“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