Krugman pg. 3 out of 3
You don't need a political scientist to tell you that modern American politics is bitterly polarized. But wasn't it always thus? No, it wasn't. >From World War II until the 1970's -- the same era during which income inequality was historically low -- political partisanship was much more muted than it is today. That's not just a subjective assessment. My Princeton political science colleagues Nolan McCarty and Howard Rosenthal, together with Keith Poole at the University of Houston, have done a statistical analysis showing that the voting behavior of a congressman is much better predicted by his party affiliation today than it was 25 years ago. In fact, the division between the parties is sharper now than it has been since the 1920's. What are the parties divided about? The answer is simple: economics. McCarty, Rosenthal and Poole write that ''voting in Congress is highly ideological -- one-dimensional left/right, liberal versus conservative.'' It may sound simplistic to describe Democrats as the party that wants to tax the rich and help the poor, and Republicans as the party that wants to keep taxes and social spending as low as possible. And during the era of middle-class America that would indeed have been simplistic: politics wasn't defined by economic issues. But that was a different country; as McCarty, Rosenthal and Poole put it, ''If income and wealth are distributed in a fairly equitable way, little is to be gained for politicians to organize politics around nonexistent conflicts.'' Now the conflicts are real, and our politics is organized around them. In other words, the growing inequality of our incomes probably lies behind the growing divisiveness of our politics. But the politics of rich and poor hasn't played out the way you might think. Since the incomes of America's wealthy have soared while ordinary families have seen at best small gains, you might have expected politicians to seek votes by proposing to soak the rich. In fact, however, the polarization of politics has occurred because the Republicans have moved to the right, not because the Democrats have moved to the left. And actual economic policy has moved steadily in favor of the wealthy. The major tax cuts of the past 25 years, the Reagan cuts in the 1980's and the recent Bush cuts, were both heavily tilted toward the very well off. (Despite obfuscations, it remains true that more than half the Bush tax cut will eventually go to the top 1 percent of families.) The major tax increase over that period, the increase in payroll taxes in the 1980's, fell most heavily on working-class families. The most remarkable example of how politics has shifted in favor of the wealthy -- an example that helps us understand why economic policy has reinforced, not countered, the movement toward greater inequality -- is the drive to repeal the estate tax. The estate tax is, overwhelmingly, a tax on the wealthy. In 1999, only the top 2 percent of estates paid any tax at all, and half the estate tax was paid by only 3,300 estates, 0.16 percent of the total, with a minimum value of $5 million and an average value of $17 million. A quarter of the tax was paid by just 467 estates worth more than $20 million. Tales of family farms and businesses broken up to pay the estate tax are basically rural legends; hardly any real examples have been found, despite diligent searching. You might have thought that a tax that falls on so few people yet yields a significant amount of revenue would be politically popular; you certainly wouldn't expect widespread opposition. Moreover, there has long been an argument that the estate tax promotes democratic values, precisely because it limits the ability of the wealthy to form dynasties. So why has there been a powerful political drive to repeal the estate tax, and why was such a repeal a centerpiece of the Bush tax cut? There is an economic argument for repealing the estate tax, but it's hard to believe that many people take it seriously. More significant for members of Congress, surely, is the question of who would benefit from repeal: while those who will actually benefit from estate tax repeal are few in number, they have a lot of money and control even more (corporate C.E.O.'s can now count on leaving taxable estates behind). That is, they are the sort of people who command the attention of politicians in search of campaign funds. But it's not just about campaign contributions: much of the general public has been convinced that the estate tax is a bad thing. If you try talking about the tax to a group of moderately prosperous retirees, you get some interesting reactions. They refer to it as the ''death tax''; many of them believe that their estates will face punitive taxation, even though most of them will pay little or nothing; they are convinced that small businesses and family farms bear the brunt of the tax. These misconceptions don't arise by accident. They have, instead, been deliberately promoted. For example, a Heritage Foundation document titled ''Time to Repeal Federal Death Taxes: The Nightmare of the American Dream'' emphasizes stories that rarely, if ever, happen in real life: ''Small-business owners, particularly minority owners, suffer anxious moments wondering whether the businesses they hope to hand down to their children will be destroyed by the death tax bill, . . . Women whose children are grown struggle to find ways to re-enter the work force without upsetting the family's estate tax avoidance plan.'' And who finances the Heritage Foundation? Why, foundations created by wealthy families, of course. The point is that it is no accident that strongly conservative views, views that militate against taxes on the rich, have spread even as the rich get richer compared with the rest of us: in addition to directly buying influence, money can be used to shape public perceptions. The liberal group People for the American Way's report on how conservative foundations have deployed vast sums to support think tanks, friendly media and other institutions that promote right-wing causes is titled ''Buying a Movement.'' Not to put too fine a point on it: as the rich get richer, they can buy a lot of things besides goods and services. Money buys political influence; used cleverly, it also buys intellectual influence. A result is that growing income disparities in the United States, far from leading to demands to soak the rich, have been accompanied by a growing movement to let them keep more of their earnings and to pass their wealth on to their children. This obviously raises the possibility of a self-reinforcing process. As the gap between the rich and the rest of the population grows, economic policy increasingly caters to the interests of the elite, while public services for the population at large -- above all, public education -- are starved of resources. As policy increasingly favors the interests of the rich and neglects the interests of the general population, income disparities grow even wider. VI. Plutocracy? In 1924, the mansions of Long Island's North Shore were still in their full glory, as was the political power of the class that owned them. When Gov. Al Smith of New York proposed building a system of parks on Long Island, the mansion owners were bitterly opposed. One baron -- Horace Havemeyer, the ''sultan of sugar'' -- warned that North Shore towns would be ''overrun with rabble from the city.'' ''Rabble?'' Smith said. ''That's me you're talking about.'' In the end New Yorkers got their parks, but it was close: the interests of a few hundred wealthy families nearly prevailed over those of New York City's middle class. America in the 1920's wasn't a feudal society. But it was a nation in which vast privilege -- often inherited privilege -- stood in contrast to vast misery. It was also a nation in which the government, more often than not, served the interests of the privileged and ignored the aspirations of ordinary people. Those days are past -- or are they? Income inequality in America has now returned to the levels of the 1920's. Inherited wealth doesn't yet play a big part in our society, but given time -- and the repeal of the estate tax -- we will grow ourselves a hereditary elite just as set apart from the concerns of ordinary Americans as old Horace Havemeyer. And the new elite, like the old, will have enormous political power. Kevin Phillips concludes his book ''Wealth and Democracy'' with a grim warning: ''Either democracy must be renewed, with politics brought back to life, or wealth is likely to cement a new and less democratic regime -- plutocracy by some other name.'' It's a pretty extreme line, but we live in extreme times. Even if the forms of democracy remain, they may become meaningless. It's all too easy to see how we may become a country in which the big rewards are reserved for people with the right connections; in which ordinary people see little hope of advancement; in which political involvement seems pointless, because in the end the interests of the elite always get served. Am I being too pessimistic? Even my liberal friends tell me not to worry, that our system has great resilience, that the center will hold. I hope they're right, but they may be looking in the rearview mirror. Our optimism about America, our belief that in the end our nation always finds its way, comes from the past -- a past in which we were a middle-class society. But that was another country. Paul Krugman --------------------------------------------------------------------------- Now let me make a Post Script to Krugman. In 1966 several of my buddies in the Army Chorus came to New York City to study voice with the leading teachers of the day. They paid 35 dollars a lesson for lessons with the people who were not the top but on the second rung of the ladder. The dollar today is worth six times less than it was in 1966. You arithmetic whizzes can figure that out, I'm sure. You figure out how much that would be. Today's top teachers in New York are in some cases charging little more than half the amount that the second tier private teachers charged in 1966 and the prices for everything in the city have gone up six times (at least) in order to live. Where they had professional apartments and uniform rent control in 1966 today most of us pay at least a third above the five fold 1970 cost of rent due to rent destabilization and with the current increases in property tax (25% increase to make up for problems passed down from Washington and Wall Street) our rent will go up an equal amount at the end of the current leases. To put it another way, our current two rooms plus 5x5 kitchen and Bath costs 100 dollars more than my two bedroom two bath large living and dining room did in 1980, pre-Ronald Reagan. But if I charged $210 for my lessons I would be the most expensive voice teacher in New York City and the students who are like we were in the Army certainly couldn't pay the fee these days. Why? Because they have less money than we did comparably and not more. The above article explains where that money went. Our lessons are not cheaper because of better productivity, in fact our having to work longer hours and harder creates poorer students because we don't have time to put in the extra practice and language study that the old teachers developed through their long years. Product quality has suffered and we hear that the European countries that used to hire young American singers don't need to anymore. That they are practicing unfair labor practices. But the truth of the matter is that Europeans can afford to take, in many cases, one voice lesson A DAY not one a week or less. They also get a lot of on stage practice because there are more working stages. And finally I will leave it to an old Army Chorus buddy who competed for a while in Europe before he came home to drive a truck. He said American Singers are "better musicians, have better languages and sing with better intonation than the Europeans." In short he said: "Americans are trained to sing in church while the Europeans are trained for the stage and we can't compete." Today's Americans are even being out competed at home as the Russian poor come here and compete for roles. Russia had the most advanced operatic system in the world that trained people as apprentice artists and not to sing in churches. I will finish this with the statement that the First Baptist Church in Ada, Oklahoma has an orchestra. Do any of you know where Ada is? It is where I was born and is the capital of the Chickasaw Indian Nation. REH
