Most Americans suffer from the unfortunate delusion that economic problems are violations of some mathematical order. When recession, severe inflation or other hard times engulf society, it is because the sacred equations have been angered. If we adjust the right variable just so, a set of very important numbers will respond appropriately, and a process of mystical, self-sustaining prosperity will begin. Knowledge of these secret statistical potions is closely guarded, and its practitioners deploy sophisticated abstractions to explain away common-sense calls for reform.
Why do so many people work 60-hour weeks for poverty wages while a few luxuriate in the fabulous returns of interest-bearing assets? Why are the citizens of Puerto Rico threatened by a deadly social collapse while the fruit of the island’s labor is shipped to Wall Street bondholders? The answer surely cannot be that some wealthy members of our society are exercising political power over the lives and incomes of others. We must consider growth, productivity, liquidity, gross domestic product and the debt-to-GDP ratio.
But at the heart of every important economic issue are simple and straightforward power relationships. When you are in debt, someone else has financial power over the ordering of your affairs. Wealth enables rich people to buy their way out of troubles that overwhelm the lives of the poor. For much of our history, the American government granted some people the right to own other people. Economic problems are political problems. They have always been so; they can never be otherwise.
And so in a perverse sense, President Donald Trump’s most recent tax proposal is a great gift to society. It clears away much of the obfuscating hocus-pocus that leaders of both political parties have been busy constructing around our politics over the past 40 years. Trump wants a massive tax cut for the very wealthy. He doesn’t really care how much it costs, or what it will do to the federal budget deficit, or to economic growth or to worker productivity. He isn’t even very picky about how, exactly, taxes for the rich are reduced, so long as they are diminished by a very large amount.
His framework suggests eliminating the estate tax, dramatically slashing corporate taxes, reducing the top rate on individual income taxes, and limiting the levies on special “pass through” accounts ― all perks that generate terrific sums for CEOs and hedge fund managers. If you want to tack on a few hundred dollars for middle-class families, Trump will not raise a fuss.
We could describe this as a complex, disembodied economic idea ― the mathematical inelegance of extreme inequality or the fearful ratios implied by a ballooning deficit. But it is really a simple expression of power. The Trump tax plan is a public demonstration of the political priority the American government has decided to grant to the wealthiest members of our society. It is a clear, unequivocal statement that in America, some citizens are more equal than others. Everything else we can say about the plan with statistics is window-dressing.
The billionaire donors cheering it on don’t need the money. It will not make them wealthier in any meaningful sense. They will buy the same Hermès scarves and Tom Ford sunnies they would have purchased without it. Their yachts will continue to be elegantly contoured and divinely upholstered. Many quite literally cannot use the money Trump wants to offer them. One of the biggest perks in Trump’s proposed framework is the elimination of the estate tax ― a levy that falls not on the millionaires of today, but on the inheritances of their heirs and heiresses. A wealthy individual needs to leave behind over $5 million to trigger the estate tax. For a married couple, the figure is nearly $11 million.
So Trump loves the rich so much he will cut their taxes even when they are dead. And the ultra-rich love Trump’s plan because it is a formal political recognition of their social prestige, an acknowledgement that they carry more weight than others in the political system we still optimistically refer to as a democracy. This is, as they see it, how it should be. It has, after all, been the way of things for decades.
In 2010, billionaire Blackstone CEO Stephen Schwarzman was enraged by President Barack Obama’s suggestion that taxes on private equity and hedge fund managers be increased from 15 percent to 35 percent ― the level that other wealthy people have to pay on their salaries. It was “war,” according to Schwartzman, who likened the plan to “when Hitler invaded Poland.”
Obama settled for 23.8 percent.
“I believe one of the major things people want from politicians is psychic income,” former House Financial Services Committee Chairman Barney Frank (D-Mass.) told HuffPost in 2014. “They want to be told that they are wonderful people, that their jobs are important for the human race, that they contribute greatly. Lloyd Blankfein was not really kidding when he said that, ‘We are doing God’s work.’ That’s his inner feeling. I don’t think that the [Dodd-Frank financial reform] legislation really hurt them much, and I think a lot of them, frankly, some of them welcome it because they’re not under competitive pressure to do stupid things — now, nobody can do them. But we really hurt their feelings mightily, particularly the president. You’ve seen that with these ridiculous statements from Steve Schwarzman going on about Nazis.”
Frank was close, but not quite right. Many Wall Streeters did have their feelings hurt when Obama told CBS that he didn’t run for president to protect the paychecks of “fat cat bankers.” But this was because the president’s words implied a political demotion. After years of being celebrated as “Masters of the Universe,” bankers were suddenly threatened with the prospect of becoming ordinary, humdrum members of a democracy; people whose actions might be subject to democratic forms of accountability. It must have been terrifying.
Wall Street’s very public freakout ― a fellow named Anthony Scaramucci implored Obama to stop bashing the “Wall Street piñata,” and JPMorgan Chase CEO Jamie Dimon declared he could now barely tolerate calling himself a Democrat ― obscured the profound degree to which Obama was protecting Wall Street interests.
Obama named a top lobbyist from JPMorgan Chase as his chief of staff. He and his attorney general, Eric Holder, steadfastly refused to prosecute what everyone knew to be widespread criminality on Wall Street during the 2008 financial crisis. The Obama foreclosure relief plan became a vehicle for big banks to harvest funds from desperate families through illegal foreclosures. Obama even protected the bonuses at AIG and big banks that received taxpayer bailouts. When vulture fund investors descended on Puerto Rico, forcing the closure of schools and hospitals in the name of debt payments, Obama waved through a half-hearted reform plan that preserved the political priority of bondholders over basic social services.
We can have a political system that respects its citizens as political equals, or we can have a society dominated by the arbitrary interests of unaccountable wealth. Trump, like Obama before him, has chosen the latter.
These bailouts and bonuses and other protections were not only infuriating because bankers were rich. They divorced socially destructive activity from political accountability. You could enrich yourself by destroying entire communities ― you could even break the law to do it ― and face no meaningful consequences. Members of a democracy, it seemed to many people, ought to be able to protect themselves from such abuses.
And yet studies by respected academics from Princeton, Northwestern University and the University of Connecticut concluded that the concerns of the wealthy dominate the congressional agenda. Some reporters on Capitol Hill noticed the same trend. But the idea has generally been dismissed by Washington officialdom, which prides itself on interpreting the mathematical codes and metaphors that show why simple problems of power are in fact very thorny economic matters.
Paul Ryan, in particular, hypnotized D.C. journalists in the days before he became House speaker with pronouncements about debt and deficits. Ryan’s story conveniently excluded credit default swaps, proprietary trading and other high-risk activity on Wall Street. He warned of an inevitable “debt crisis” just around the corner if America didn’t cut its spending ― particularly on social programs for the poor and elderly.
This wasn’t because he hated the indigent, mind you ― he merely recognized that we now had too many “takers” and not enough “makers” and were nearing a “tipping point.” He even found the magic number: If America’s public debt reached 90 percent of its gross domestic product, we were headed for another 2008, only worse. The figure, based on research from two prominent conservative economists, was eventually discredited by a lowly graduate student who discovered it was the result of a very simple Microsoft Excel error.
Today, as Trump proposes massive tax benefits for the super-rich, the deficit hawks and austerity mongers have fallen strangely silent. The profound ratios and disequilibria that once threatened to dissolve society itself have disappeared now that they are being fueled by tax cuts rather than spending programs.
We can have a political system that respects its citizens as political equals, or we can have a society dominated by the arbitrary interests of unaccountable wealth. Trump, like Obama before him, has chosen the latter. In the not-so-distant past, polities ruled by unaccountable wealth have demonstrated a marked tendency to generate less accountability and an astonishing capacity for statistical deception and logical absurdity.
In 1929, the global economy was in terrible shape. There was a tremendous amount of work to be done ― highways to be built, telephone lines to be wired, electrical grids to be constructed ― yet millions of people were out of work. The British economist John Maynard Keynes co-authored a political pamphlet with a simple solution: The government could hire the unemployed people to do the work. Financiers in the city of London were aghast at the idea, and told the public that it was all much more complicated than Keynes suggested. If the government hired people, after all, it would deprive future generations of the chance to get a job. All of the work would already have been done. Keynes knew he wasn’t proposing anything particularly clever, just trying to knock down silly ideas that people only took seriously because they were delivered by very prestigious people.
“Our main task,” he wrote, “will be to confirm the reader’s instinct that what seems sensible is sensible, and what seems nonsense is nonsense.”
No one in power listened to him then, and there will probably be plenty of Democrats and Republicans in Congress who shrug off critics of the Trump tax plan now. Our government, like those of the Gilded Age, likes to give the wealthy what they want. At least with Trump, we will not mistake a simple act of political domination for the music of the spheres.