December 01, 2011 by Blaise.Tobia
I am neither a professor of economics nor of history, as are the two faculty members who often publish commentaries in The Triangle. But then, economics is not an exact science, and history is strongly contested territory. I write as a citizen who has experienced a changing U.S. society over the past 50 years and who is informed by a number of generally well-regarded experts who impress me with their facts and their reason.
What spurred me to speak up was a recent news item indicating that in-state undergraduate tuition at University of California campuses will reach $22,000 per year by 2015. When I started my graduate studies at U.C. San Diego in 1974, the in-state undergraduate tuition was $600, and U.C. schools were regarded as among the very best in the country. Prior to that, I received my Bachelor of Arts at Brooklyn College. It and two other C.U.N.Y. schools were also regarded as top tier nationally. The in-state tuition was $0 — I actually made money each year by collecting my Regents Scholarship.
I believe that what has changed most over the intervening time period is our society’s commitment to the common good. We, and especially the richest among us, have become more self-centered and obsessed with maximizing our personal wealth to the detriment of our national well-being. In 1978, shortly after I’d completed my U.C.S.D. studies, the California voters passed “Proposition 13,” which severely limited property tax rates in the state. It is not coincidental that the quality of California’s public school system, once regarded among the best nationally, has now fallen to 48th place.
It was just the first blow in an increasingly tax-aversive social climate in which the concept of a “flat tax” has gained widespread popularity once again in this presidential campaign season. The previous commentary I wrote for The Triangle was an examination of flat versus progressive taxation, demonstrating that much of our total tax burden is already flat or nearly so, in the forms of payroll taxes, state and local income or wage taxes, sales taxes, energy taxes, property taxes, and that disguised regressive tax — the state lottery. Additionally, the effective federal income tax rate is far flatter than it has been in the past. Every serious analysis of the flat taxes proposed by candidates so far, especially Herman Cain’s “9-9-9” plan, shows that taxes would go up on middle-income earners and down on the wealthy.
Looking back to the early 1970s, when the C.U.N.Y. schools had zero in-state tuition, we can note that the sales tax in New York City was 6 percent while it’s now nearly 9 percent, property tax rates were lower, and there was no state lottery. Income taxes were higher, but they were more biased toward the wealthy. These were the revenue sources that directly funded higher education, along with federal contributions and subsidies. At the federal level, there were enough tax receipts to simultaneously fund huge Cold War defense expenses, a major space exploration program, social welfare networks and massive foreign aid, as well as broadly subsidize an educational system that was, at every level, the pride of the world. At the same time, in that “high tax” environment, U.S. business was flourishing. Our global trade balance was well in the black, and the unemployment rate (in 1970) was 4 percent.
An extremely important historical fact to note is that this was also the period of the greatest income equality in the U.S. The top 1 percent (now made famous by the Occupy movement) received less than 8.9 percent of the total national income in 1976. This was the result of 40 years of progressive policies that sought to balance income distribution after its concentration had peaked at 23.9 percent for the top 1 percent in 1929, contributing significantly to the onset of the Great Depression, according to Robert Reich.
Starting in the late 1970s, income began to concentrate again, peaking for a second time in 2007 at 23.5 percent for the top 1 percent, contributing once again to a major economic collapse. If we look at effective tax rates, it is clear that the increase in income concentration tracks with a decrease in tax rates. The top 1 percent paid an effective federal tax rate of 37 percent in 1979. The rate was 29.5 percent in 2007.
These non-coincidences have been described in great detail by Robert Reich in his recent book, “Aftershock: The Next Economy and America’s Future.” Reich demonstrates that wealth concentration is disastrous for the U.S. economy and social well-being. He shows that the few super-wealthy simply can’t pump money into the economy as effectively as millions of middle-income spenders. They also seek more and more exotic investments, such as the bundled mortgages that were the spark for the recent collapse. Earlier last month, Reich addressed Occupy Berkeley, emphasizing that the U.S. economy has doubled in size over the past 30 years, but the inflation-adjusted median wage has barely risen.
In these days of extremely high unemployment, the most widespread conservative argument for low tax rates on the wealthy is enhanced job creation. In support of this concept, the lowest-ever effective tax rates on the wealthy were put into place during the George W. Bush administration. Did this create jobs? Absolutely not. The lowest rate of job creation since the Great Depression, averaging only 0.38 million per year, was recorded during that period. This compares with 2.9 million jobs created per year under Bill Clinton. Taking a longer view, during the period from 1944 to 2008, jobs were created during Democratic administrations at twice the rate of Republican administrations (2.1 million per year vs. 0.94 million per year).
Finally, if we look at wealth, rather than income, we can consider another mind-boggling fact expressed by Reich: The 400 richest U.S. citizens now have more of it than the 150 million citizens at the bottom. Reich goes on to point out that this imbalance constitutes a grave danger for our nation that goes beyond the abominations of poverty and the stresses of debt. Money has always brought political power, and huge concentrations of money bring huge concentrations of political power. And, with the recent gutting of campaign contribution limitations and reaffirmations of the “personal” rights of corporations, money will speak even more loudly in its own favor.
One more staggering fact to consider: The net wealth of the bottom 40 percent of the U.S. population, collectively, is zero! Some have literally nothing, and many more simply have debt well in excess of their equity. Students who graduate college with about $100,000 of debt, who want to begin living on their own and spending some money beyond their loan payments, will find themselves part of this zero-net-wealth group for many years to come, and some may never emerge from it.
Blaise Tobia is a professor of art and art history. He can be reached at email@example.com.
Blaise Tobia is a professor of art & art history. He can be reached at firstname.lastname@example.org.