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Mitchell Bard

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Income Inequality Is the Achilles Heel in the GOP Strategy to Demonize Occupy Wall Street

Posted: 10/26/11 01:17 AM ET

"I don't care about that."

That is what Rick Perry said in the New York Times when John Harwood told him his tax plan would increase income inequality. Give Perry credit for his honesty. After all, he just articulated out loud what is the accepted dogma of the modern Tea Party-owned Republican party, which is completely dedicated to protecting the wealthy and corporations on the backs of the (rapidly shrinking) middle class, by way of a religious adherence to far-right free market principles.

But there is a danger to Republicans adopting a "Let them eat cake" approach. By dismissing income equality as a key issue, the GOP is headed for a trip wire the party doesn't seem to see coming.

We see it in their approach to Occupy Wall Street. The GOP strategy seems to be that if they can dismiss the protesters as a bunch of crazies (or "human debris," as the always vile Rush Limbaugh put it), then Americans won't notice the issues underlying the protest.

In the short term, the Republican strategy will probably work. By highlighting the elements that look and sound the most out of the mainstream, average Americans won't be able to relate to the protesters and will be wary of being grouped with them.

But what the Republicans are missing is that the anger underneath the Occupy Wall Street protests isn't limited to the dedicated individuals sleeping in a Lower Manhattan park.

So long as the GOP can frame Occupy Wall Street as an attack on the rich or an attack on capitalism, its appeal will be limited. No matter how tough things are with the U.S. economy, Americans don't hate rich people. On the contrary, they aspire to be rich people.

But the middle class can't become wealthy if the government is, through action and inaction, helping the rich get richer while keeping the middle class down, as it has done for the last 30 years (something Jacob Hacker and Paul Pierson demonstrate in "Winner-Take-All Politics").

And Americans have no use for unfairness. They want there to be a correlation between hard work and success. For the financial executives who caused the 2008 financial crisis, there wasn't even a correlation between success and success. Wall Street bankers made billions of dollars for recklessly devising and selling financial instruments they knew were junk, resulting in a near financial collapse that required a government bailout from the Bush administration.

The resulting recession and economic stagnation hit the middle class hard while leaving the wealthiest Americans untouched and corporations flush with cash. (Paul Krugman provided a great recap earlier this month of the abuses that led to the financial crisis.)

The bottom line is that income inequality has been skyrocketing since Ronald Reagan took office (and accelerated under George W. Bush) behind policies (like massive unpaid-for tax cuts for the wealthy) that had the effect of redistributing income from the middle class upward.

Mother Jones recently compiled some staggering statistics on income inequality:

  • Between 2007 and 2009 (pre- and post-financial crisis), Wall Street profits rose 720 percent while American's home equity plummeted 35 percent, all while the unemployment rate went up 102 percent.
  • The average income of the top 1 percent has nearly quadrupled since 1980, but the top 20 percent showed only modest growth while the bottom 80 percent flatlined during that period. As a result, the top 1 percent's share of income has exploded by nearly 120 percent since 1980, while the top 20 percent went up a bit and the bottom 80 percent lost its share of income. Put another way, if income growth was equal during the period, the top one percent would have made597,241 less per household (totaling673 billion), while the bottom 90 percent would have made more (between3,733 and10,100 per household, depending on where the family fell in the percentile list).
  • Even as the top 1 percent made out like bandits over the last 30 years, they actually bore less of the tax burden. Between 1992 and 2007, the 400 taxpayers with the highest incomes experienced a 392 percent increase in income but saw their average tax rate go down 37 percent.
  • As of 2007, the top 1 percent of Americans in wealth controlled 34.6 percent of America's net worth. The top 10 percent controlled a whopping 73 percent of the country's wealth. And these figures came before the housing bubble burst, hitting the middle and working classes especially hard.

The AP recently did a study that found that the recovery from the 2008 recession has been the most unequal of any recovery since the 1930s. The money did not find its way to the middle class. The percentage of the economy made up of workers' pay and benefits hit an all-time low, all while corporate profits surged, as did CEO compensation. And the stock market recovery put money in the pockets of the wealthiest 10 percent of Americans, even as the middle class continued to struggle and lose ground. In fact, the New York Times ran a front page story today noting how there has been a 53 percent increase in poverty in the suburbs since 2000, with the bulk of that coming after the 2008 financial crisis.

The key to why the Republicans are miscalculating in dismissing income inequality lies in a telling piece of data Mother Jones provides: The actual distribution of income in the United States is far more unbalanced than Americans think it is, and, as importantly, far, far above what they think it should be.

The Republicans want to claim that the Democrats are engaging in class warfare by trying to let the Bush tax cuts for the wealthy expire, but the Republicans have been waging a class war on behalf of the top ten percent against everyone else for the last 30 years.

It's not about hating on the rich. Nobody begrudges entrepreneurs and hard-working visionaries like Steve Jobs and Warren Buffet their successes. No, the anger underneath Occupy Wall Street is about fairness. And income inequality fostered by government policy is not fair.

As unemployment continues to remain high, the economic situation remains murky, and Americans start to see the redistribution of wealth from the middle class to the wealthy, anger will intensify. And when the anger moves from more easily dismissible protesters in Lower Manhattan to a larger swath of the American citizenry, comments like Perry's "I don't care about that" will not be received well.

The participants in Occupy Wall Street may not look like Middle America, and they may not have a polished plan to rectify the problems they are seeking to publicize, but that doesn't make the anger they are expressing less real. More importantly, that anger is shared by more Americans than would make the GOP comfortable.

So Republicans should ridicule Occupy Wall Street at their own risk. They may be able to belittle the protesters, but they can't hide income inequality from the American people.

 

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