Déjà vu All Over Again: The GOP Prepares to Make the Rich Even Richer

Published on
by

Déjà vu All Over Again: The GOP Prepares to Make the Rich Even Richer

It's not that trickle-down economics "doesn't work." The problem is that it has "worked" exactly how the wealthy and powerful have always wanted it to work: for them

President-elect Donald Trump, his wife Melania and Vice president-elect Mike Pence, talk as they pose for photographers with House Speaker Paul Ryan of Wis. after a meeting in the Speaker's office on Capitol Hill in Washington, Thursday, Nov. 10, 2016. (Photo: AP/Alex Brandon)

As the Republican Congress begins to execute its latest attack on poor and middle class Americans (the repeal of the Affordable Care Act; cuts in education spending, Social Security and Medicare; attacks on worker rights, and, of course, more tax cuts for the rich), it’s worth putting this assault in context.

The United States is, by every reasonable measure and by far, already the most unequal of the world’s rich countries.  For decades, the U.S. has been suffering from a crisis of inequality, and it has only gotten worse over time.  The Democrats have not taken this crisis seriously enough. The Republicans remain hell-bent on making it worse.  And in the process (and in the service) of this massive redistribution, the GOP has enthusiastically stoked the fire of racial resentment, relentlessly blaming the victims in order to enrich the privileged.

"The GOP economic agenda is about plunder.  It’s that simple."

Evidence of extreme and rising economic inequality in the U.S. is quite overwhelming. In 1979, the top 1 percent captured about 9 percent of all income; in 2014, they grabbed 22 percent. The incomes of the top 0.1 percent have grown even faster. More than half of all economic growth since 1976 has ended up in the pockets of the top 1 percent. Meanwhile, the incomes of the shrinking middle class have stagnated, while the incomes of those with a high school education or less have fallen substantially. The purchasing power of the federal minimum wage is 15 percent lower than in 1979, despite a doubling of labor productivity.  In the meanwhile, CEO pay has soared. In 1965, the typical CEO earned 20 times as much as the average production worker.  In 2015, they earn 300 times more.  One in five kids in the US lives in poverty.  And the US is the only rich country in the world without universal healthcare. 

And while much has been made of the (very real) hard times endured by the “white working class” in recent decades, profound racial inequality remains a defining feature of the US economy.  The income of the median African American household is about 60% that of the median white household.  The wealth of the median African American household is one thirteenth that of the median white household.   24% of African Americans live in poverty—nearly three times the rate for whites—and a third of African American children live in poverty.  This racial inequality manifests itself in other realms of social life as well: education, health care, housing, employment, capital markets, the criminal justice system, exposure to toxins, and more.

Despite this grim reality, the Republican Party’s economic policy agenda has not changed for decades. Cut taxes for the 1 percent.   Reduce corporate accountability (“deregulate”)—so that banks can run wild and corporations can pollute with impunity.  Undermine the bargaining power of workers. And then blame the inevitable decline in workers’ incomes on people of color—"illegal immigrants," "welfare queens," food stamp recipients, and those who’ve “cut the line” thanks to "quotas" and "special preferences."

In reality, the lost income of workers of all sorts—union and non-union, black and white, male and female, public sector and private secto—can be found in the pockets of the 1 percent. 

Over the past few decades, effective tax rates on U.S. corporations and the richest 1 percent have fallen by about a third. Among the world's rich countries, U.S. tax rates on the rich are near the very bottom.  Since 1970, the percentage of private sector workers in unions has fallen from 29 percent to 7 percent.

But isn’t rising inequality inevitable in a capitalist economy?  Nope.  Between 1948 and 1975, the income of the median U.S. household doubled. Over this period, the incomes of the bottom 20 percent actually grew a little faster than the incomes of the top 20 percent. Between 1928 and 1950, the distribution of income in the US actually became dramatically more equal.

Why should we be concerned about inequality? America is about opportunity, not guarantees—right?  Actually, no. Among the world's rich countries, the U.S. is tied for last in class mobility; an American's economic status is in fact highly correlated with his/her parents' wealth and status. Richard Wilkinson captures this sad reality perfectly: "If you want the American Dream, you'll have to go to Denmark."

In this context—soaring inequality and declining economic security for almost everyone—the GOP agenda is especially appalling. The Republican agenda calls for still deeper cuts  in taxes for corporations and the top 1 percent, and a further easing of the "regulatory burden" on oil, coal and gas companies (including "frackers") and—believe it or not—Wall Street.  A tax plan proposed by House Speaker Paul Ryan this summer would give an average annual tax cut of $137,780 to households in the top 1 percent.  And we can expect the GOP to pursue deep cuts in spending on education, Head Start, environmental protection, Social Security, Medicare and Medicaid because, um, “we can’t afford it.” Remarkably, the Republicans have concluded—as they always do—that the super-rich are getting too little while children, the elderly, the middle class, the poor, and people of color are getting too much.

And all of this will be facilitated by a cabinet chock full of laissez-faire billionaires, racists, and libertarian nuts. Trump’s administration is overflowing with Goldman Sachs alums—including Trump’s top economic adviser (Gary Cohn), his Chief Strategist (Steve Bannon) and the Secretary of the Treasury (Steven Mnuchin).  Trump’s nominee for Labor Secretary—Andrew Puzder, a fast food CEO—opposes the minimum wage.  Workers in his restaurants (Hardee’s and Carl’s Jr.) allege that "wage theft" and sexual harassment are common.  Ben Carson, the prospective Secretary of Housing and Urban Development (HUD), believes that "poverty is a choice."  Trump’s nominee for Energy Secretary is Rick Perry, a lifelong lacky for Big Oil and, further, an idiot. Tump’s nominee for Secretary of State, Rex Tillerson, is the CEO of ExxonMobil, where he has spent decades ravaging the planet for profit. 

Does this all sound familiar? After thirty-five years, it should. This is trickle-down economics.  The "logic" here is that the economy will grow if we provide a better "business climate"—lower taxes and fewer regulations will liberate corporations to create jobs. The problem is that it doesn't work. Decades of lower taxes and reckless deregulation have saddled us with slow growth, soaring inequality, the financial meltdown of 2008, a devastating recession, rising tuition at our public universities, and diminishing opportunities for millions of Americans. And yet—like a zombie that will not die and despite its long record of failure—trickle-down economics is alive and well.  William Blum has it just right: "The 'trickle-down' theory: the principle that the poor, who must subsist on table scraps dropped by the rich, can best be served by giving the rich bigger meals."

The Trump/GOP agenda is appalling and immoral, and it is bad economics.  Indeed, it is bad in every imaginable way.  Trickle-down economics has failed to promote shared prosperity over and over again.  But it does not follow that it has been a "mistake" or a "failure."  This set of policies has gone a very long way toward achieving the objectives of its advocates: it has helped the rich to accumulate wealth and political power.  Ha Joon Chang, author of 23 Things They Don't Tell You About Capitalism, hits this nail on the head: "Once you realize that trickle-down economics does not work, you will see the excessive tax cuts for the rich as what they are—a simple upward redistribution of income, rather than a way to make all of us richer, as we were told."

The GOP economic agenda is about plunder.  It’s that simple.

I’m not sure what Trump’s working class supporters were voting for.  But I’m pretty sure it wasn’t this. 

Tim Koechlin

Tim Koechlin holds a Ph. D. in economics. He is the Director of the International Studies Program at Vassar College, where he has an appointment in International Studies and Urban Studies. Professor Koechlin has taught and written about a variety of subjects including economic, political and racial inequality; globalization; macroeconomic policy, and urban political economy.

Share This Article