July 20, 2009
For all the laid-off "Joe the Plumbers" who share the Right's fury about the "class warfare" of imposing higher taxes on millionaires, there is this hard truth: the rich don't need as many of you as they once did -- and taxing the rich may be the only way to make the economic system work for you.
Indeed, the surplus labor of everyone from factory workers to bookkeepers is fast becoming the biggest structural problem facing U.S. society. Even an economic "recovery" is unlikely to put millions of unemployed Americans back to work, at least in any meaningful way.
Unemployment and under-employment are almost certain to stay high, and those lucky enough to have jobs will have to work harder, faster and longer than before.
This era's great irony may be that those of us who grew up watching "The Jetsons" or similar representations of the future didn't see this bleak future coming. We thought technological progress was going to mean more free time for the human race -- to play with the kids, to read a book, to travel or to just take it easy.
Instead, technology has contributed to making our lives more slavish and more brutish, especially when job loss is combined with lost health benefits and endless pressure from bill collectors.
Yet, while the middle- and working-classes have seen the American dream recede, the upper stratum of the super rich have watched the benefits of the high-tech global economy flow disproportionately into their stock portfolios and trust funds, creating wealth disparities not seen in the United States since the age of the robber barons.
The tiny fraction at the top -- the richest 0.01 percent -- has fattened its collective income by 400 percent, adjusted for inflation, over the past two decades. While this trend was accelerating from 1980 through 2008, the Republican-dominated federal government aided the wealth concentration by cutting income tax rates for the wealthy.
Prior to Ronald Reagan's presidency, the top marginal tax rate (the percentage that the richest Americans paid on their top tranche of income) was about 70 percent. By the time, George H.W. Bush left office in 1993, the marginal rate was at 31 percent -- and the U.S. budget deficit was exploding.
To get the deficit under control, President Bill Clinton and the Democratic-controlled Congress took the politically dangerous step of raising the top marginal rate to 39.6 percent, a move that contributed to the Republican congressional takeover in 1994.
Still, the Clinton tax hike helped get the federal budget back into balance and led to a projected surplus so large that policymakers fretted about the complications that might result from the U.S. debt being completely paid off. However, when George W. Bush took power in 2001, he immediately resumed the Reagan-esque push to reduce taxes, especially on the rich.
Under Bush-43, the top marginal rate was cut to 38.6 percent and then to 35 percent, contributing to another record surge in the federal deficit. By the time Bush left office in 2009, the U.S. government was hurtling toward a $1.2 trillion deficit and the Wall Street financial bubble -- inflated in part because of huge bonuses and other compensation -- had burst.
Yet, President Barack Obama and the congressional Democrats feared a replay of Election 1994, so they passed a $787 billion stimulus package and implemented costly bailouts for the Wall Street banks without seeking any immediate tax increase. The result has been a further worsening of the federal deficit -- and the Republicans accusing the Democrats of fiscal irresponsibility.
Any discussion of raising taxes on the rich -- like the House plan to apply a surtax on the wealthy to help pay for health-care reform -- brings howls of protest from protectors of the elites. The Washington Post's neoconservative editorial page denounced the surtax as a case of "soak-the-rich."
However, even the Post's editors acknowledged that "a serious case [could] be made that the U.S. income tax system should be more progressive.
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