwarzman benefits from the so-called "carried interest rule" loophole:   financial sharks typically take their compensation in the form of capital gains rather than salaries, thus knocking down their income-tax rate from 35% to 15%.   But that's not the only way Mr. Skin-in-the-Game benefits:   the 6.2% Social Security tax and the 1.45% Medicare tax apply only to wages and salaries, not capital gains distributions.   Accordingly, Schwarzman is stiffing the system in two ways:   not only is his income-tax rate less than half the top marginal rate, he is shorting the very Social Security system that others of his billionaire colleagues, like Pete Peterson, say is unsustainable and needs to be cut.

After the biggest financial meltdown in 80 years and a consequent long, steep drop in the American standard of living, who is the nominee for one of the only two parties allowed to be competitive in American politics?   None other than Mitt Romney, the man who says corporations are people and whose effective rate for federal taxes, at 14%, is lower than that of many a wage slave.

Opposing him will be the incumbent president who must raise a billion dollars to compete.   Much of that loot will come from the same corporations, hedge-fund managers, merger-and-acquisition specialists, and leveraged-buyout artists the president will denounce in pro forma fashion.

The super-rich have seceded from America even as their grip on its control mechanisms has tightened  

That wealth-worship -- and a consequent special status for the wealthy as a kind of clerisy -- should have arisen in the United States is hardly surprising, given the peculiar sort of Protestantism that was planted here from the British Isles.   Starting with the Puritanism of New England, there has been a long and intimate connection between the sanctification of wealth and America's economic and social relationships.   The rich are a class apart because they are the elect.

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Most present-day Americans, if they think about the historical roots of our wealth-worship at all, will say something about free markets, rugged individualism, and the Horatio Alger myth -- all in a purely secular context.   But perhaps the most notable 19th-century exponent of wealth as virtue and poverty as the mark of Cain was Russell Herman Conwell, a canny Baptist minister, founder of perhaps the first tabernacle large enough that it could later be called a megachurch, and author of the immensely famous "Acres of Diamonds" speech of 1890 that would make him a rich man.   This is what he said:

"I say that you ought to get rich, and it is your duty to get rich.   " The men who get rich may be the most honest men you find in the community.   Let me say here clearly " ninety-eight out of one hundred of the rich men of America are honest.   That is why they are rich.   That is why they are trusted with money.   " I sympathize with the poor, but the number of poor who are to be sympathized with is very small.   To sympathize with a man whom God has punished for his sins " is to do wrong " let us remember there is not a poor person in the United States who was not made poor by his own shortcomings."

The conjoining of wealth, Christian morality, and the American way of life reached an apotheosis in Bruce Barton's 1925 book The Man Nobody Knows.   The son of a Congregationalist minister, Barton, who was an advertising executive, depicted Jesus as a successful salesman, publicist, and the very role model of the modern businessman.

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Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've (more...)

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