During the Republican presidential primary season, Mitt
Romney accused President Obama[i] of
class warfare. Then again, when Romney suggested he would be willing to limit
tax deductions for mortgages on second homes based on income, Newt Gingrich
accused Romney of the same offense as he claims those on the left employ.[ii]
I take it that from Gingrich’s perspective, anything other
than a flat tax or sales tax or best yet, a per capita tax, is unfair and promotes
class warfare. As with many of Romney’s positions, it’s not clear what he deems
class warfare, except that he’s against it and the other side’s policies nurture
it.
All of this is a tempest in a teapot because the American
people don’t (yet) much believe in class warfare. I think there are three main
reasons for this:
1. Our social roots are based on the immigration of our
ancestors seeking opportunities to succeed. Even those of us who can trace
their ancestors to the Mayflower surely recognize deep down inside that they
came because America provided opportunity they did not have in their homeland. What
class system existed at the time of their immigration did not prevent
perspiration, inspiration and a dollop of luck from allowing the poorest to
become the richest, for a worker to become a capitalist. Even if such a rise
could not occur in the immigrant’s generation then it was possible in the next
or the next.
North American society has always had a top 1% (by
definition). Most people know they have very little possibility of attaining
that level of income or wealth, but do not begrudge those who have on account
of their perspiration, inspiration and luck.
We do, however, have little sympathy for those “born with a
silver spoon in their mouth” unless these people serve the public in some
manner; then we tend to adore them. Witness the general regard for the Kennedy
clan.
What we as a nation have historically begrudged were the
most recent wave of immigrants because their hard work and cheap(er) labor
threatened those who had recently reached the lower middle classes. Consider as
examples the high levels of discrimination against the Irish on the East Coast
during the middle 1800s and the Chinese laborers when they flooded our shores
to build our western railways. This economic fear drives much of the current
angst against illegal immigrants.
2. The burden of our local, state and national governments
has always been shouldered disproportionately by those with higher incomes or
accumulated wealth. Despite Gingrich’s statements about Romney’s tax policy
reeking of class warfare, this differentiation in tax structure has been a part
of our social structure from the get go. We are a country primarily founded on English
law, which does have social classes. England (and other feudal societies)
developed a system of property taxes, which by their very nature skew the cost
of government to those who have wealth.
After the 16th amendment to our constitution was
approved, our first income tax structure provided for a 1% rate on income over
$3,000 graduating up to a 6% rate for income over $500,000. That was 1913.
Adjusting for inflation, the $3,000 would now be about $70,000 and the $500,000
is equivalent to over $11.7 million![iii]
I will grant that the tax rates were not high, but my point
is that from its birth, the income tax targeted those well off, and only later
were the less well-off included in the tax.
Voters in North Dakota, a state currently flush because of
oil and gas revenues, just voted by a 3-1 margin against eliminating the
property tax. North Dakota is not exactly a bastion of liberals. They are
simply expressing their vision of part of the social contract: those well off
have a greater obligation to fund our public goods.
3. Lastly, most members of the US society are themselves
among the 1%. To be in the top 1% of earners within the US requires an income
in the $400,000 range (it varies from year-to-year because of bonuses, capital
gains and so on). However, when we extend our view to the world, most of us are
no longer among the 99%; we are the 1%—and at least subconsciously we know it.
Depending on whether and how one adjusts for purchasing differences across the
world, all it takes is an income of $34,000-$41,000 to be included in the
world’s top 1% of earners.
We Americans aren’t drawn to the idea of class warfare
because we intuitively understand people in glass houses should not throw
stones. However, if those at the top of the income and wealth scales in the US continue
to call down the “class warfare” card over each and every proposal that does
not actively shrink their financial burden for our public weal, at some point
the masses may well decide that in fact class warfare is in operation, except
it is the rich warring on the rest of us.
We are in the midst of a great dispute over what public
goods should be included in our social contract. That discussion is needed and
healthy. Regardless of how that debate is resolved through our democratic
processes, we still need to agree on how to pay for government. We have no
current agreement.
As a society we are complicit with the malfeasance of
political leaders of both parties who have chosen to fund current government expenditures
through continual deficit spending, placing the burden on the backs of future taxpayers.
Our current predicament is caused by three major factors. (1) We have not
recognized the true costs of the social programs we have adopted through
bipartisan votes (i.e. Social Security and Medicare). (2) The Bush tax cuts
have starved the federal government of cash at a time it is needed. (3) We have
engaged in a series of unfunded wars that have dramatically increased expenses
without adding a single penny of revenue.
There are people who want to solve all three problems on the
backs of the middle class by decreasing government spending that provides them
income and adjusting the tax code so the rich will pay less (which implies
others will have to pay more.)
Here I will remind everyone of my version of a fair income
tax structure [http://2centsb4inflation.blogspot.com/2012/02/jim-jackson-simplified-income-tax-plan.html
]. If we adopt a tax system that is socially fair, we will continue to avoid
real class warfare. If, however, the rich continue to shirk their social obligation
and entrench their privilege by eliminating estate taxes so that generations of
rich enclave themselves as a privileged subset within the US, then perhaps the
rich will push the country into true class warfare.
Such a conflict will not be good for anyone in the US. The usual
result of such a conflict is that the middle and lower classes suffer a significant
decrease in their standard of living as society falters. The rich who do not
flee quickly enough lose most of their property and many lose their lives.
It is not the poor who cause class warfare; it is rich. If
they keep raising the banner of class warfare to try to gain short-term
financial gains at the expense of the masses, they may end up causing that
which they most fear, and they will have no one to blame but themselves.
~ Jim
[i]
The Boston Globe reported [http://www.boston.com/Boston/politicalintelligence/2012/01/mitt-romney-accuses-president-obama-engaging-class-warfare/vApeJAIfEgTgmeYsrJsFBL/index.html]
that in Iowa Romney indicated that Obama’s policies will “substitute envy for ambition and poison
the American spirit by pitting one American against another and engaging in
class warfare.”
[ii] CNSNews.com
reported Gingrich to say, “Governor
Romney’s proposal to limit certain tax deductions based on income, including
the deduction for mortgage interest on second homes, is a surrender to the
class warfare rhetoric of the Left."
[iii]
The CPI-U [http://www.usinflationcalculator.com/inflation/consumer-price-index-and-annual-percent-changes-from-1913-to-2008/
] in Jan. 1913 was 9.8. In May 2012 it had increased to 229.815, a ratio of
~23.45.
