Class Warfare? Yes, and the Rich Are Winning

When Clinton left office, 133 million had jobs. Net job creation – about a 20% gain. Apparently, a tax on the wealthy didn't hurt job creation at all.

“There’s class warfare, but it’s my class, the rich class, that’s making war, and we’re winning.” —Warren Buffet

There is class warfare in this country. The rich are winning. In fact, they've been winning for the last 30 years. It is just recently, though, that this war is gaining the attention it deserves.

The average working American knows they are losing even if they don't have facts at hand. Do you feel materially better off?  Do you still have that sense of hope that things will get better and you will be able to keep your American dream? Not the dream of homeownership—the real American dream that your children will do better than you.

For most Americans, the answer is no. And yet the rhetoric that surrounds this issue attempts to convince us that we should not allow the Bush-era tax cuts to expire, or worse, never raise taxes on the "wealthy job creators."

If the wealthy are job creators, where are the jobs?

George Bush, citing a budget surplus, created tax breaks for the very wealthy. That should have created jobs, right? When George Bush entered office in 2001, there were roughly 133 million jobs in this country. When he left office in 2009 there were roughly 135 million jobs in this country. Net job creation—about a 1% gain.

Conversely, Bill Clinton citing a need to get the economy moving and reduce the deficit, raised taxes on the wealthy. When Clinton entered office there were roughly 109 million jobs in this country. When Clinton left office, 133 million had jobs. Net job creation – about a 20% gain.  Apparently, a tax on the wealthy didn't hurt job creation at all. 

My grandfather taught me that "no one gives up power willingly." Money is power.  How much money is enough? Apparently for the wealthy, it won't be enough until our middle class is destroyed and we become a nation of working poor.

Thomas Piketty and Emmanuel Saez use income tax tables to examine real income growth. (Tax tables are the only consistent data over time.) In 2007 they exposed a very concerning trend.  In the period from 1993 to 2006 real income for most families grew at an inflation-adjusted rate of 15%. That's about 1.1% per year – not much when gas and food costs keep going up. Conversely, the top 1% saw their inflation-adjusted income grow by 105%. That's 5.7% per year.

Granted, there was economic expansion under both presidents. During this time though, Clinton raised taxes on the wealthy, while Bush reduced taxes on the wealthy. During both of these administrations, the wealthy saw their income rise. Saez points out, though, that during the Clinton administration the bottom 99% saw an annual growth of 2.4%. During the Bush administration the bottom 99% had annual growth of less than 1% year.

During the Bush era the top 1% accrued three quarters of all of the wealth being generated in this country. That’s 75 cents of every $1.  Unlike the rest of us, the wealthy are able to save and invest their money which just generates more wealth. When money is being spent the economy isn't being stimulated. $.75 of every dollar— when is enough enough?

Obviously there is class warfare in this country. Have we ever seen this before? Yes. This same concentration of wealth occurred just before and during the Great Depression. During FDR's first term he tried some of the same stimulus policies we see today giving breaks to the wealthy and corporations so they would create jobs – they didn't do it.

During his second term he completely changed his rhetoric and leveraged the strong labor movement along, with the fears of the worldwide development of socialism and communism, to tax the rich and the corporations. He then use that money to have the federal government directly create, and pay people to work.

FDR’s federal job creation essentially saved the middle class and created a body of infrastructure that still exist today. If we don't learn from the past, we will repeat the mistakes of the past. We can also learn from the past to continue the successes.

It's time for every individual who is not part of that top 1% to demand a return to greatness in this country. If that means an expansion of government jobs, If that means creating a just system of taxation, and if that means everyone, including the wealthy, giving back to keep this country and its ideals and hopes alive – so be it.


University of California, Department of Economics, 549 Evans Hall #3880, Berkeley, CA94720. This is an updated version of “Striking It Richer: The Evolution of Top Incomes in theUnited States,” Pathways Magazine, Stanford Center for the Study of Poverty and Inequality,Winter 2008, 6-7.

Much of the discussion in this note is based on previous work joint withThomas Piketty. All the series described here are available in excel format at http://elsa.berkeley.edu/~saez/TabFig2006prel.xls


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Komfort February 28, 2012 at 02:56 AM
"So where does this leave us? It is true that when Clinton raised the top marginal tax rate to 39.6 percent -- the same level Obama would like to return it to now -- the U.S. saw strong job growth in the ensuing years. But to the extent Obama is suggesting a cause and effect relationship between those two events -- and we think he certainly leaves that impression when he says we "should go with what works" -- that is dubious, according to the cross-section of economists we spoke to. There were many other economic factors that played a larger role in job growth, they said. However, most agree that the tax increases did not appear to hinder job growth, and that's significant given the dire warnings some Republicans have issued about Obama's plan to return the top tax rate to Clinton levels. Perhaps, as Foster argues, the situation is different enough now -- more precarious -- that a tax hike would have a more damaging effect. That's a matter for economists to debate. When Obama says we saw job growth in the 1990s even as Clinton raised taxes, he's right. But to the extent that he's suggesting raising taxes created job growth -- as he appears to be when he says "we should go with what works," he goes too far. We rate his claim Half True." http://www.politifact.com/truth-o-meter/statements/2011/jul/07/barack-obama/obama-claims-job-rate-soared-after-clinton-raised-/ Spending too much? Nah.
Paul Schnaubelt February 28, 2012 at 03:27 AM
Interesting. Yet the original premise is unchallenged. Clinton raised taxes--the number of jobs increased. Bush lowered taxes--the deficits began to spiral upwards and he led us to war without paying for it. So now we must contain debt and cannot create public sector jobs. The real stimulus--the reduced Social Security tax--it put spendable dollars in peoples pockets who spend money.
Komfort February 28, 2012 at 05:01 AM
Actually, it was challenged. You would have to read the entire link I provided.
Things I Learned February 28, 2012 at 06:22 AM
Post hoc ergo propter hoc Or so the story goes. Clinton was the deficit hawk And Bush caused all our woes. Tax and spend and spend and tax; Government, it must dole. We're all Keynesians, natch: So dig a deeper hole. Hooray the stimulus! And Boo! the G.O.P. Barry's our St. Nicholas, Karl Marx is S.O.P. FDR?!? Pay as you go! We did in World War Two. He was thrifty with your dough... Does that fool me or you? Brudda keep your hat on My logic's illin' viral: Stimulate eschaton or Deficits will spiral. Cut taxes for the spenders, Savers are on their own. A public sector bender 'Til them chickens come home!
Komfort February 28, 2012 at 05:14 PM
“There are a couple of interesting observations to be made from the above graphic from the Bureau of Labor Statistics. One, the steep decline in American jobs correlates to when the Democrats took over control of Congress. Coincidence? Perhaps. But then recall that Barack Obama begins his presidency in 2009 and the decline very much continues well into 2010 where it at least flatlines. 2010 was when Republicans then took control of the House of Representatives and gained a number of seats in the Senate – which the Democrats still control. $5 TRILLION in lost taxpayer deficit dollars is quite a sum for what that chart reflects –stagnant job growth. Millions who remain unemployed. Millions more who have dropped out of even trying to find work and are therefor not even being counted in the unemployment figures. For a bit of contrast check out thiscomparative chart detailing the Reagan recovery vs the Obama recovery. One president charged ahead with plans to greatly reduce taxes, lessen regulations, and pushes to increase domestic energy production in the United States. The other president – Barack Obama, called for more taxes, more regulation, and has fought increasing domestic energy production at every opportunity – such as his shutting down of the much-needed Keystone pipeline:” Graph at the link. http://theulstermanreport.com/2012/02/24/the-chart-barack-obama-doesnt-want-america-to-know-about/


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