Wednesday, October 12, 2011: Roundtable Discussion on Occupy Wall Street
-- Roger Berkowitz, Associate Professor of Political Studies and Human Rights; Academic Director, Hannah Arendt Center for Politics and the Humanities, Bard College.
-- Paul Mariental, Director of the Bard TLS Program.
-- Jennifer Derr, a former professor in the History and Middle Eastern Studies programs at Bard College.
-- Steven Maslow, a banker on Wall Street and an avid supporter of the Hannah Arendt Center.
-- Two Bard Students who have been involved in the OWS demonstrations.
On October 12th, 2011, the Arendt Center hosted a roundtable discussion on the Occupy Wall Street movement with Bard faculty, Bard students who participated in the protests, and representatives of Wall Street.
John Cassidy over at the New Yorker has an excellent article that clarifies some of the basics about the debate over inequality. In Inequality 101, Cassidy reproduces a chart "Who Killed the Middle Class?" an article he published in 1995. The chart is fairly clear. It shows how from 1947-1973, the wealthy, the middle class, and the poor in the United States all saw their incomes rise at about the same levels. From 1973-1993, however, this equality disappeared. While the poor saw incomes decrease, and the middle-class stayed the same, the wealthy saw incomes rise, although not as much as earlier.
This chart is similar to the one I described in my Friday Post, The Way Forward. As I wrote there:
We see that until 1982, the wages of workers and the income of non-wage earners (thus the higher-paid supervisory workers) was largely equal. Beginning in 1982, however, the earnings of non-wage earners began to rise significantly faster than the income of wage workers. This is at least one original source of the increasing inequality of the American populous and it is exacerbated by an increasingly less-progressive tax code and also by the increasingly profitability of capital investments in the global economy.
Since the 1990s, the rate of inequality in our society has skyrocketed, especially for the very highest earners in the 1% and even the .1%. Cassidy provides this chart as well to make this clear.
I will be speaking with John Cassidy on May 10 in New York City. The event is part of the Hannah Arendt Center NYC Lecture Series. You can learn more about the event and RSVP here, as seating is limited.
Is economic inequality becoming a problem for Americans? The common sense today is that OWS has put inequality on the agenda today in a way that is new in American politics. And today Eduardo Porter makes the argument that OWS is having some traction on the question of income inequality. While Americans traditionally are tolerant of inequality, that may be changing.
Our tolerance for a widening income gap may be ebbing, however. Since Occupy Wall Street and kindred movements highlighted the issue, the chasm between the rich and ordinary workers has become a crucial talking point in the Democratic Party’s arsenal. In a speech in Osawatomie, Kan., last December, President Obama underscored how “the rungs of the ladder of opportunity had grown farther and farther apart, and the middle class has shrunk.”
There are signs that the political strategy has traction. Inequality isn’t quite the top priority of voters: only 17 percent of Americans think it is extremely important for the government to try to reduce income and wealth inequality, according to a Gallup survey last November. That is about half the share that said reigniting economic growth was crucial.
Seventeen percent seem a low number of citizens concerned about inequality, but looking deeper, Porter argues that attitudes are changing.
A slightly different question indicates views have changed: 29 percent said it was extremely important for the government to increase equality of opportunity. More significant, 41 percent said that there was not much opportunity in America, up from 17 percent in 1998.
Statistics on income mobility are notoriously hard to measure and contested, but the surveys indicate that optimistic Americans are losing that sense of mobility and possibility. Even if people can and do often earn more than their parents, the vast rifts opening up between rich and middle class means that increasingly Americans live in different worlds. These vast divisions are now seen as a problem not only by liberals, but also by conservatives like Charles Murray, whose book Coming Apart bemoans the loss of a common sense of American values. There is a way in which the truly extraordinary gaps in income are unraveling the social contract that holds the country together.
In other words, even for those who are accepting of inequality and who believe in a meritocracy, excessive inequality cannot be justified. As Porter writes:
One doesn’t have to believe in equality to be concerned about these trends. Once inequality becomes very acute, it breeds resentment and political instability, eroding the legitimacy of democratic institutions. It can produce political polarization and gridlock, splitting the political system between haves and have-nots, making it more difficult for governments to address imbalances and respond to brewing crises. That too can undermine economic growth, let alone democracy.
Read more here.
Jack Blum, Chair of Tax Justice Network USA, is a longtime friend of the Hannah Arendt Center. He participated in the Center's 2009 Conference, The Burden of Our Times: The Intellectual Origins of the Financial Crisis. One of the national experts on tax evasion, Jack recently collaborated on the film, "We're Not Broke," in which he helps shed light on the tax system in the United States. We reached out Jack to shed some light on Mitt Romney's tax returns for 2010-2011. We found him at the Sundance Film Festival in Utah where he is promoting "We're Not Broke," and he agreed to share with us his thoughts.
Mitt Romney’s tax returns show us just how rotten the American tax system has become. He is right when he says that his returns are correct and that he followed the law – but what a law! His work allowed him to call his salary a “carried interest.” Under current tax law he can to decide when to take the income, and when he decides to declare it, to pay tax on that income at the capital gains rate of 15%.
Making matters worse, his line of business, venture capital, relies in large part on tax breaks. Venture capitalists more often than not buy their target companies on borrowed money. They convert the capital in the target business from equity to debt and take deductions for interest payments on the debt. Capital is after tax money – debt is before tax and thus tax favored. Call it capitalism without real capital.
All of this is perfectly legal, but that doesn’t make it right. After all, slavery was legal for hundreds of years. So was preventing women from participating in the political process.
Beyond the case of venture capital, the tax code is riddled with privileges for the few, and for the multi-national corporations. Senator Carl Levin D-Mich. Has just introduced legislation that tries to close many of the most egregious loopholes. But, he is not on the tax writing Finance Committee, and that Committee is looking at ways to make the situation worse, not better.
The question every citizen should ask is how the Internal Revenue Code got this way. Certainly a government prepared to cut the budget for education, research, and infrastructure should be looking at the way it is subsidizing “free market” financial engineering business activity – activity that is usually not terribly productive. The answer lies in the campaign finance system. Seats on the tax-writing committees are the most coveted in Congress because the members are showered with contributions from lobbyists, political action committees, and employees of corporations wanting favors.
As a result, it should come as no surprise that many of the largest corporations have a negative tax rate.
The latest insult to the political system is the Citizens United decision that gives corporations the right to contribute to political campaigns. Corporations are not people. They are not citizens. They will invert one of the slogans the country was founded on. The new slogan will be “representation without taxation.”
Mitt Romney thinks that what he has done to take advantage of the loopholes without comment on the inherent injustice is normal and justifiable.
It does not seem to occur to him that the tax code that made him rich has shifted the burden of providing for the funding the common good to average citizens who are being told that they should expect nothing from government.
Finally, the people who are most favored by the tax system are the leaders and funders of the incessant drumbeat that social security and Medicare are bankrupting the country. The Mitt Romney’s of the world who make their money from “carried interest” don’t pay social security and Medicare taxes and won’t need the benefits.
The debate over the economy and the budget must include corporate tax subsidies. America cannot provide for its needs if the likes of Google, Apple, and Pfizer pay no tax. It cannot provide for its needs if the very rich can turn real income into capital gains and time their decision on when to take the income. The silence on this subject is deafening.