America’s Billionaires’ Coup Part II

Huck/Konopacki Labor Cartoons

Yesterday, in America’s Billionaires’ Coup Part I, I examined an article in Der Spiegel, claiming that the U.S. was becoming a banana republic and that it should no longer be considered part of the West. Today I examine an article by George Monbiot, in the Guardian, UK, on the billionaire’s coup in the U.S.

While Monbiot’s piece makes a much better analysis than the one in Der Spiegel, it suffers from the same faulty premise that things today are substantively different than they were in a romanticized past. A coup implies an illegal or extrajudicial takeover of the state, which is not at all what has happened. The wealthy have (as they always have) used their wealth and power to influence policy in their favor. While there are a few billionaire politicians, most are mere millionaires and humble one-hundred-thousandaires.

Regardless, all three classes of individuals are members of the same ruling class. They are bosses, bankers, financiers, corporate attorneys and entrepreneurs. They share the same interests and they rule to protect those interests. What is different today is that they have become more aggressive and overt in their attacks on the rest of us than they have in several generations.

You can read Monbiot’s article below, with my comments in italics.

Anger, Deceit and a Billionaires’ Coup

 By George Monbiot/ Guardian UK (Britain) / August 2, 2011

Anger and deceit has led the US into a billionaires’ coup. The debt deal will hurt the poorest Americans, convinced by Fox and the Tea Party to act against their own welfare.

Huck/Konopacki Labor Cartoons

 True—the deal will hurt the poor the most and Americans have been convinced to act against their own welfare. However, there has not been a coup. American politics is functioning the way it always has—as an instrument of capital.

There are two ways of cutting a deficit: raising taxes or reducing spending. Raising taxes means taking money from the rich. Cutting spending means taking money from the poor. Not in all cases of course: some taxation is regressive; some state spending takes money from ordinary citizens and gives it to banks, arms companies, oil barons and farmers. But in most cases the state transfers wealth from rich to poor, while tax cuts shift it from poor to rich.

A point of clarification: Income taxes theoretically harm the wealthy more than the rest of us as they have higher incomes and more money to lose. However, relative to overall wealth, they can also afford to lose much more and still come out on top. Furthermore, the marginal tax rate is at its lowest level in decades, with the result that the wealthy get to keep much more of their bloated incomes than they have in the past. In the 1930s, the marginal rate was 64%. From 1940 until 1963 it ranged from 80-92% and never dropped below 50% until 1986, during Reagan’s second term. Nevertheless, the wealthy believe they shouldn’t have to pay any taxes. Emboldened by Reagan and then George W. Bush, they have been screaming and hollering for greater and greater tax cuts. And they have received these cuts in numerous forms, including cuts to the other taxes that primarily affect the rich (e.g., corporate taxes, capital gains taxes and inheritance taxes). The corporate taxe rate, for example, has declined from 52%, in 1952, to 35% today, and most companies pay much less after taking advantage of loopholes. GE, for example, only paid 7.4% last year. Capital gains and inheritance tax rates are also at historical lows.

Government spending benefits the rich and the poor. Spending on the military and on subsidies to oil companies, Big Pharma and Big Ag all benefit the wealthy and amount to transfers of wealth from the working and middle classes to CEOs. The rich by and large support this kind of spending and never refer to it with disparaging terms like “entitlements,” which is reserved for spending that has little or no benefit to them at all (e.g., education, Medicare, social security).

So the rich, in a nominal democracy, have a struggle on their hands. Somehow they must persuade the other 99% to vote against their own interests: to shrink the state, supporting spending cuts rather than tax rises. In the US they appear to be succeeding.

All democracies are essentially systems that allow the rabble to vote for their rulers and encourage them to vote against their own interests. The entire basis of the state is to create and defend the conditions necessary for capitalists to increase their profits. The only difference between the U.S. today and whatever alternative that Monbiot is comparing it to, is the severity and intensity (and perhaps transparency).

Partly as a result of the Bush tax cuts of 2001, 2003 and 2005 (shamefully extended by Barack Obama), taxation of the wealthy, in Obama’s words, “is at its lowest level in half a century.” The consequence of such regressive policies is a level of inequality unknown in other developed nations. As the Nobel laureate Joseph Stiglitz points out, in the past 10 years the income of the top 1% has risen by 18%, while that of blue-collar male workers has fallen by 12%.

Shameful, but expected. After all, Obama is the president. His job is to help the rich help themselves to whatever they want. What is truly shameful is the unions’ acceptance of this. The CTA, for example, not only accepted Gov. Jerry Brown’s plan to close the California budget gap with regressive taxes, they actively organized their members to fight for it, rather than demanding that the rich pay higher taxes, something that could not only close the budget gap, but provide a sufficient surplus to raise wages and lower class sizes.

The deal being thrashed out in Congress as this article goes to press seeks only to cut state spending. As the former Republican senator Alan Simpson says: “The little guy is going to be cremated.” That means more economic decline, which means a bigger deficit. It’s insane. But how did it happen?

More decline, bigger deficit and more hysteria on Wall Street. It is ironic that the ruling class insists on stuffing their pockets even at the risk of bringing the economy crashing down and despite the fact that this terrifies them to the point that they liquidate their stock holdings.

The immediate reason is that Republican members of Congress supported by the Tea Party movement won’t budge. But this explains nothing. The Tea Party movement mostly consists of people who have been harmed by tax cuts for the rich and spending cuts for the poor and middle. Why would they mobilise against their own welfare? You can understand what is happening in Washington only if you remember what everyone seems to have forgotten: how this movement began.

On Sunday the Observer claimed that “the Tea Party rose out of anger over the scale of federal spending, and in particular in bailing out the banks.” This is what its members claim. It’s nonsense.

The movement started with Rick Santelli’s call on CNBC for a tea party of city traders to dump securities in Lake Michigan, in protest at Obama’s plan to “subsidise the losers.” In other words, it was a demand for a financiers’ mobilisation against the bailout of their victims: people losing their homes. On the same day, a group called Americans for Prosperity (AFP) set up a Tea Party Facebook page and started organising Tea Party events. The movement, whose programme is still lavishly supported by AFP, took off from there.

So who or what is Americans for Prosperity? It was founded and is funded by Charles and David Koch. They run what they call “the biggest company you’ve never heard of”, and between them they are worth $43 billion. Koch Industries is a massive oil, gas, minerals, timber and chemicals company. In the past 15 years the brothers have poured at least $85 million into lobby groups arguing for lower taxes for the rich and weaker regulations for industry. The groups and politicians the Kochs fund also lobby to destroy collective bargaining, to stop laws reducing carbon emissions, to stymie healthcare reform and to hobble attempts to control the banks. During the 2010 election cycle, AFP spent $45m supporting its favoured candidates.

But the Kochs’ greatest political triumph is the creation of the Tea Party movement. Taki Oldham’s film (Astro)Turf Wars shows Tea Party organisers reporting back to David Koch at their 2009 Defending the Dream summit, explaining the events and protests they’ve started with AFP help. “Five years ago,” he tells them, “my brother Charles and I provided the funds to start Americans for Prosperity. It’s beyond my wildest dreams how AFP has grown into this enormous organisation.”

AFP mobilised the anger of people who found their conditions of life declining, and channelled it into a campaign to make them worse. Tea Party campaigners take to the streets to demand less tax for billionaires and worse health, education and social insurance for themselves.

Are they stupid? No. They have been misled by another instrument of corporate power: the media. The movement has been relentlessly promoted by Fox News, which belongs to a more familiar billionaire. Like the Kochs, Rupert Murdoch aims to misrepresent the democratic choices we face, in order to persuade us to vote against our own interests and in favour of his.

What’s taking place in Congress right now is a kind of political coup. A handful of billionaires have shoved a spanner into the legislative process. Through the candidates they have bought and the movement that supports them, they are now breaking and reshaping the system to serve their interests. We knew this once, but now we’ve forgotten. What hope do we have of resisting a force we won’t even see?

This history of the Tea Party and the influence of the Koch brothers and Rupert Murdoch is interesting and relevant, but also an incomplete picture. The non-Tea Party Republicans and Democrats have been going along with the Tea Party agenda, and not because of the Tea Party’s strength. The Tea Party is still a minority in Congress. They’ve been going along with it because the Tea Party agenda serves their interests and the interests of their funders and allies.

The Tea Party has identified an historic opening in American politics, with an extremely weak labor movement and left, considerable fear and uncertainty among the populace, and the opportunity to essentially do whatever they wish without fear of resistance. They are taking advantage of this opportunity to massively transfer wealth from taxpayers to the rich, privatize the public sector and crush the labor movement and the left, in general—all things that the rule elite have dreamed about for decades, but have been unable to accomplish, in part because of resistance by labor.

The Democrats and even some liberals in Congress, with no threat of backlash by their traditional constituents, are hedging their bets and going along with the program, thinking this will give them the most leverage in upcoming elections. Sure, many are crying out against the gutting of Medicare or social security, but few are doing anything substantive to defend these and other social programs. They have almost all bought into the hysteria that the deficit must be closed now and are supporting a shrinking of government at precisely the time that government spending must be expanded, not just to extend the safety net to the millions who are still suffering from the recession, but to stimulate the economy sufficiently to end the recession. A reduction in spending will likely prolong the agony or cause a deterioration into a deeper recession.