Aristocracy on the rise in U.S.
Gene Lyons
Posted on Wednesday, June 8, 2005

One virtue of American-style capitalism is the way it has sustained democracy by transforming the lust for power into the quest for cash. You don’t need to know much about the biographies of 19th century robber barons like John D. Rockefeller or Andrew Carnegie, for example, to be glad they stuck to commerce instead of politics. Not that the two are
ever completely separate, but we’re better off with the control freaks in the counting house instead of the White House.

This shouldn’t be read as a slap at the inheritors of great fortunes, like Arkansas Lt. Gov. Win Rockefeller, nor the universities, libraries, museums and hospitals founded in their names. But it’s worthwhile asking whether the truce between wealth and democracy in America isn’t breaking down as the tycoon class commands an ever greater share of the nation’s wealth and uses it to tilt the political system even further in its favor. Based upon The New York Times’ recent first-rate series on social class in America, two things are happening: A small group reporter David Cay Johnston dubs the "hyper-rich" is making so much money and paying so little in taxes that the nation may be creating a permanent, European-style aristocracy. Meanwhile, social mobility stagnates and the security of the salaried classes looks increasingly threatened.

The numbers are pretty amazing. According to Johnston, also author of "Perfectly Legal," an incisive study of the U.S. tax code, the top one-10th of 1 percent of income earners, or the top one thousandth, saw their average incomes rise 250 percent between 1980 and 2002. Their share of the nation’s total income, he writes, "has more than doubled since 1980, to 7.4 percent in 2002. The share of income earned by the rest of the top 10 percent rose far less, and the share earned by the bottom 90 percent fell." (My emphasis.)

And that’s just income, not total wealth. Between 1980 and 2001, the number of families worth more than $10 million grew by more than 400 percent.

Here’s another way of looking at how fast the hyper-rich are accelerating away from the rest of us, according to Johnston: "From 1950 to 1970... for every additional dollar earned by the bottom 90 percent, those in the top 0.01 percent earned an additional $162, according to the Times analysis. From 1990 to 2002, for every extra dollar earned by those in the bottom 90 percent, each taxpayer at the top brought in an extra $18,000."

The evidence is everywhere you look. Particularly since President Bush took office, corporate profits have been growing as wages have stagnated. According to a recent story in the Los Angeles Times: "CEOs at California’s largest 100 public companies took home a collective $1.1 billion in 2004, up almost 20% from 2003. That compares with the 2.9% raise that the average California worker saw last year."

The same is true all over the country. There’s an epidemic of greed. Executives once content to earn, say, 20 times as much as salaried employees now command hundreds of times more, all this amid stock market scams, looted corporate pension funds and thievery in executive suites. If it were up to me, people couldn’t be allowed to vote in 2006 without seeing the documentary film about the Enron collapse, "The Smartest Guys in the Room."

That’s not to say that the tycoon class has prospered solely through thievery. An ongoing technological revolution and the creation of a worldwide marketplace—much of what we call "free trade" is a quest for cheap labor—have tilted the so-called playing field away from people who make things and provide services toward those who innovate or simply manipulate money.

How is our political system responding to preserve fairness and equity within American society? Very badly. Propaganda from tycoon-funded Washington "think tanks" has conditioned virtually all Republicans and even many nominally Democratic pundits to cry, "Class warfare!" whenever anybody raises the issue.

But today’s tycoon class pays nothing close to its fair share of the tax bill. The New York Times produced a chart showing that after the Bush tax cuts, the richest 400 taxpayers in the U.S. pay roughly 17.5 percent of their income in taxes, equivalent to persons earning $50,000 to $75,000. Meanwhile, "those earning more than $10 million a year now pay a lesser share of their income in these taxes than those making $100,000." This, remember, on an immensely larger and ever-growing share of the national wealth. It’d be one thing if the U.S. government were paying its debts. But it’s running huge and (all economists agree) dangerous budget deficits primarily caused by Bush’s devotion to what he once lightheartedly described as "the haves and the have-mores. Some people call you the elite. I call you my base." Democrats should say this: They’re playing you for a sucker because they think you’re a fool.

•–––––—Free-lance columnist Gene Lyons is a Little Rock author and recipient of the National Magazine Award.