The Bush Tax Cuts & Class Division in America

G.W. Bush

Titanic sums of money – the taxes paid in mostly by the working class – have been spent by the Administration primarily on two things – the continuing slaughter in Iraq and the further enrichment of the top 10 percent of Americans. Millions of working people in the United States continue to worry about whether or not they will have a job two months from now or even next week. And how does the ‘compassionate conservative’ in the White House soothe the nation’s anxiety? By handing out billions of dollars to the modern-day robber barons of Capital.

It is estimated that the Administration’s budget, without including the costs of the occupation of Iraq or the proposed Social Security “reforms”, will run a $229 billion deficit by 2010. This is the result of Bush’s tax cuts, which started taking effect in 2002. The Congressional Budget Office predicts that the budget will be short $2.5 trillion by the ten-year period ending in 2015, again without the costs of the occupation or Social Security privatization included. Defense spending not related to Iraq would increase by $419.3 billion. It requires nearly one billion dollars a week to continue the “extension of Democracy and Civilization” to the people of Iraq – via tanks, bullets and bombs. These expenditures (Dollars for Democracy?) are again not included in the budget.

The Bush tax cuts are deepening the huge chasm of wealth between the classes in the United States. Under the revised tax system, 53 percent of the cuts will go to the top 10 percent of the population. Over 15 years, 15 percent of the tax cuts affecting a country of some 300 million people will go to just 145,000 people, or 0.01 percent of the population (the “hyper-rich” – those who earn an average of $3 million annually). This leaves little for the other 90 percent of the population, most of whom received a one-time U.S. Treasury check for $300, which is what the average worker makes in one week.

From an article in the New York Times by Bob Herbert, titled ‘A Class War is Raging, and the Rich are Winning Handily’ we read the following: “Under the Bush tax cuts, the 400 taxpayers with the highest incomes – a minimum of $87 million in 2000, the last year for which the government will release such data – now pay income, Medicare and Social Security taxes amounting to virtually the same percentage of their incomes as people making $50,000 to $75,000. Those earning more than $10 million a year now pay a lesser share of their income in these taxes than those making $100,000 to $200,000.”

So, now in addition to enjoying the dividends of largely tax-free corporations, the American capitalists are becoming largely tax-free themselves! The U.S. Treasury Department has openly complained that “the very wealthiest find ways, legal and illegal, to shelter a lot of income from taxes.” After all, if a Bermuda bank account is good enough for some of the world’s largest corporations it should be good enough for the world’s wealthiest people! The actual amount of money these people have plundered, “legally” and illegally, may never be known.

The extreme polarization of wealth in the world’s richest country is of course nothing new. The only difference is that never before has the gulf been so wide, nor has the distance between the two increased so rapidly. This widening division has been an ongoing process. Interestingly enough, this accelerated process roughly corresponds to the end of the post-war prosperity of the 1950s-1970s, the stagflation of the mid-1970s and the beginning of ‘de-industrialization’ in the United States.

Since 1980, the income of the top 0.01 percent of Americans has increased to 7.4 percent of the nation’s total income while the income of the rest of the top 10 percent rose at a smaller rate. The average income for the top 0.1 percent was $3 million in 2002, the latest year for which averages are available. That is two and a half times the $1.2 million, adjusted for inflation, that group reported in 1980. No other income group rose nearly as fast.

Since 1980, the inflation-adjusted income of the bottom 90 percent has fallen. The net worth, which includes the value of homes, other property and investments, of those with more than $10 million has risen by 400 percent. For every dollar earned by the bottom 90 percent of the population during the period from 1950 to 1970, the top 0.01 percent earned $162. But between 1990 and 2002, for every dollar earned by the bottom 90 percent of the population, the top 0.01 percent earned an astonishing $18,000. Last but not least, during the relative post-war prosperity years, economic mobility, the degree to which individuals “moved up” in income and class, was the highest in the world. Today, economic mobility in the United States rates near the bottom of the ‘industrialized’ world. A worker in Britain, France or Sweden is more likely to “strike it rich” than their American counterpart. Class mobility in the United States now ranks alongside countries like Japan, Germany and Italy.

While the very wealthiest have seen their income and net worth skyrocket over the past 25 years, the American working class has seen the opposite end of this “prosperity.” Beginning in the 1980s, U.S. corporations began a process of exporting factories overseas to the nations of the Pacific Rim. Later, the introduction of the North American Free Trade Act (NAFTA,) opened the way for the U.S. capitalists to set up their plants across the southern border in Mexico. While touting ‘de-industrialization’ as a way to help the “third world” and enrich American workers at the same time, the capitalists knew that neither was true.

The workers of Mexico have not benefited from the brutal maquiladora system any more than the American workers in the “rust belt” have from seeing their communities die a slow death and taking jobs that pay half of their old incomes. The ruined peasantry of China flooding into the coastal cities looking for work are more likely to find unemployment and desperation than any help from the American imperialists’ ‘magnanimity.’ The capitalist economy is not driven by people’s needs or to develop industry, our cities or quality of life. Capitalism is driven by profit, and if the capitalists can reap a larger profit by shutting down huge swathes of industry than by operating it, they will do so, workers’ livelihoods be damned.

The Russian revolutionary leader, V.I. Lenin, in his book Imperialism: The Highest Stage of Capitalism was the first to describe the economic and social process unfolding in the United States, and by connection the world, today. Beginning in the early stages of its development, capitalism greatly developed the means of production in the industrialized countries. It was able to do so by doing away with the old feudal organization of society, emptying the countryside of the small peasantry by revolutionizing agriculture and consolidating the land under large landowners. This landless and unemployed mass became the raw material for capitalist exploitation in the factories.

As capitalism re-organized and developed the nation-state on a capitalist basis, the narrow confines of the nation-state came into contradiction with the productive possibilities of capitalism. Capitalism had to expand beyond its own borders in a quest for markets and raw materials. The State came to be more and more the reflection of the national capitalists class interests as it conducted its diplomacy, made its treaties and fought wars, in order to conquer and defend markets, resources and spheres of influence. During this period, finance capital, the financial banks and investment firms, became the central and dominant players in the world capitalist economy. When capitalism had reached the stage where finance capital reigned supreme and the world was divided into spheres of influence dominated by the largest capitalist countries, it had become what we call imperialism today.

Lenin, analyzing the modern world using the ideas of Marxism, came to the conclusion that capitalism could no longer develop the world in any fundamental way once it had reached the stage of imperialism. Once capitalism has reached this stage it has reached its full potential, and from that point on can only act as a barrier to development. Nearly 100 years later, the world is still being held back by the barrier of imperialism. Today’s unprecedented concentration of wealth in the hands of a few corporations and billionaires illustrates this graphically.

The world’s capitalists, foremost among them the American capitalists, are unable to provide any meaningful development for the world economy, let alone the needs of the American and world working class. Unable to maintain their profit margins in the ‘traditional’ way on the basis of domestic industry, the American capitalists embarked in the 1980s on the road of ‘de-industrialization,’ with all of the shocks and loss of living standards for the working class that entailed. Bush and his Administration, who are nothing but the chosen representatives of the capitalist class, have resorted to looting the Treasury through tax cuts and extravagant no-bid contracts to their cronies in the defense and oil industries.

In their short-sighted greed to enrich themselves as rapidly as possible, they are preparing the ground for tremendous explosions of the class struggle in the coming period. The illusion that things will get better “tomorrow” is fading fast. Under capitalism, “‘someday’ never comes”. Only the socialist reorganization of society can reverse the accelerating polarization of the classes and finally dispense with class society altogether.


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