Pity the Rich Having to Fight to Extend the Bush Tax Cuts

There's a brutal battle in the US in which legislators are fighting tooth and nail to make sure that the top 1% of income earners get to keep their extraordinary tax cuts showered up on them by Bush.

It helps to look at the statistics about the ultra-rich to understand these people who are willing to throw aside the START treaty and bring the legislature to a halt if they don't get their tax cut. Here is a bit from an article by David Cay Johnston:

But they [payroll tax data] do give us a stunning picture of what’s happening at the very top of the compensation ladder in America.

The number of Americans making $50 million or more, the top income category in the data, fell from 131 in 2008 to 74 last year. But that’s only part of the story.

The average wage in this top category increased from $91.2 million in 2008 to an astonishing $518.8 million in 2009. That’s nearly $10 million in weekly pay!

You read that right. In the Great Recession year of 2009 (officially just the first half of the year), the average pay of the very highest-income Americans was more than five times their average wages and bonuses in 2008. And even though their numbers shrank by 43 percent, this group’s total compensation was 3.2 times larger in 2009 than in 2008, accounting for 0.6 percent of all pay. These 74 people made as much as the 19 million lowest-paid people in America, who constitute one in every eight workers.

Clearly these fat cats have a lot to protect. No wonder they are pulling out all the stops to make sure they get to keep their tax cuts!

Here is a comparison of the world before Reaganomics "revolutionized" American society versus the reality today:

the average income of the bottom 90 percent
Prior to Reagan		After Reagan
1950	$17,719	1980	$30,941
1980	$30,941	2008	$31,244
Increase	$13,222	Increase	$303
% Increase	74.6%	% Increase	1%

If you want to understand how America has transformed itself into this "Reagan Revolution", read this article by Andy Kroll on the TomDispatch.com blog. They argue that this war of the rich upon the poor pre-dates Reagan with some initial victorious skirmishes under the Carter administration:

How did a middle-class-heavy nation transform itself into an oligarchy? You'll find answers to these questions in Winner-Take-All Politics, a revelatory new book by political scientists Jacob Hacker and Paul Pierson. The authors treat the present figures we have on American wealth and poverty as a crime scene littered with clues and suspects, dead-ends and alibis.

Unlike so many pundits, politicians, and academics, Hacker and Pierson resist blaming the usual suspects: globalization, the rise of an information-based economy, and the demise of manufacturing. The culprit in their crime drama is American politics itself over the last three decades. The clues to understanding the rise of an American oligarchy, they believe, won’t be found in New York or New Delhi, but on Capitol Hill, along Pennsylvania Avenue, and around K Street, that haven in a heartless world for Washington’s lobbyists.

"Step by step and debate by debate," they write, "America's public officials have rewritten the rules of American politics and the American economy in ways that have benefitted the few at the expense of the many."

Most accounts of American income inequality begin in the 1980s with the reign of President Ronald Reagan, the anti-government icon whose "Reaganomics" are commonly fingered as the catalyst for today's problems. Wrong, say Hacker and Pierson. The origins of oligarchy lay in the late 1970s and in the unlikely figure of Jimmy Carter, a Democratic president presiding over a Congress controlled by Democrats. It was Carter's successes and failures, they argue, that kicked off what economist Paul Krugman has labeled “the Great Divergence."

In 1978, the Carter administration and Congress took a red pen to the tax code, slashing the top rate of the capital gains tax from 48% to 28% -- an enormous boon for wealthy Americans. At the same time, the most ambitious effort in decades to reform American labor law in order to make it easer to unionize died in the Senate, despite a 61-vote Democratic supermajority. Likewise, a proposed Office of Consumer Representation, a $15 million advocacy agency that was to work on behalf of average Americans, was defeated by an increasingly powerful business lobby.

Ronald Reagan, you could say, simply took the baton passed to him by Carter. His 1981 Economic Recovery and Tax Act (ERTA) bundled a medley of goodies any oligarch would love, including tax cuts for corporations, ample reductions in the capital gains and estate taxes, and a 10% income tax exclusion for married couples in two-earner families. "ERTA was Ronald Reagan's greatest legislative triumph, a fundamental rewriting of the nation's tax laws in favor of winner-take-all outcomes," Hacker and Pierson conclude.

The groundwork had by then been laid for the rich to pull definitively and staggering ahead of everyone else. The momentum of the tax-cut fervor carried through the presidencies of George H.W. Bush and Bill Clinton, and in 2000 became the campaign trail rallying cry of George W. Bush. It was Bush II, after all, who told a room full of wealthy donors at an $800-a-plate dinner, "Some people call you the elites; I call you my base," and who pledged that his 2001 tax cuts would be a boon for all Americans. They weren't: according to Hacker and Pierson, 51% of their benefits go to the top 1% of earners.

And the article goes on to point out that financial deregulation was a contributor to this growth in income inequality. And the fight was carried into the courts capped by the recent victory of anonymous corporate political donations being protected under "free speech" laws in the Citizens United decision:

There's no mistaking how, in less than a year, Citizens United has radically tilted the political playing field. Along with several other major court rulings, it ushered in American Crossroads, American Action Network, and many similar groups that now can reel in unlimited donations with pathetically few requirements to disclose their funders.

What the present Supreme Court, itself the fruit of successive tax-cutting and deregulating administrations, has ensured is this: that in an American “democracy,” only the public will remain in the dark. Even for dedicated reporters, tracking down these groups is like chasing shadows: official addresses lead to P.O. boxes; phone calls go unreturned; doors are shut in your face.

And this has led to the new political reality:

Then there's the roster of corporations who have used their largesse to influence American politics. Health insurance companies, including UnitedHealth Group and Cigna, gave a whopping $86.2 million to the U.S. Chamber to kill the public option, funneling the money through the industry trade group America's Health Insurance Plans. And corporate titans like Goldman Sachs, Prudential Financial, and Dow Chemical have given millions more to the Chamber to lobby against new financial and chemical regulations.

As a result, the central story of the 2010 midterm elections isn’t Republican victory or Democratic defeat or Tea Party anger; it’s this blitzkrieg of outside spending, most of which came from right-leaning groups like Rove's American Crossroads and the U.S. Chamber of Commerce. It's a grim illustration of what happens when so much money ends up in the hands of so few. And with campaign finance reforms soundly defeated for years to come, the spending wars will only get worse.

...

We don't need to wait for 2012 to arrive, however, to know that the sheer amount of money being pumped into American politics makes a mockery out of our democracy (or what's left of it). Worse yet, few solutions exist to staunch the cash flow: the DISCLOSE Act, intended to counter the effects of Citizens United, twice failed in the Senate this year; and the best option, public financing of elections, can't even get a hearing in Washington.

Until lawmakers cap the amount of money in politics, while forcing donors to reveal their identities and not hide in the shadows, the New Oligarchy will only grow in stature and influence. Left unchecked, this ultimate elite will continue to root out the few members of Congress not beholden to them and their “contributions” (see: Wisconsin's Russ Feingold) and will replace them with lawmakers eager to do their bidding, a Congress full of obedient placeholders ready to give their donors what they want.

Never before has the United States looked so much like a country of the rich, by the rich, and for the rich.

That's the fight the ultra-rich are in, and they are in it to win, and win big.