Evil Geniuses: The Unmaking of America: A Recent History (37 page)

Given the power balance in Washington during Obama’s first two years, it’s hard not to feel that his and other Democrats’ habitual restraint, manners, and economic centrism got the best of them. In addition to a president who had been elected with a mandate for
CHANGE
(as well as
HOPE
and bipartisanship), the Democrats had historically huge majorities of seats in both houses of Congress. The House majority was the Democrats’ largest in years—and larger than any the Republicans have held since 1931. In the Senate, Democrats had 59 of 100 seats (and for six months a filibuster-proof 60), more than they’d held since 1979—and larger than any Republican majority since 1923.

But they really didn’t act like it. Take healthcare reform. The Affordable Care Act was a difficult and important achievement. However, the administration and the Democratic congressional leadership seem to have punted when it came to pushing for a law that included a “public option,” some form of Medicare-for-anybody coverage that people could buy as an alternative to private insurance. For his first few months in office, Obama seemed to be all for it, as did all the Democratic chairs of all the congressional committees that would create the reform law. But the insurance industry and the physicians’ trade group, the American Medical Association, were against it. The most conservative Democrats in the House, the Blue Dog Coalition, were iffy, but only a dozen of those fifty would be required to pass a bill. Over the summer, however, Obama got publicly wobbly on the public option—as Paul Krugman wrote at the time, “weirdly unable to show passion on the issue, weirdly diffident even about the blatant lies from the right”—and by Labor Day, the Democrats surrendered.

That same summer of 2009, Democrats also gave in to big business in an important showdown with organized labor. A bill was moving through Congress that had a provision to make unionization easier—instead of winning a secret-ballot referendum in a workplace, labor organizers would just have to convince a majority of the workers face-to-face to sign up. The Business Roundtable lobbied hard against it. A few moderate Democratic senators were persuaded—and without their votes the forty Senate Republicans could kill the whole bill by sticking together and filibustering it, so despite the (theoretically) filibuster-proof majority, it got dropped. A year later big business was still making sure that the measure stayed dead: on Business Roundtable letterhead, the CEOs of Verizon and Caterpillar warned Obama’s budget director that any such change remained “foremost among our companies’ labor concerns” because it would have “a devastating impact on business” and “significantly and negatively impact global competitiveness, job creation and economic recovery.” As it happened, six weeks after he got that letter, the OMB director left the administration and soon went to work for a member of the Business Roundtable, the CEO of Citigroup, as his vice-chairman of corporate and investment banking.

It was very expensive for the government to save Wall Street and the economy after the crash and during the Great Recession, requiring a trillion dollars more per year in extra federal debt for a few years. So of course Republicans and corporate figures and many Democrats framed that hysterically as
the new crisis,
which queered any hopes of creating any large new government programs. To lower those deficits, superresponsible Obama and the superresponsible congressional Democrats did manage to enact a serious spike in the average tax paid by millionaires—up to 34 percent, as it had been under Clinton in the 1990s.

Tax rates for the well-to-do and the tax code in general are fundamental to the story of this book: they are the most direct, large-scale way in which economic fairness or unfairness is built into the system. And for the last forty years, the story of the tax code has been the same back and forth and back again, Republicans radically lowering rates on business and the rich, then Democrats nudging them back up, not mainly to expand social programs or redistribute wealth but to reduce budget deficits. And true to form, in 2017, with Republicans once again in control of both the White House and Congress, the average income tax paid by millionaires was radically cut once again—all the way down to 27 percent, the lowest rate since the Reagan 1980s.

Some Democrats’ moves on economics in the late 2010s were often said to amount to a “lurch” to the left. It strikes me rather as a long-overdue ideological correction, people finally standing up, after decades in a defensive crouch that made them resemble the last living liberal Republicans.

*
The founder of Citizens United, a right-wing political group, became Trump’s deputy campaign manager in 2016 and has been credibly accused of operating a scam to rip off MAGA donors. A right-wing legal group that for a decade laid important groundwork for the
Citizens United
case was the James Madison Center, founded in 1997 by Senator Mitch McConnell with funds provided by Betsy DeVos.

A majority of Americans were persuaded to agree to a makeover of our political economy in the 1970s and ’80s, to turn it into a brand-new old-fashioned version of itself. By radically reducing taxes on the rich, regarding markets as infallible and government as irrelevant or worse, indulging business at every turn, and letting creative destruction run wild,
everybody
would make out great.

It hasn’t worked out that way.

The original supply-side idea of the 1970s and ’80s was that low tax
rates
would make people work more and earn lots more and thus generate just as much tax
revenue
for the government. The other half of the Reagan promise was that all the billions and trillions in tax savings going to the investor class and business would make America boom again as it had in the 1950s and ’60s—trickling down to regular people—by providing everybody with good jobs and a fair share of the new economic bounty.

A supply-side premise—that tax rates at some very high level tend to persuade people to work less—is true. “Of course,” a pair of prominent left economists from UC Berkeley and MIT wrote recently, “increasing upper income tax rates can discourage economic activity…and potentially reduce tax collections.” Yet as Krugman says, “the optimal tax rate on people with very high incomes is the rate that raises the maximum possible revenue.” Economic research shows convincingly that the self-defeating level of taxation is
much
higher than our highest federal income tax rate has been for the last forty years—apparently the disincentive effect doesn’t kick in until you get up to a top marginal rate of at least 48 percent and maybe not until 76 percent or higher. Meanwhile, in real life since 1980, the supply-side low-tax pay-for-itself magic has repeatedly failed to do the trick: the federal government is negligibly smaller, but the federal debt has more than tripled in real terms.
^*

Nor has our post-1980 rich-right tax regime produced the job-creating or other sustained economic good news that it has always promised. Plenty of comparable countries with much higher taxes and much larger social spending have grown as much as we have, and according to
The Wall Street Journal,
“there is no clear correlation between economic growth since the 1970s and top tax-rate cuts” in the world’s twenty-five most developed countries. Focusing only on our American experience, when you compare what happened after federal taxes on the well-to-do were raised (by Clinton and Obama in their first terms) or cut (by George W. Bush), the result seems to have been the
opposite—
more overall growth and jobs after taxes went up, no trickle-down benefits after they went down.

We’ve now had four decades to judge the failure of laissez-faire supply-side trickle-down economics for most Americans, yet the right sticks to its story, unrevised. As Republicans rewrote the tax code in 2017—cutting the tax rate on all income above half a million dollars significantly, cutting the effective tax rate on corporations by half—they insisted, just as they had all the previous times, that despite appearances, the rewrite was really
all about
helping ordinary people, creating jobs, and raising the incomes of the majority of Americans who, as even the Republican Speaker of the House admitted then, “live paycheck to paycheck” with “a lot of economic anxiety.” The Trump administration claimed that the new tax law would generate such explosive growth that the average family would soon earn $4,000 or maybe $7,000 more per year. While average people would all get that “pay raise,” “the rich will not be gaining at all,” the president lied. What’s more, the $2 trillion tax cut over this next decade, his treasury secretary promised, would “not only pay for itself, but it will pay down [government] debt” because…
supply side,
all the extra tax revenue from all the extra income that rich people and businesses will be earning.

That really wasn’t happening in 2018 and 2019. In fact, until the spring of 2020, U.S. economic growth had been steady as she goes for the decade since the Great Recession, not amazing, not terrible, averaging closer to 2 percent a year than 3 percent—and actually a bit slower in 2019 than in the years before.

What clearly and immediately did change after the 2017 tax cut, however, was the flow of money to the well-to-do and big business. They received two-thirds of the benefit through early 2020, and under the law, that fraction was to continue increasing for the rest of the decade. And the gift to big business was an even worse bait-and-switch scam than it looked like originally. In return for slashing the corporate tax rate from 35 to 21 percent, the law included provisions that were supposed to force companies to pay hundreds of billions in taxes, finally, on the trillions in profits they pretend or contrive to earn outside the United States. But that was just for show.

Instead, starting in 2018 the familiar Business Roundtable members (including GE, United Technologies, Bank of America, IBM, ConocoPhillips) and lobbyists from other companies (such as AIG, the giant financial firm that U.S. taxpayers bailed out in 2008) descended on the Trump treasury bureaucrats writing the nuts-and-bolts rules, who cooperatively, promptly made company-by-company carve-outs that gutted the law’s untaxed-foreign-hoard provisions.

One of the designers of those tax cuts was Stephen Moore, a poor man’s Arthur Laffer who’d joined up early with candidate Trump. Moore is a pure creature of the right-wing counter-Establishment—M.A. (but no Ph.D.) from George Mason, cofounder and former president of the Club for Growth, Cato Institute,
Wall Street Journal
editorial board, Heritage Foundation. “Capitalism,” he said a decade ago, “is a lot more important than democracy.” A year after Trump’s 2017 tax cut was enacted he published a
Journal
piece headlined “The Corporate Tax Cut Is Paying for Itself,” but that simply wasn’t true. In 2018 the United States had the largest percentage reduction in tax revenues of any developed country on Earth. In fact, in the first three full years of the Trump administration—
before
COVID-19 and the trillions spent to sustain people’s lives and the economy—the federal debt increased by $1.5 trillion more than it had in Obama’s final three years.

It’s hard for me to believe anyone knowledgeable among the right and the rich still believes their rationales when they argue that a robust American economy absolutely
requires
low taxes on millionaires and billionaires. Surely they know that the latest new federal innovations to help business—exempting millions more workers from overtime, minimum wage, and other labor laws, leaving it to employers to report their own violations of those laws, reducing workplace safety inspections, and so on—only help business and overwhelmingly hurt workers.

I said earlier that financialized America is like the specter of a Communist America they used to warn us about. Our economic rightists also remind me of the Soviet party leaders and propagandists who publicly insisted till the end, despite all the miserable realities of their society, that Communism would presently work out
just fine
for the masses. And given how the cynical leaders of our own ruling party have felt obliged for several years to make excuses for the former Soviet intelligence officer who now runs Russia, the irony is extreme.

It was during the Russian Revolution a century ago, in fact, that Americans first became familiar with the term
class war
. Usage in this country peaked during the Depression, then declined after the New Deal was enacted and the huge, thriving economic middle grew and grew. By the late 1970s,
class war
seemed like an overwrought antique word, obsolete and unattractive, unwelcome for use in polite society except in descriptions of the past or of foreign countries or as a kind of jokey figure of speech.

So in 1978, when that UAW president’s cri de coeur letter of resignation from President Carter’s unions-and-corporations working group included the phrase, people noticed. “I believe leaders of the business community, with few exceptions, have chosen to wage a one-sided class war today in this country—a war against working people,” Douglas Fraser wrote, “and even [against] many in the middle class of our society.” People on the
New York Times
editorial board were vexed,
alarmed
that
“
one of the nation’s most enlightened labor figures” who thank goodness wasn’t a “man of wild temperament…talks now about a ‘class war’ allegedly directed against the big unions by big business.” And the following year, in its profile of the presidential heir apparent of the AFL-CIO, the
Times
was so struck by
his
use of the term in a speech to businessmen—“Now, [it] seems class warfare has been launched by the most privileged and powerful in our society”—that they led with it. News is man bites dog—or in this case, a mention of class warfare by a “low-key” labor leader who “hardly seems the sort to man the barricades of a class war” given his “taste for contemporary art.”

In fact, for the next three decades, Americans generally used the phrase
class war
and its associated tropes only to dismiss as stupidly old-fashioned or dangerously un-American almost any serious complaint about the unfairness of our economic system or the greed of rich people. For instance, right after the crash of 2008, when we agreed to put up $200 billion to bail out AIG, AIG announced it was paying a
half-billion dollars
in bonuses
to its employees who were most directly responsible for the disaster that wrecked their company and nearly wrecked our financial system. The very rich new CEO the Obama administration hired to run the company complained that the resulting public brouhaha over the bonuses had been “intended to stir public anger, to get everybody out there with their pitch forks and their hangman nooses, and all that—sort of like what we did in the Deep South, and I think it was just as bad and just as wrong.” He and his rich Wall Street executives were being lynched!
Class war!

So naturally, attention was also paid in the 2000s, when the world’s second-richest man and most beloved American billionaire—beloved because he’s both low-key and plainspoken—admitted that those labor leaders in the late 1970s had been right, that the privileged and powerful had launched a one-sided war against working people and the middle class.

“There’s class warfare, all right,” Warren Buffett said, and “it’s
my
class, the rich class, that’s making war, and we’re winning”—and we “shouldn’t be.”

Forbes
had published its very first list of the richest people in 1982, estimating Buffett’s wealth then to be the equivalent today of almost $700 million. Two decades later, when he talked about the rich waging and winning class war, his fortune had grown to $58 billion. His fortune is now $85 billion, 130 times what it was at the beginning of America’s—his phrase—class war.

As in actual wars, not all the impacts can be quantified—the winners’ glorious victories and sense of their own brilliance validated, the losers’ chronic insecurities, diminished hopes, sense of having been mistreated or plundered. But relevant statistics are still necessary and illuminating.

For instance, the experts’ standard measurement of inequality, the Gini index, reduces all the disparities of income or wealth in any country (or city or state) to a number between 0 and 100—in a place rated 100, one resident would have all the money, and in a place rated 0, everyone would have an equal share. Back in 1979, America’s Gini index for income put us around where Canada is today—in the more admirable and highly developed half of nations, although not up with the super-high-equality countries of northern Europe. Our extreme income disparities these days, however, make us the most unequal rich country on Earth, with a Gini number considerably worse than those of western Europe or Canada, down among developing countries. America is slightly more equal than Uruguay and Congo, a little less equal than Haiti and Morocco.

But that’s still a bit of a bloodless abstraction for conveying the effects of the forty-year war. And along with how it has affected the
average
among us versus the average Dane or Japanese, we need to look at how it worked out for the small fraction of American winners compared to our large majority of losers.

So it’s time for another synopsis and highlight reel of information I’ve culled, this one depicting from several angles how the slicing of the economic pie has changed. I suggest you read slowly, in order to savor each one.