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Posted by Time for change in General Discussion (1/22-2007 thru 12/14/2010)
Mon Nov 24th 2008, 05:21 PM
Now we have the conservative elites of our country trying to pressure P-E Obama to cancel his plans to reverse the Bush tax cuts for the wealthy, using the phony excuse that increasing taxes on the wealthy during a recession is not sound economic pol
I am so sick and tired of hearing the presstitutes of our national corporate news media talk about how unwise it would be of our new President to make good on his campaign promise of reversing the Bush tax cuts on the wealthy. Oh my, we can’t have a tax increase during a recession, they say – as if it is common knowledge that increasing taxes on the wealthy during a recession or depression means certain death to the economy.

And now we hear that Obama is considering going along with that advice. How disappointing.

We should look at this in an historical context. There was one time in our nation’s history when our government raised taxes on the wealthy substantially during a serious recession or depression. That was during the Presidency of Franklin Delano Roosevelt, who took office in the midst of the worst depression in our nation’s history and who is generally ranked by presidential scholars to be the second greatest President in our nation’s history. Before taking a look at how FDR’s tax increases on the wealthy worked out, let’s consider his attitude towards the subject.

FDR’s attitude towards great concentrations of wealth

FDR did not feel that there was anything sacred about people piling up vast economic fortunes during times when so many other people were starving or homeless. He did not see that phenomenon as something that propelled our economy. In fact he saw it as a big part of the problem, something that prevented other people from obtaining their fair share of our nation’s resources. This is what he had to say on the subject at the 1936 Democratic National Convention:

Out of this modern civilization economic royalists carved new dynasties. New kingdoms were built upon concentration of control over material things. Through new uses of corporations, banks and securities, new machinery of industry and agriculture, of labor and capital – all undreamed of by the fathers – the whole structure of modern life was impressed into this royal service.

There was no place among this royalty for our many thousands of small business men and merchants who sought to make a worthy use of the American system of initiative and profit. They were no more free than the worker or the farmer. Even honest and progressive-minded men of wealth, aware of their obligation to their generation, could never know just where they fitted into this dynastic scheme of things.

It was natural and perhaps human that the privileged princes of these new economic dynasties, thirsting for power, reached out for control over Government itself. They created a new despotism and wrapped it in the robes of legal sanction. In its service new mercenaries sought to regiment the people, their labor, and their property. And as a result the average man once more confronts the problem that faced the Minute Man.

The hours men and women worked, the wages they received, the conditions of their labor – these had passed beyond the control of the people, and were imposed by this new industrial dictatorship…

Those who tilled the soil no longer reaped the rewards which were their right. The small measure of their gains was decreed by men in distant cities. Throughout the Nation, opportunity was limited by monopoly. Individual initiative was crushed in the cogs of a great machine. The field open for free business was more and more restricted. Private enterprise, indeed, became too private. It became privileged enterprise, not free enterprise…

FDR also believed that the enormous income inequality that existed at the time was deleterious to democracy itself:

An old English judge once said: "Necessitous men are not free men." Liberty requires opportunity to make a living – a living decent according to the standard of the time, a living which gives man not only enough to live by, but something to live for.

For too many of us the political equality we once had won was meaningless in the face of economic inequality. A small group had concentrated into their own hands an almost complete control over other people's property, other people's money, other people's labor – other people's lives. For too many of us life was no longer free; liberty no longer real; men could no longer follow the pursuit of happiness.

An historical perspective on taxing the wealthy in the United States

Increasing taxes on the wealthy was not the only thing that FDR did in his attempt to decrease income inequality and bring us out of the Great Depression. But it certainly was one of his major actions. One reasonably good indicator of taxing the wealthy is the “top marginal tax rate”, which is the highest tax rate paid on income above a certain level.

The 16th Amendment to our Constitution, the Progressive Income Tax Amendment, ratified in 1913, opened the door to our nation’s ability to tax the wealthy disproportionately. It was first used to raise money for the costs of World War I, the top marginal tax rate peaking at 77% in 1918, and then gradually decreasing after the war was over, to 25% by 1925, where it stood when FDR took office.

Consistent with his vow to reduce income inequality, FDR progressively raised the top marginal tax rate, as can be seen in this graph, to 63% in 1932, to 79% in 1936 to 88% in 1942, and to 94% in 1944.

It then continued at high levels, 70% or more, for several decades after FDR’s death, until it declined precipitously at the start of the Reagan presidency in 1981. It continued to decline during the Reagan and Bush I years, then rose moderately during Bill Clinton’s presidency, before substantially declining again under Bush II.

How did FDR’s tax increases on the wealthy work out?

From listening to today’s right wing conservatives and the blathering talking heads of our corporate news media you’d expect catastrophic consequences to our economy from any attempt to increase taxes on the wealthy, even to the relatively moderate levels that existed just prior to the Bush II presidency. From these warnings you would think that the extremely high rates of taxation on the wealthy beginning with FDR’s presidency and lasting for half a century would have ruined our economy for many years to come.

Many people consider median income to be a more accurate indicator of economic well being than gross national product, since it is an indicator of the economic health of the average citizen, whereas sometimes a high GNP can coexist with economic hardship for much of the population if wealth is grossly unequally distributed towards the top.

I could not find statistics on median income in the United States prior to 1947. However, the fact that FDR was re-elected to three consecutive Presidential terms, all by large margins, concurrent with the largest top marginal tax rate in our nation’s history, is a pretty good indication that we weren’t doing too badly during this period.

In any event, the high top marginal tax rates continued for several decades after FDR died, at 70% or more (far higher than what Obama is proposing increasing it to), until the Reagan Presidency starting in 1981. This chart shows median family income levels, beginning in 1947. With the top marginal tax rate approaching 90% at this time, median family income rose steadily (in 2005 dollars) from $22,499 in 1947 to more than double that, $47,173, in 1980. Then, for the next 25 years, except for some moderate growth during the Clinton years, there was almost no growth in median income at all, which rose only to $56,194 by 2005 (85% of that growth accounted for during the Clinton years).

However one wants to interpret those numbers, nobody could possibly conclude that they indicate overall bad financial consequences accruing from high tax rates on the wealthy. To the contrary, as Nobel Prize winning economist Paul Krugman notes, this period coincides with “the greatest sustained economic boom in U.S. history”.

Income inequality and depression

An article by Gabriel Thompson’s in The Nation contains a graph titled “Plutocracy Reborn – Re-creating the Gap that Gave us the Great Depression”. Here it is:

This chart plots income inequality, measured as the ratio between the average income of the top 0.01% of U.S. families, compared to the bottom 90%. Note that preceding the great stock market crash of 1929, which plunged us into depression, the ratio rose from about 250 at the start of the 1920s to a peak of about 900 by 1929. The ratio then plunged, and by the start of WW II it had declined to about 200, where it remained with some relatively minor ups and downs until the beginning of Ronald Reagan’s Presidency. It then began another precipitous climb, with a sharp decline beginning during the last year of Clinton’s Presidency, but then another sharp increase beginning at about the time that the Bush tax cuts for the wealthy first went into effect, so that by the end of 2006 we’ve exceeded even the peak ratio of 1929 that preceded the Great Depression. The three green bars in the chart represent the stock market crash of 1929, the last pre-Reagan year, and the present.

The chart below this one (Click on “Full size chart”), titled “Our Incredible Shrinking Top Marginal Rate”, which is close to the mirror image of the top chart, shows that our top marginal tax rate has historically been inversely proportional to income inequality in our country.

I should note that Thompson wrote this article several months ago, to sound a warning. The point was that record breaking levels of income inequality, associated with a very low top marginal tax rate, immediately preceded the Great Depression – and now we have very similar levels of income inequality, along with an historically low top marginal tax rate. Since that time, Thompson’s warning seems to be bearing out.

Implications for our situation today

We have now reached a level of income inequality not seen in our country since just prior to the onset of the worst depression in our history – and it appears that history may be repeating itself. Today the top 1% of U.S. households owns more than the bottom 90% of our population combined. The Bush administration has done everything in its power to encourage that income inequality, not least of all through the lowest sustained marginal tax rates for the wealthy that we’ve had since the 1920s.

Recent statistics show: 47 million Americans without health insurance, associated with the first rise in infant mortality in our country in 40 years; an unemployment rate of 6.5% and rising rapidly; 35.5 million Americans living in food insecure households; approximately 3.5 million homeless Americans in any given year, including 1.35 million children; a poverty rate of 12.5%, up from 11.7% in 2001. All of these statistics are getting worse.

Senator Obama’s Presidential campaign included comprehensive plans to ameliorate the economic distress of our nation’s people, including: a health care plan to make health insurance affordable and accessible to all Americans; plans to tackle poverty; reversal of the Bush tax cuts for the wealthy, and; tax breaks for middle and working class Americans.

The reversal of the Bush tax cuts for the wealthy was a crucial part of Obama’s plan because, not only would that directly reduce income equality, but it would make the other parts of his plan affordable without necessitating crippling additions to our national debt. Without them, how is President Obama going to proceed with his other economic plans?

Now we have the conservative elites of our country, including our national corporate news media, trying to pressure President-Elect Obama to cancel his plans to reverse the Bush tax cuts for the wealthy, using the phony excuse that increasing taxes on the wealthy during a recession is not sound economic policy. But there is no historical basis for that conclusion, and in fact it flies in the face of our historical experience.

Continuing the worst of the failed Bush policies would not only do nothing to reverse the toxic trends in income inequality in our country, but it would greatly hamper the initiation of plans to provide relief to the vast majority of our citizens and get our economy back on track. I fervently hope that President Obama decides to proceed with his plans as originally formulated.
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The Unfulfilled Promise
The Unfulfilled Promise of the American Dream: The Widening Gap between the Reality of the United States and its Highest Ideals

Time for change

Notwithstanding the lofty sentiments and purpose of the U.S. Declaration of Independence, the reality of the United States of America did not then – and never has – lived up to its ideal. Our nation remains today a long way from fulfilling the promise implied by those ideals. Yet, our Declaration was a great start, and it has long shone as a beacon of hope for people all over the world.

Throughout our history, while many have striven to close the gap between our highest ideals and the reality of our nation, others have focused on the accumulation of private wealth and power, at the expense of everyone else. In recent decades the latter have gained much ground, leading to increasing imperialism abroad and deteriorating democracy at home, characterized by routine (and legal) bribery of our public officials, the fusion of government and private corporate interests (corporatocracy), a corrupt election system largely in the hands of private corporations, a corporate controlled communications media, and the widespread acceptance of Executive Branch secrecy, routinely justified with little if any questioning, by the magic words “national security”. All of this is rapidly turning our country from the democracy proclaimed at our founding into a plutocracy (government by the wealthy and for the wealthy). The result is the most obscene wealth gap our country has ever known, the highest imprisonment rate in the world, rampant militarism, routine flaunting of international law, the least efficient health care system in the developed world, a pending environmental catastrophe that threatens to destroy the life sustaining forces of our planet, and myriad other problems that threaten to destroy our nation and tyrannize our people.

My new book, The Unfulfilled Promise of the American Dream – The Widening Gap between the Reality of the United States and its Highest Ideals, explores the roots and consequences of the demise of our democracy, and why most Americans have been unable to understand this process or even become aware of it. A good understanding of why and how we have deviated so greatly from the ideals of our nation is the first and necessary step towards getting back on the right track and revitalizing our society.

The book is currently being sold in electronic PDF format and can be purchased at for $3.99. It will also soon be available in Amazon Kindle format. DU members who cannot afford to buy the book but would like to read it can pm me with your e-mail address, and I will send you a free PDF copy.

I’ve previously posted on DU a slightly earlier version of the introduction to the book, which is also posted at my site. Here is the Table of Contents, followed by a brief description of the three parts of the book:


Prologue – What is Wrong with the United States of America?

Part I – Root Causes of the Impending Demise of American Democracy
Chapter 1 – Legalized Bribery
Chapter 2 – Human Psychological Factors
Chapter 3 – Corporatocracy
Chapter 4 – Corporate Control of Media
Chapter 5 – Corrupt Election System
Chapter 6 – Government Secrecy
Chapter 7 – American Exceptionalism

Part II – A Sampling of Imperialist Actions
Chapter 8 – Slavery and its Legacy
Chapter 9 – Early U.S. Imperialism
Chapter 10 – U.S. Imperialism in Cold War
Chapter 11 – Iraq War and Occupation
Chapter 12 – Afghanistan War

Part III – Consequences
Chapter 13 – Election of George W. Bush
Chapter 14 – War and Imperialism
Chapter 15 – Class Warfare
Chapter 16 – Predator Financial Class
Chapter 17 – Shock Therapy
Chapter 18 – Contempt for Int. Law
Chapter 19 – The “War on Drugs”
Chapter 20 – Climate Change
Chapter 21 – “War on Terror”
Chapter 22 – Health Care
Chapter 23 – Unaccountable government
Chapter 24 – Response to 9/11 Attacks

PART I – Root Causes of the Impending Demise of American Democracy

It is somewhat difficult to separate the causes of our problems from their consequences, since they combine to form a long chain of cause leading to consequence, leading to more consequences, etcetera. Nevertheless, it seems worth while to identify the root causes of our problems, those that occur early in the chain and lead to so many of the tragic consequences we see today. The only chance we have of reversing the demise of our democracy is through addressing and attacking its root causes.

At the top of the list is the systematic bribery of public officials by the powerful corporations (Chapter 1) whom our government is charged with regulating in the public interest. Instead of calling it bribery, we call it “campaign contributions”, but what we call it isn’t as important as what it is. It is hard to fathom how democracy can survive when such a practice is legal and condoned.

Working in tandem with our system of legalized bribery is the nature of the people who inhabit our country. That is not to say that Americans are inherently substantially different than any other people. Human beings are imperfect, and that is probably a major reason why in a world where civilization began more than five millennia ago, the oldest written national framework of government in the world today – the Constitution of the United States of America – is only a little more than two and a quarter centuries old. Chapter 2 explores the roles of basic human needs, authoritarianism, psychological defense mechanisms used to prevent us from perceiving reality as it is rather than as we’d like it to be, and corrupted ideologies in causing us to passively accept the accumulation of power in the hands of ambitious and ruthless individuals who care about little else than expanding their own wealth and power.

When bribery of public officials is tolerated as an inevitable aspect of public life, government inevitably grows close to the wealthy interests that shower it with money in return for legislative and other favors. A malevolent symbiosis grows between the state and corporate power, resulting in rule by an oligarchy that is highly detrimental to the lives of ordinary people (Chapter 3). Using their accumulated wealth and power to manipulate our legislative process, the oligarchy grabs for more and more control of the communications media (Chapter 4) that are used to control the information available to and shape the attitudes of our nation’s people, in pursuit of their own narrow interests.

Since the 1980s an orchestrated campaign has been underway to demonize “big government”, thereby paving the way for private corporate control over more and more functions that were previously deemed intrinsic functions of government. Among those functions is the running of public elections (Chapter 5) – the function that symbolizes democracy perhaps more than any other single function. Consequently, the purging of selected registered voters from our computerized voter rolls has become a routine recurring event throughout much of our country, and without a doubt determined the results of the 2000 – and probably 2004 as well – presidential election. Just as bad, more and more of the counting of votes in our public elections have been turned over to private corporations, which count our votes using electronic machines using secret software to produce vote counts that cannot be verified by anyone.

Bribery, the fusion of government and private interest, fake and biased news, and corrupt elections are not things that government and its corporate allies want us to know about. Consequently, they construct walls of secrecy (Chapter 6) to keep us from obtaining information that sheds light on their activities. The perfect phrase for facilitating this is “national security”. When our government tells us that the “national security” requires that certain things be kept secret from us, the understanding is that to question such a pronouncement is unpatriotic, and to actually attempt to obtain the “secret” information may be treasonous.

But indefinitely maintaining secrets from the American people can be very difficult, because at least some people want to know what their government is up to. So in addition to the formal mechanisms of secrecy, informal mechanisms are constructed (Chapter 7) to keep vital information away from us. One of the primary methods for doing this is to make certain sensitive subjects taboo – that is, to create the widespread belief that discussion of these topics is so outside the bounds of acceptable human discourse that anyone who discusses them should be shunned by society, or worse. The most common issue that falls into this category is any discussion that sheds light on the disparity between American ideals and the reality of life in our country today.

PART II – A Sampling of Imperialist Actions in U.S. History

Notwithstanding the fact that our founding document says that “all men are created equal” and speaks of the inalienable rights of humankind, the United States has throughout its history partaken of massive exploitation of other peoples.

It is estimated that at the time of our birth, 18% of our population was black slaves. In our expansion westwards during the late 18th and 19th centuries, we decimated the original inhabitants of our continent, and often treated them with great cruelty. In 1846 we manufactured an excuse for war with our neighbor Mexico, in which we continued to expand our country westwards and southwards. In 1893 we began our overseas imperialism with the conquest of Hawaii. Our overseas expansion was greatly accelerated in 1898 with our participation in the Spanish-American War, which led to our conquest of Cuba, Puerto Rico, and the Philippines. With our arrival at world superpower status at the end of World War II, we began the Cold War, which led to and served as a rationalization for covert and/or direct military actions against myriad foreign nations over the next 46 years. With the September 11, 2001 attacks on our country, we declared a perpetual “War on Terror”, which served and continues to serve as an excuse to invade and occupy Iraq and Afghanistan, nations that posed no threat to us. We do not know when or if this perpetual war will ever end. We don’t know how many additional imperial conquests it will lead to.

Most Americans don’t think much about all this. Many of these actions are done in secrecy, and the American people don’t find out about them until many years later – or we never find out about them at all. Those that we do know about are spun into the most favorable light, to make them seem benign or even noble.

But these actions come at great costs: in the lives of our soldiers; in the ruined lives of the peoples of the victim countries; in trillions of dollars cost to our people and their future generations; in our international reputation; in anti-American hatred leading to terrorism; and, to our democracy itself. For how can a nation claim to believe in the inalienable rights of humankind specified in its founding document, while making a mockery of that belief in the way it treats other peoples? For that reason alone it is worth while to take a brief look at our long history of imperialist actions.

PART III – Consequences

In the Prologue I give a brief account of what I see as some of the worst and tragic consequences of the root causes that I discuss in Part I – to enable the reader to see where this book is heading. When elections of our public officials are for sale to the highest bidder… when our public officials are so addicted to the “campaign contributions” of their wealthiest constituents that they develop a symbiotic relationship with them… when our communications media are owned and controlled by an oligarchy of wealthy elites… when our citizenry lack the ability to differentiate propaganda from reality… when we allow machines provided by private corporations to count our votes using secret electronic software… then we should expect that the consequences will not be pretty or comfortable for the vast majority of our citizens.

In Part III, I explore those consequences in much greater detail, in the hope that the reader will agree with me that these are very serious problems, and that they must be successfully addressed if our country is ever to fulfill the promise of its ideals, or even make progress in that direction. When enough Americans recognize our problems as problems, stripped of the gloss and spin put on them by our oligarchy, they will rise up and do something about them. Until then there will be no progress, and we are very likely to head in the direction of all the former empires of our planet, ending in chaos, widespread catastrophe, suffering, and ignominy.

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