Rising Above With Disdain: Class Entitlement and the “Fiscal Cliff”

First published on ZNet on December 8, 2012

“Some Form of Sacrifice” 

You’ve got to hand it to the 1% – they’ve got chutzpah.  

Listen to the following proclamation made in a full-page advertisement bearing an image of the Star Spangled Banner in The Wall Street Journal – an ad purchased by the pro-big business cable television network CNBC ten days after the 2012 presidential election:  

“RISE ABOVE” 

“The American economy will only be unleashed if we avoid the fiscal cliff, pare our deficit and rise above partisan politics….….It’s time to RISE ABOVE

For a deal to get done, Washington must rise above partisan bickering.

For a deal to get done, politicians must move the County toward some form of sacrifice. That’s always been the spirit of America.

CNBC will urge politicians to get down to business and find a solution to the impending Fiscal Cliff – ensuring a robust, healthy economic engine for the future generations of Americans.” 

“It’s time to RISE ABOVE”[1] 

The Rich Rising Above 

CNBC is hardly the originator or main force behind the deficit mania and the related call for Americans to “do more with less” that has been dominating the nation’s political and media culture literally since Election Day. A much bigger driver is “Fix the Debt” (FTD), a coalition of 95 leading corporate and financial CEOs that calls for “shared sacrifice” to “prevent disaster and renew America’s economic strength.” FTD has raised more than $60 million to lobby for a “debt deal” that makes significant long-term cuts in “entitlements” (Social Security, Medicare, and Medicaid). A key leader of FTD is none other than Goldman Sachs CEO Lloyd Blankfein, recipient of more than $16 million in total compensation last year.  

Time to “move the County toward some form of sacrifice?” Hello? How about the last three decades, during which time the share of the nation’s income granted to the top 1% of U.S. “earners” rose from 9 to 24%, an income disparity not seen in the United States since 1928? In 2005, U.S. senator Bernie Sanders (I-VT) reported this year, the top 1 percent received more income than the bottom 50 percent of Americans – “with the top 300,000 earners making more money than the bottom 150 million.” Five years later, leading inequality analyst and UC-Berkeley economist Emmanuel Seaz determined that the 1% garnered fully 93 percent of the nation’s income gains in 2010.[2]

Meanwhile, wealth has concentrated back to near-1920s levels, with the top 1 percent controlling more than 40 percent of the nation’s net worth – the highest percentage since, again, the end of the 1920s.[3] By the time of Occupy Wall Street’s emergence, the 400 richest Americans possessed more wealth than the entire bottom half of the U.S. population – 150 million U.S. citizens. The top 1 percent possessed as much as the bottom 90 percent, a reflection among other things of the fact that lowest two U.S. wealth quintiles (the bottom 40 percent) of the U.S. controlled an astonishingly paltry 0.3 percent of the nation’s net worth, essentially nothing.[4]   

This historic re-concentration of wealth and income began in the late 1970s, gathered force in the 1980s and went stratospheric between 1990 and 2007. By the latter year, the U.S. was home to more than 10 million millionaire households and to more than more than half a million households worth in excess of $10 million – more than double the numbers in 1990. Never before had so many Americans become so wealthy so fast. The upward distribution was without parallel in terms of the number of super-wealthy Americans created and in terms of the United States’ position in global rankings for inequality. The original Gilded Age and the 1920s stock market boom of the 1920s may have generated richer single individuals relative to the overall (e.g. John D. Rockefeller’s at the turn of the 20^th century, estimated to possess wealth equal to 1.5 percent of the American GDP), But “the Second Gilded Age” that was the 1990s and 2000s “eclipsed all others,” Wall Street Journal reporter Robert Frank notes in his book The High-Beta Rich, “when it came to the sheer number of new millionaires and billionaires. The combined annual incomes of the top 1 percent exploded to $1.7 trillion, greater than the annual GDP of Canada. Their wealth topped $21 trillion at its peak in 2007.”[5] 

The rising fortunes of the few grew “in stark contrast to the rising debts and stagnant wages of the rest of America.”[6] According to reigning neoliberal, so-called free market economic theory and ideology, increased wealth at the top would “trickle down” to the rest of the populace, demonstrating a glorious identity of interests between the investing class and the broad populace. Quite to the contrary, however, the “plutonomic” American system of the last thirty plus years has generated languishing incomes for the majority. Over the three decades connecting Reagan era to the Obama administration, the wages of the typical American worker have stagnated, averaging only $280 more than thirty years ago – a less than 1 percent gain over a third of a century. Beginning in 2001, the U.S. median wage actually began to drop.[7] Thanks in part to the lingering human consequences of the Great Recession (itself a consequence of raging inequality, like the Great Depression of the 1930s), a sixth of the population lives below the federal government’s notoriously inadequate poverty level and well more than a million U.S. children live at less than half that level, in what researchers call ‘deep poverty.”  A third of the population lives in near poverty (at or below 150% of poverty) and roughly half the U.S. is officially “low income.”  

Along the way, the size, wealth and income of the American middle-class has shrunk considerably across the New Gilded Age. As the esteemed Washington think tank the Pew Research Center reported in an August 2012 study titled The Lost Decade of the Middle Class: Fewer, Poorer, Gloomier, “61 percent of all [U.S.] adults were middle class in 2011, compared to 61 percent in 1971.” Between 1971 and 2011, Pew determined, the middle class’s share of the nation’s income fell from 62 to 45 percent.  

The 21st century has been particularly cruel towards the group that both of the two dominant corporate political parties ritually claim to make their top policy priority. Pew reports that media wealth of the nation’s “middle-income group” fell by a remarkable 28% (from $130,000 to $93,000) across the “lost decade” of the 2000s.[8] 

The FTD CEOs and others in the American elite have been rising above alright, flying high over an ever more insecure and impoverished U.S. population for more than three decades now. 

Against this recent arch-regressive background, it is simply obscene for American plutocrats and their servants to lecture Americans on the need “move the country toward some form of sacrifice” and to call for “shared sacrifice.” [9]

 Blankfein Speaks: “American Can No Longer Afford the Same Level of Generosity” 

And what, pray tell, do the supposedly benevolent overlords propose to save the country through mutual giving? The perceptive Milwaukee-based left and labor journalist Roger Bybee recently captured the nauseating essence of the “grand bargain” offered by the captains of corporate and financial America:  

‘For the top 1% of mega-millionaires and billionaires, their sacrifice is merely modest tax increases, which could come in the form of slight rate changes or the elimination of some exemptions. These are “sacrifices” so minor that they will not even notice, especially when they rake in the gains from the new corporate tax breaks for which they are pressing.’ 

‘But for working people who have worked in grueling jobs their entire lives—on auto assembly lines, as waitresses on their feet all day, as construction workers toiling outside in extreme heat and frigid cold—their sacrifice consists of working two more years with their battered bodies until they can finally gain assistance from Social Security and Medicare.….Blankfein holds out the tantalizing prospect of a vast wave of new corporate investment in America once the CEOs’ demands are met. All this requires is President Obama and the Democrats caving in to draconian, life-shattering changes in Social Security and Medicare….Blankfein and his Fix the Debt allies are quite prepared to be “flexible” in agreeing to pay mild increases on their income above $250,000, “but only if they are joined by serious cuts in discretionary spending and entitlements.” He apparently perceives an equivalent level of sacrifice from his modest tax increase and a 65-year old jobless worker who must now wait two more years for a Social Security check to sustain a meager existence. Or consider that worker, lacking any health care coverage, being required to accept a delay of two years in receiving Medicare.’ 

‘America can no longer afford the same level of generosity as before,’ Blankfein told CBS recently…”You’re going to have to do something, undoubtedly, to lower people’s expectations of what they’re going to get, the entitlements, and what people think they’re going to get, because you’re not going to get it,” he wrote.’

‘Meanwhile, in their purported quest to lower the government’s deficit, Blankfein and the Fix the Debt coalition are busy promoting the notion that U.S. corporations should no longer be obligated to pay taxes on their plants and other operations located outside the U.S.’ [10]

 “Cash Rich Overseas, Cash Poor at Home” 

Consistent with Bybee’s concluding observation, a recent Wall Street Journal report notes casually and well off the front page that numerous top and cash-stocked “U.S.” firms have to borrow money in the U.S. to pay dividends and taxes and buy back company shares. The reason for this seeming paradox is that many leading companies keep most of their cash savings outside the country so as “keep Uncle Sam away from [taxing] their foreign income.” Among the companies that are “cash rich overseas” but “cash poor at home”: Johnson&Johnson Co., which “kept all of its $24.5 billion in cash outside the U.S.” last year;” General Electric Co., which “had only about a third of its $85.5 billion in cash in the U.S. at the end of September, even through the U.S. accounted for about 45% of the conglomerate’s revenue;” Whirlpool Corp., which “had 85% of its cash offshore at the wend of last year;” and Microsoft Corp., which “had about 87 % overseas as of September 30.”[11] 

A Pension Deficit Disorder 

It gets worse. A recent study by the Institute for Policy Studies (IPS) shows that 54 CEOs on FTD’s “Fiscal Leadership Council” have together accumulated pension assets of more than $649 million from their firms’ executive retirement plans. Seventy one CEOs affiliated with FTD sit atop publicly traded companies. Of those 71 companies, less than 60 offer pension plans to their employees. Among the 41 companies that do provide pension systems, IPS finds, all but two have failed to contribute enough to their employees’ pension funds to pay out their expected obligations. The total deficit among these 39 companies’ pension funds is more than $100 billion. The IPS study bears a clever and devastating title: A Pension Deficit Disorder: The Massive CEO Retirement Funds and Underfunded Worker Pension funds at Firms Pushing Social Security Cuts.[12]   

How disgusting: a two-pronged CEO assault on workers’ right to retire in comfort both in the private system and in the more public system constructed in response to popular struggle and employers’ failure to provide remotely adequate private pensions in the mid-20^th century. Can anyone say “class warfare” (the top-down kind)? 

High Beta Kitchens and $10 Million Holiday Gifts for the Children  

I read the CNBC advertisement quoted at the beginning of this essay in a weekly Wall Street Journal section titled “Mansion.” The section targets richly entitled readers at the top of the 1%, reporting on opportunities and developments in the elite real estate market. The lead story in the “Mansion” section where CNBC called for America to “rise Above” reports that a rising number of the American rich are building homes with kitchens as large as 3000 feet. The kitchens of the “high-beta rich” are now often bigger than many typical middle-class homes.[13]   

A different story in the same section tells high end homeowners how to transfer property to their children before lifetime gift-tax exemptions are scheduled to sunset on December 31^st. “Want to give the kids a little something extra for the holidays?” “Mansion” writer Annmaria Andriotis asks. “Get going,” Andriotis urges readers.” The generous lifetime gift-tax exemption – in which couples can give up to $10.24 million to descendants tax free – expires at the end of the year.” A number of wealthy homeowners are currently racing to transfer property to their children before the aristocratic, inter-generational free pass goes away. While some insiders report that the rich may succeed in pressuring Congress to restore the generous plutocratic benefit,  Andriotis mentions some different ways for the hyper-wealthy to get around likely changes: (i) putting property in a limited-liability company, thereby reducing the property’s marketability and therefore its taxable value; (ii) setting up a “qualified personal residence trust” to keep the property in parents’ control for a specific period of time; (iii) “have a child’s trust buy the parent’s property, with the transaction financed by the parent.”  Under this last arrangement, “The parent then pays rent, which the child uses to pay off the loan. Only the initial amount gifted in the trust – not the entire value of the house – is applied to the exemption limit.”[14] 

Among the recent real estate transactions listed in the November 16^th “Mansion” section of the Wall Street Journal: “The 10,000-Square Foot One-Bedroom L.A. home of Richard Zannuck Sells for $20.1 Million” and “David Geffen Buys Denise Rich’s New York Penthouse for $54 Million.” [15]

Such is just some of the luxuriant hyper-opulence enjoyed behind high-tech security systems by the hyper-wealthy Few, whose leading business and political operatives call for “shared sacrifice” while attacking public and private wages, health benefits,  and pensions for the Many. Along the way, the super-rich are finding new ways to skirt their obligations to “Uncle Sam,” to accumulate ever more grotesque levels of wealth, and to pass that plenty on to their offspring. They would be offended, no doubt, by any reference to their children’s inherited wealth (or to their own commonly inherited starter fortunes) as forms of “entitlement,” a term they reserve for a senior worker’s right to retire comfortably and receive medical coverage on the basis of payments he or she made over a lifetime. 

“It’s About Class” 

Why are “Fix the Debt” (FTD), CNBC, the Wall Street Journal and so much of the rest of the business, political, and media elite so obsessed with the purported deficit calamity in the first place? As Paul Kugman and other leading liberal economists have been noting for some time now, the nation isn’t actually facing a fiscal crisis. It is still struggling however with a mass unemployment crisis that is ruining millions of lives, no small part of why most Americans think that creating jobs, not slashing the deficit – stimulus, not austerity – ought to be policymakers’ top priority. Acting on that majority sentiment means government spending more, not less, in the short-term.[16] 

Why doesn’t Washington make tackling epic massive and long-term joblessness its top priority?  Krugman has come to an interesting judgment on the matter. “It’s hard,” he writes, “to avoid the conclusion that it’s about class. Influential people in Washington are worried about losing their jobs; by and large, they don’t even know anyone who’s unemployed. The plight of the unemployed simply doesn’t loom large in their minds – and, of course, the unemployed don’t hire lobbyists or make big campaign contributions.”[17] 

Unleash Sustainable Populist Outrage 

Even if the corporate “deficit scolds” (Krugman’s term[18]) are sincere about wanting to “unleash the American economy” (and it’s not clear that they have any particular commitment to the U.S. economy as such anymore), it is worth adding that (somewhat contrary to Krugman and other liberals’ attachment to restoring growth[19]) recent dire environmental reports indicate that livable ecology could not survive another major U.S. economic expansion. We are badly overshooting the environmental limits of Western-imposed. U.S.-led state-capitalist growth and now face a climatological “tipping point” with disastrous consequence for our own and other species.[20]  A far better project would be a democratic leveling-out of the American economy – a major downward redistribution of American wealth, income, and power in connection with conversion to a sustainable economy and a rejection of the dominant Western growth ideology, which has long squelched demands for equality with the deadly promise of endless economic expansion.[21] The “rising tide that [supposedly] lifts all boats” has not delivered for the majority[22] and has now generated a literally rising sea level that threatens do put us all more than just metaphorically underwater. The rich, no doubt, expect to be able to rise above the rising floods that pull the rest of under. The progressive project starts among other things with unleashing and organizing the nation’s deep underlying and legitimate populist outrage.[23] 

Paul Street (www.paulstreet.org) is the author of numerous books, including Empire and Inequality: America and the World Since 9/11 (Paradigm, 2004), Segregated Schools: Educational Apartheid in the Post-Civil Rights Era (Routledge, 2005); Racial Oppression in the Global Metropolis (Rowman&Littlefield, 2007), The Empire’s New Clothes: Barack Obama in the Real World of Power (Paradigm, 2010), and (co-authored with Anthony DiMaggio) Crashing the Tea Party: Mass Media and the Campaign to Remake American Politics (Paradigm, 2011). Street can be reached at paulstreet99@yahoo.com

Selected Endnotes