The ’15 State of the Union: ‘Class warfare’ and the ’16 campaign

Washington is like a cable TV series that stays on the air too long – think Weeds, think Dexter – recycling the same plot lines and rhetorical tropes. The latest example is the Republican resurrection of the term “class warfare.”

President Obama, in his State of the Union speech tonight, is expected to point out the obvious, that the rising tide of economic recovery is not sufficiently buoying middle-class boats. His proposed solution borrows a page from Robin Hood. He wants to cut middle-class taxes (thus boosting middle-class incomes), and pay for those cuts by raising taxes on richest Americans’ inherited wealth. He’d do the latter by closing some loopholes. He’d also bump the capital gains tax from 23.8 percent to 28 percent (for those with incomes north of $500,000).

The reaction is what you’d expect. Senator Orrin Hatch: “This plan that we’ll hear about tonight appears to be more about redistribution and class warfare.” Congressman Adam Kinzinger: “I see this as the president returning to the theme of class welfare.” Clyde Crews Jr. policy director at the conservative Competitive Enterprise Institute says Obama’s middle-class proposals “aggravate class warfare.” And so on – with nary an acknowledgment that the federal tax code’s perks have been steadily redistributed to benefit the top tier.

On and off since the early ’90s, whenever anyone has suggested that the rich should sacrifice a wee bit in order to help the average citizen, Republicans have denounced the idea as “class warfare.” Which is perversely humorous, because If there has indeed been “class warfare” in this country during the last four decades, the rich have already won. Because they’ve incrementally grown richer at the expense of everyone else.

It’s right there in the economic stats (the stats still mean something to those of us who reside in the reality-based community). The rich have been getting richer, while everyone else has fallen further behind, since at least 1979. According to the Center on Budget and Policy Priorities, “Between 1979 and 2007, the average after-tax incomes for the top one percent (of earners) rose by 281 percent after adjusting for inflation – an increase in income of $973,100 per household – compared to increases of 25 percent ($11,200 per household)” for the middle class. As Warren Buffett quipped in 2003, “If it’s ‘class warfare,’ my class is winning.”

And four years ago, The Wall Street Journal reported: “The average tax rate for the top 400 earners in the U.S. fell to as low as 16.62 percent in 2007, from a recent peak of 29.9 percent in 1995,” thanks largely to the Bush tax cuts on capital gains and dividends. As the Journal pointed out, roughly 56 percent of the top earners’ incomes, on average, are comprised of capital gains – a percentage that the average citizen can’t hope to match.

Which is one reason why Obama wants to target capital gains, slicing off a teensy bit more of that largesse for the benefit of middle-class Americans. Income inequality has widened on his watch – just like it did under Bush, Clinton, Bush, Reagan and Carter – and he thinks it’s time to prioritize that festering problem, now that the economy is sufficiently robust, now that the budget deficit has been sufficiently tamed.

But, of course, his proposed tax reforms aren’t likely to pass, not with Republicans controlling both congressional chambers. This he knows. Which is why the ’15 State of the Union speech is more about framing ’16 politics than enacting ’15 policy. He’s trying to tee up the Democrats as the party of economic populism (and perhaps teeing up the issue for Hillary Clinton, who needs to shed her Wall Street image if she is to galvanize the Democratic base). He’s also daring the Republicans to come out “against” tax cuts for the middle class – or at least force them to say what they would credibly do to reduce income inequality, instead of simply jerking their knees and crying “class warfare.”

Problem is, they’ve long had woefully little to say about income inequality; when Mitt Romney was asked about it in 2012, he said that raising the issue in public was tantamount to – you guessed it – “class warfare.” The one-percenter said that he preferred “to talk about those things in quiet rooms.” But, as the ostensible lame-duck president clearly understands, we can no longer afford that kind of quietude.

 

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