Stealing Our Livelihood,
Hiding the Loot,
Taxes: Would Robbers Cheat?,
Breaking and Entering

excerpted from the book

Robbing Us Blind

The Return of the Bush Gang and the Mugging of America

by Steve Brouwer

Common Courage Press, 2004, paper

If we look back to the beginning of the 20th century, around the time the Internal Revenue Service began keeping reliable income statistics, it is clear | that a huge share of American income ~ was controlled by the very rich, the top 1% of the population, and the upper middle class, the 9% below them. The trend reached its height during the runaway stock market boom of 1925-1929 when the top one-tenth raked in 47%-50% of all income. This happened in part because Andrew Mellon, the Republican Secretary of the Treasury throughout the 1920s, had succeeded in slashing the taxes of the upper class in 1926. This unleashed rampant financial speculation on the part of the rich. In 1928, just before the stock market crash of 1929, the top one tenth of Americans grabbed exactly half of the income, with the top one per cent gobbling up almost a quarter, or 24%, all by themselves. This left just 50% of all income for the large majority of Americans, the bottom nine tenths who did not benefit from the financial boom.

Although the Great Depression and the stricter regimen of the New Deal dampened the spirits of the rich throughout the 1930s, no one threw those "robber barons" in jail. But they did have to relinquish some of their power. Taxes were raised dramatically on the wealthiest citizens and the government provided work for masses of unemployed people through a variety of public programs. Most important, the U.S. Iabor movement for the first time in history was allowed to operate and organize freely after the Wagner Act was passed in 1935; it set up the National Labor Relations Board to protect workers' democratic rights and allowed the newly formed CIO to organize millions of factory workers and miners in industrial unions. Still, it took almost a decade for these measures, followed by the massive increases in industrial production required for World War 11, to really shift the economic playing field so it benefited the great majority of Americans. By the 1940s, economic outcomes were much more favorable for working people, whether they were wage earners, small proprietors, or salaried employees.

For a remarkably long time, for over four decades from 1942 to 1985, the income share of the top 10% of American households was corralled within the range of 32-34%, while working people brought home a much bigger chunk of the bacon, 66-68%, than they had ever enjoyed before. Their high point, 68% of all personal income, was reached in the early 1950s. It was no accident that this occurred precisely when the percentage of union members among all employed people reached the level of 35-38%, which was an all-time high in the U.S. At the same time in some European countries, the rate of unionization rose as high as 60% to 90%, and included most white collar as well as blue collar workers.

... toward the end of the 20th century ... the levels of taxation on the very wealthy had fallen so sharply that the worst sorts of speculation and corporate gambling were encouraged. The Bush Gang and their fellow travelers including many conservative Democrats) had managed to accomplish the same things that Calvin Coolidge and Andrew Mellon had engineered back in the Twenties.

By 1996-2000, the very wealthy and the upper middle class, the top 10% of the American population, were again collecting well over 40% of all personal income, finally reaching a level of 44% to 48% in 1999-2000.

The stock market, though supposedly "democratized," is still primarily serving the immediate needs of the very rich. Mainstream press accounts have thoroughly exaggerated the amount of stock ownership among average Americans. It is true that more than 52% of Americans owned stock in some form in 2001, either through direct ownership or indirect means, such as mutual funds, retirement accounts, 401(k)s, and defined contribution pensions. On the other hand, their amounts of ownership were pitifully small. In 1998, the average stock holdings of people on the bottom rungs of economic ladder, the lowest 40%, were just $1,700 (only about 6% of this near-majority of Americans owned any stocks or mutual funds at all). The average stock holdings of someone in the middle 20% only amounted to $9,200; but the amount of stock held by the richest 1% was extraordinarily high, an average of $2,525,200, according to economist Edward N. Wolff. These very rich citizens held 48% of all publicly traded corporate stock ...

Business leaders of the 1970s ... were upset by their mediocre returns on investment and wanted to increase corporate profitability... Upon taking office in 1981, the Reagan/Bush administration immediately designated working people-in particular, unionized citizens-as the enemy. As a demonstration of their resolve, they first attacked PATCO, the air controllers' union and forced all employees to resign; then they packed the National Labor Relations Board with anti-labor members. Unions, in their view, were a major cause of their mediocre profits. These businessmen and friends of big business tended to ignore the overriding international reality, that profits had fallen because capitalist industry worldwide had built up a tremendous overcapacity of production, thus competition between countries and corporations was driving down profit rates. This has been the classic example of capitalist crisis ever since Karl Marx identified it 150 years ago. Obviously, our captains of industry seldom read Marx or the able critics of capitalism who have followed in his wake up until the present day.

By the early 1990s, the corporate anti-union campaign was supplemented by the overwhelming popularity of "downsizing" among corporate executives, who started laying off their employees like crazy, often dumping as many white collar employees as blue collar. The lay-offs and increased pressure on remaining workers were two of the factors that helped push profit rates up by the mid-1990s. The median wage for American men was $11.62 in 1995, exactly $2.04 below the male median wage in 1979, when its value was $13.66 (figures adjusted for inflation in 1995 dollars).

Economist Mark Weisbrot of the Center for Economic and Policy Research, 2002

The real median hourly wage in 1973 was $12.45 - measured in 2000 dollars. In 2000, it was about $12.90. Considering that the U.S. economy grew by 72 percent on a per-capita basis during that period, somebody got shafted.

In 1980, the CEOs of the Fortune 500 companies earned 42 times as much as the average American worker; by 1999, they earned 531 times as much. How was this possible?

It happened because the CEOs, with the help of senior managers working under them and the backing of elite conservative political supporters, were able to break or bypass the bargaining power of workers' unions and then harness all the desperate labor power of the unorganized. The CEOs did their job, according to the dominant ideology among the owners of capital, which was to maximize profits and stock value while minimizing labor costs.

Paying for labor ... was not popular among America's corporate leaders and owners. Or to put it another way, they realized that not paying for labor was the most direct path to profits. This tactic has been a favorite of the owners of property ever since the great empires of antiquity imposed slave labor upon their subjects and the people they conquered. Feudal arrangements were hardly better, for the noble owners of productive property, the land, were always tempted to see just how little food and other necessities were required to sustain their working peasants. And in the primitive stages of capitalism, when globalization of trade by the Europeans opened up vast new opportunities to exploit labor, slavery was reintroduced as a method of extracting the highest return on investment. In the extreme, some plantation owners, for instance the English on their sugar islands in the Caribbean, found it "economical" to simply work their slaves to death, then acquire new ones.

Slave owners occasionally made a calculation that was remarkably similar to the one that was so popular with American CEOs operating in the supposedly "advanced" mode of late 20th century capitalism. Plantation overseers, especially those who were hired to produce very fast profits by absentee owners, decided it was more "efficient" to work people so hard that they were simply discarded, dead or alive. No one cared about the long-term health of the working people, the condition of the land, or the economic enterprise because those in charge-both plantation managers and owners-wanted to get their money quickly and get out.

This is not to say that contemporary American capitalists have determined that working people will be whipped and beaten until they keel over and die at their typewriters or cash registers. But clearly they did notice that American workers, being among the best-paid people in the world, could labor more hours and survive on less money than we did before. In the eyes of the corporate class of the late 20th century, the wages, salaries, and incomes of the large majority of Americans were downwardly flexible, and could bend and yield so that capital could be well served. Paying capital, at the highest rate possible, was in great favor because first, it is the primary job of capitalists to cultivate their capital. Secondly, as they experimented with limiting wage growth, restricting labor organizations, and subjecting workers to more stress, pollution, and injuries in the work place, there was not enough outrage expressed on the part of the general public and the forces of organized labor had become too weak to muster resistance all on their own. With relatively small expenditures of money, most conservative members of the owning class supported this reactionary change in our political economy. They found it easy to bankroll anti-labor campaigns within corporations and pro-wealth campaigns on the political circuit.

Ronald Reagan, 1981, on signing the law deregulatilng the savings and loan industry

"I think we hit the jackpot with this one."

Ronald Reagan

"What want to see above all is that this remains a country where someone can always get rich."

... the richest 1% of the population, families with average fortunes of about $12 million as of 2002

... Below them, another 9% of the population is not doing badly, since they hold 38% of all stock in their hands and about as much of all financial assets. In the eyes of everyone but the top 1%, this 9% seems quite rich because the assets of the families in this group average about $1.1 million (ranging, in very rough terms, when all their assets, houses and possessions are included, from less than $600,000 to more than $2,000,000).

... The average wealth of the top 1 % was over $10 million per family in 1998, climbed to over $14 million in 2001, and settled back to around $12 million in 2002.

... the poorest 90% of the population, only own about 14% of corporate stock and 20% of all financial assets ...

Ivan Boesky in a 1985 UC Berkeley commencement speech

"Greed is all right, by the way. I want you to know that. I think greed is healthy. You can be greedy and still feel good about yourself.

The looting of the savings and loan industry [1980s] caused the failure of an entire wing of the banking industry. The S&Ls were originally created for the legally designated purpose of serving community homeowners. They promptly shifted gears as soon as they were deregulated in 1981, and began investing heavily in risky real estate development schemes instead. Their subsequent collapse left American taxpayers with a staggering bill to pay off, $500 billion when interest was included. The commercial real estate collapse in America's big cities and suburbs was set up by similar circumstances-a combination of deregulation, a stampede of legally questionable limited partnerships, changes in accelerated depreciation rules, and the manipulation of other tax laws. The losses of the large commercial banks were estimated to be even greater than the S&Ls, at $1 trillion and up. In this case, because the whole economy was at risk, corporate giants like Citibank were rescued through huge injections of capital from the Federal Reserve banks and very rich foreign investors.

In the 1980s, there was a warning sign about the nature of the Bush clan that should have been heeded. The family was showing a pronounced tendency to involve themselves in the wave of piracy that was endangering the financial health of the whole nation. While our current president was one case in point, and his Uncle Jonathan was banned from selling brokerage securities, the example of Neil Bush, brother of George W, was the most blatant. Neil probably had as many failed business ventures as George W, but some were more spectacular, especially the Silverado Savings and Loan in Colorado, which lost more than $1 billion when p it collapsed in the late 1980s.

From the figures above the reader can appreciate the fact that the fines assessed against Neil and his ganglet were far less than the real criminal damage to the economy and the taxpayers' pocketbooks. Moreover, Neil and his buddies did not really pay the damages, for the entire $49.5 million was paid off by liability insurance on their S&L and a special "legal defense fund" the Silverado directors had wisely created even before the institution collapsed and they were investigated. The cost of this one white-collar crime was far greater than all the armed bank robberies committed in the United State in 1987.

Neil Bush had found a way to pass on millions in unsecured loans to his friends, but did not seem to profit much himself from this criminal escapade. Undeterred, he promptly went out and signed up for a loan from the Small Business Administration, and received $2.35 million to finance his next endeavor, Apex Energy. That business flopped and he never repaid the loan.

Neil Bush's transgressions were but light snowflakes atop the tip of a giant corporate iceberg of crime, most of which stayed hidden from sight. The large majority of savings and loan irregularities were not properly investigated or prosecuted, even though the Federal Home Loan Bank Board found evidence of fraud and other criminal activity by managers and directors at 75% of the failing S&Ls. When the Office of Thrift Supervision was investigating Neil Bush's tricks in 1990 and decided not to prosecute, this undoubtedly had something to do with his father, George H.W., being president of the United States. The Bush family could have rightly claimed that their son was not getting preferential treatment because almost all the criminals working the same territory, the savings and loan racket, were going unpunished.

The first Bush administration let them all walk free! This gets to the essence of the Bush Gang's criminal influence over the past twenty years. More important than their own personal transgressions has been their propensity to let anything go. They deregulated and then looked the other way because these were their friends at work. The decade of the 1980s had produced theft, fraud, and undisciplined gambling with America's vast wealth. Business values had deteriorated to the point, said Business Week in a famous cover story, that America had become a "Casino Society.''

Adam Smith, in The Wealth of Nations, 1776

... as Henry Home (Lord Kames) has written, a goal of taxation should be to 'remedy inequality of riches as much as possible, by relieving the poor and burdening the rich.'

When the Bush Gang moved into Washington in the 1980s they initiated another massive tax giveaway for themselves and their friends. Maximum tax rates on the richest individuals were lowered from 70% to 50% to 28%, so they were able to keep a bigger share of their rapidly growing pre-tax income.

Effective taxation on high incomes has always been lower than the official top rates because of the special tax categories and tax shelters granted to the rich. Therefore even when the Democrats increased the top marginal income tax to 39.6% in 1993, it produced a much more modest increase, from 22% to 27%, in the amount of taxes actually collected from the wealthiest Americans in 1996. When Bush Gang II returned to Washington in 2001 they immediately took up the task of individual tax reduction again, once again favoring themselves and other wealthy Americans by lowering their effective tax rate to 25% for 2001, with further reductions to 23% slated a few years down the line. They were simply resuming the program that was instituted during the reign of the Reagan/Bush administrations: in those 12 years the Bush Gang had engineered a staggering reversal of the American tradition of progressive taxation.

Worker's payroll taxes, the main source of federal revenues from low and middle income Americans, have increased dramatically, bringing in over 34.9% federal revenues in 2001 as opposed to just 6.9% in the 1950s. These revenues compensated for the drastic drop in corporate income taxes from 26.5% in the 1960s to 7.6% of federal revenue in 2001. In fact, it was the middle and working classes that were suffering higher taxation with very little representation, brought to them courtesy of Alan Greenspan, who was chairman of the Republican Council of Economic Advisors in 1983. That group successfully pushed for raising the rate of FICA withholding taxes (Social Security and Medicare) by about 20% between 1980 and 1990.3 In 1987 Greenspan was chosen to be chairman of the Federal Reserve Board, a post he was still holding sixteen years later under Bush II.

Over the long run, federal taxes on working families had doubled, going from 9% of their income in the 1950s to 18%, or even 20% in the mid 1990s. Because of the large social security increases, a small reduction in federal income taxes on working families in the 1980s did not offset this overall trend. There was a really big change, however, when it came to the income taxes of the rich.

With guidance from the Bush Gang, Ronald Reagan returned to that glorious decade of Coolidge and his youth, when the rich ran rampant and their income tax rate was below 30%. In 1986 the top marginal rate dropped to 28%. The results, compiled by the IRS a few years later, were striking:

Though these tax cuts for the rich were very generous, the federal tax system remains mildly progressive overall, in the sense that most rich people still pay a higher percentage of their income than do the poor. But at the state and local level, the rich won the taxation battle long ago. Many regressive state taxes, like the sales tax, end up penalizing the poor much more than the rich. The middle class, too, is taxed at a much higher rate than the richest 1% of taxpayers. State legislatures, even when they are not populated with anti-tax reactionaries, are very wary of insulting multinational corporations or very rich individuals by raising their taxes, since then they might move to another state or another country. Although most states have some form of income tax, many do not apply it too rigorously. As might be expected, the Bush boys gravitated to two of the six states that have no income tax at all, Texas and Florida. Jeb Bush's Florida ranks number two in terms of having the most unfair combination of state and local taxes in the nation.

One of the great successes of contemporary conservatives has been to eliminate the distinction that even Andrew Mellon acknowledged was an element of fairness, the one between the "earned" income produced by one's labor and the "unearned" income produced by one's capital. By eliminating this conceptual barrier to all-out greed, the Bush forces have mounted a full scale attack on wages and salaries even though they are the product of a person's active work (even the bloated pay of the big CEOs is generally connected to showing up at work every day). The income of investors, however, is passive, the byproduct of wealth already amassed.

This passion for taxing work more heavily than non work has allowed the very richest Americans to enjoy lower tax rates than ordinary, run-of-the-mill rich folks.

There are four pillars of progressive taxation that really aggravate the Bush Gang because they are direct or indirect taxes on capital: the capital gains tax, the corporate income tax, the progressive tax on all individual income because the highest incomes also tend to have the highest shares of capital income, and the estate tax that is levied at the death of very rich citizens. All of these were imposed in the first half of the 20th century so that there would be little chance for the wealthy owners of America's corporations and financial institutions to divert money from one kind of investment to another, thereby wiggling out from under the long arm of the tax man. If the Bush administration can destroy these restraints on capital, all remaining semblance of democracy in America will collapse, leading to outright victory and permanent domination by a committee of plutocrats.

Franklin Roosevelt in 1935.

"The transmission from generation to generation of great fortunes by will, inheritance, or gift is not consistent with the ideals and sentiments of the American people."

Theodore Roosevelt in his presidential message to Congress in 1906

"The primary objective should be to put a constantly increasing burden on the inheritance of those swollen fortunes, which it is certainly of no benefit to this country to perpetuate."

Theodore Roosevelt

"... malefactors of great wealth, the wealthy criminal class."

Congressman Hudson of Kansas spoke on behalf of the Income Tax Act of 1884

This method [the income tax lays the burdens on those possessing the ability to pay, and compels those who reap the give more of that harvest for the common good. I know that many wealthy men are generous and charitable...On the other hand, the majority of the very wealthy are haughty, overbearing, autocratic, mean, and it is that class in particular that the income tax is designed to reach.

Social Security has been our most reliable federal program for two thirds of a century. Retirement checks arrive reliably and are adjusted to keep up with inflation, while the government expense of running the program is very low. Because of its commitment to paying spouses who survive the original recipients, Social Security also serves as our largest life insurance program, its $12 trillion of insurance being worth more than all the policies of all private insurance companies combined. Its administration is incredibly efficient, costing less than 1% of total revenues because the aim of the Social Security Administration is to distribute the checks, not to turn a profit. This is far superior to the private sector, which keeps 12% to 14% of its premiums as the cost of doing business. Furthermore, Social Security is the most successful poverty program of all time, having reduced the poverty rate for people over 65 from 35.2% in 1959 to less than 10% forty years later. Without Social Security fully half of all senior citizens would fall below the poverty line.

Robbing Us Blind

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