Rep. Paul Ryan (R-Wisc.) and his budget proposal. (AP)

How the press aids and abets the GOP attack on the middle class

By Henry Banta
henrybanta@aol.com

One positive thing to come out of our current budget squabble is that we can now more clearly see what each of the parties really cares about – or at least what the Republicans really care about. In the end it was not Planned Parenthood, abortion, or EPA regulations. It was all about money. Lower taxes for the rich and fewer resources for the poor and middle class were at the core of what they would fight for until the bitter end. Unfortunately, this clarity has escaped the major media, most of which are, once again, totally absorbed by the political games.

By now the Republican obsession should surprise no one, as the single most important fact about the American economy for the last three decades has been, by far, the massive shift in wealth and income to the top of the economic ladder. 

The numbers need not long detain us here; the details are readily available for any one who cares. But it is worth reviewing some major points: For more than a decade the top 1 percent has captured about 50 percent of the nation’s total growth – nearly a quarter of the nation’s total income. Twenty-five years ago the top 1 percent controlled 12 percent of the nation’s wealth; they now control 40 percent. By all accounts things are getting worse.

There are some who claim that this massive shift in wealth and income is the result of inexorable economic forces. Not so. In a major work (Winner-Take-All Politics) Professors Hacker (Yale) and Pierson (University of California) have left us with no doubt what and, indeed, who was responsible. For the last 30 years this transfer has been the consistent objective of powerful and well organized interest groups, mostly allied with the Republican party. It is impossible to point to a single Republican-sponsored economic measure that did not have the effect of enhancing or protecting the wealth and income of the very rich. The tax code has been a major factor. As David Cay Johnston of Tax Notes has observed, since 1993 the effective tax rate for the top 400 taxpayers has gone down more than 40 percent.  All without a single note of protest by our current budget hawks. In effect we have had a “tax-and-transfer” program (thank you Ross Douthat) but the transfer went from the bottom and the middle to the top, the very top.

One gets a strong sense that the rabid concern of the Republicans over the budget has very little to do with fiscal responsibility. It is born of a fear – a legitimate fear – that some day the middle class may figure out what has happened and try to get back some part of what they have lost. 

It is this fear that drives the Republican hostility toward the broad programs that benefit the middle class. They are forever insisting that “we” cannot afford, and therefore must fix, reform or even abolish Social Security and Medicare. The real risk they see is that we may decide to pay for such things with higher taxes. Such taxes could turn out to be progressive. Who knows where that might end up.

Just how legitimate is this fear is indicated by a study by Michael I. Norton (Harvard Business School) and Dan Ariely (Duke University). In a broadly representative survey they asked thousands about how they thought wealth was distributed. What they found was that “regular” Americans had no idea how unequally wealth was distributed and dramatically underestimated the extent of the inequality (thinking that the top 20 percent had about 59 percent of the wealth – when the actual number is 84 percent). More surprising was their conclusion that “all demographic groups – even those not usually associated with wealth redistribution such as Republicans and the wealthy – desired a more equal distribution of wealth than the status quo.”

Even more surprising was the finding that 92 percent of Americans preferred a distribution of wealth like that of Sweden. A Bloomberg Business headline summed it all up: “Americans think the U.S. has far more income equality than it has. They want it to be even fairer. Yet they hate the policies that would make it so."

It is only in this context that a lot of foolish positions make sense. For example, the fanatic opposition to estate taxes, which affect only a very few, and were never very much anyhow, becomes quite rational as a preemptive strike. Similarly, one can make sense of cutting the IRS budget. There is overwhelming evidence that one dollar spent on tax enforcement earns multiple returns and cutting the IRS budget is senseless, especially coming from those who claim to be concerned about responsible fiscal policy. But it makes a great deal of sense when one recognizes that the rich have far more opportunities to cheat on taxes than do the rest of us.

More importantly, it explains the apparently insane opposition to any rational financial regulation. Republicans fully understand that the 40 percent increase in the ratio of debt to GDP was not the result of “runaway spending” but rather the result of the financial crisis precipitated by reckless deregulation. Their continued opposition to any real financial reform makes sense when one recognizes whose real interests are at stake. As pointed out by Simon Johnson (former chief economist of the IMF), between 2006 and 2008 the executives of the top 14 banks took home in cash $2.6 billion. The CEOs of the top five alone took home $2 billion. There is a good reason the very rich have a different take on regulatory reform.

Keeping the electorate ignorant and misinformed merely requires a compliant and complacent media willing to pay excessive attention and give excessive credibility to the constant drumbeat of propaganda on the budget and debt issued by those who have the most to lose if we deal with it in the context of our shrinking middle class.

Could there be a single person, outside of a prison or monastery, who has not over the last few weeks heard some pundit declare that we can’t get out of our budget difficulties by taxing the rich? Or that an effort to restore some fairness to the tax code would be a foolish attempt to “soak the rich”? The implication being that if we can’t solve the whole budget problem by increased taxes on the rich, why raise their taxes at all? 

For many years the major media and the political leadership, with rare exceptions, have kept the subject of inequality taboo. It must never be allowed to become any part of serious political discourse, much less mentioned on a Sunday TV talk show or on the evening news. Essential to this consensus is the media’s well-established phobia of facts. Analysts and pundits can gush with “political commentary” but become hopelessly inarticulate when confronted with a simple factual issue. The media reaction to the Republican budget proposal put forward by House Budget Committee chairman Paul Ryan (R-Wisc.) is a good example. As Professor Alan Blinder (Princeton) noted in the Wall Street Journal, (April 19, 2011) the thing, as a matter of simple fact, makes no sense – a conclusion seconded by most budget experts.

But the matter is not completely hopeless. Factual questions can creep up even where they are not wanted. Several news outlets, including the liberal blog, Think Progress, reported (April 20, 2011) that in a town hall meeting Rep. Ryan was challenged by a constituent on the issue of growing inequality and the Republican defense of lower tax rates for the very wealthy. The constituent saw inequality as contributing to the Great Recession. He saw “nothing wrong with taxing the top because it does not trickle down.” What is notable about this confrontation is that it happened and it involved an ordinary citizen – not a member of the media. It is difficult to imagine such an exchange being initiated by any member of the Washington press corps. On a Sunday morning talk show it would cause a lot of serious people to spill their coffee. Most certainly, no one would have challenged the amazing mixture of misinformation and ideological claptrap in Ryan’s reply: 

“We do tax the top. Let’s remember, most of our jobs come from successful small businesses. Two-thirds of our jobs do. You got to remember, businesses pay taxes individually. So when you raise their tax rates to 44.8 percent, which is what the president is proposing, I would just fundamentally disagree. That is going to hurt job creation.”

No one would have the ill grace to ask what evidence he had about the effect of the top tax rate on job creation. Nor would anyone have pointed out that Mr. Ryan uses an absurdly broad definition of small business. Much less would there have been a follow-up to the constituent’s suggestion that the economic stagnation of the middle class made a major contribution to recession. Indeed, if smaller government, lower taxes and less regulation is the path to prosperity, how is it we had this recession in the first place? What happened to the jobs that President Bush’s tax cuts were supposed to give us? If high taxes on the rich can do so much damage, why did the economy do so well in the 1950s when the top marginal rates were over 90 percent? And in the 1960s when the rates were over 70 percent? 

Stay in Washington, Mr. Ryan. Nobody will ask you embarrassing questions. No one there will ask you about how your proposed budget will affect our increasing inequality in wealth and income. You’ll be safe there.
 

Henry M. Banta is a partner in the Washington, DC, law firm of Lobel, Novins & Lamont. E-mail: henrybanta@aol.com

Comments

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Program Manager Posted by Bruce DeMartini 05/02/2011, 07:24 PM Thank you for your observations about how the popular media aids misinformation from the right. I read the New York Times about what's happening with the budget and feel as though the writer is more interested in the politics of the process than trying to explain what's really going on and what could be the outcomes of an agreement. Indeed, facts seem to be absent from the conversations and reporting. By the way, I really appreciate your fine writing.

Posted by Jim R 05/02/2011, 09:54 PM Less than 2% of small businesses earn more than 250k yearly and yet pols spew nonsense daily, unchallenged on the spot by the stenographer of the day conducting the interview, about their undying devotion to small business - who oh yeah by the way include billion dollar per year hedge funds. The media is the essential tool in the corporate takeover of America the last 30-40 years. As a traveling machine engineer who's interacted with tens of thousands of factory workers, I can assure you Keynesian Economics and not cutting government spending in a recession is never discussed. Let alone the irrefutable fact that we've always prospered most when taxes were highest and those cursed regulations were the strongest. Think Reagan Democrat and "What's The Matter With Kansas?" as the inevitable result.

The politicians come and go but the media personalities remain. Posted by David 05/02/2011, 11:19 PM The politicians come and go but the media personalities remain. The economy and the corruption of our democracy would not be possible without the participation of those in control of the media. If we had a criminal justice system that investigated white collar crime and politicians corrupting the processes government the way they do car theft and shoplifting most politicians and media executives would be in jail!

Look over there, not over here. Posted by Don G. 05/03/2011, 03:54 PM Mr. Banta expresses what I have long thought about the Republican Party. They use wedge issues to distract the middle class (particularly the lower middle class) and at the same time use those issues to act as if they share the same values. While Republicans and their mouthpieces wail on about "tax and spend liberals", I see no one complaining about "tax cut and spend" neoconservative Republicans. A recent study attributed about 7 trillion dollars of the national debt to the actions of our previous administration - lowering tax rates, fighting two wars while keeping the costs off the books as "emergency appropriations, borrowing the money to conduct those conflicts, and basically wasting the surplus briefly enjoyed by this nation back in 2000. No one in the media that I am aware of have called the Republicans on their brazen disingenuousness when they complain about President Obama runninng up the national debt. Do journalists, let alone the American public, have such short memories? Jump to top of list