Death to the American Middle Class

The core of the Republican Party is accumulators, would-be accumulators, those who fantasize that with a little luck, they could also become accumulators, non-accumulators who worship the accumulation process (e.g., fundamentalist Christians who think that if they pray hard enough they will become rich), and "values voters" who are swayed by right-wing positions on wedge issues, such as abortion, gay rights, and immigration. It also contains members of the military and protective services (police, firemen, corrections, security personnel), managers, its own operatives and employees, and entrepreneurs small-business people. Many of these categories overlap. In my introduction, I saw the class struggle between the accumulating class and the rest of us as over the appropriation and redistribution of the surplus. I also mentioned that the particular sector of the accumulating class that took over in the Reagan Revolution depended on the federal government to allocate capital in its interests.

http://youtu.be/mn4daYJzyls

George Bush on elites, “You are my base.”

No longer do Republicans believe, as did Calvin Coolidge, that the prime function of government is the "night watchman." When Southern rim capitalists took over the Republican Party and subsequently the federal government, they realized that they could use the instrumentalities of the government to increase their access to the material surplus. Researchers have talked about corporate welfare and military Keynesianism (e.g., Seymour Melman) in the Defense Department budget, which seems to expand whether we are at peace or war. However, with Reagan, they learned that a fiscal crisis of the state was extremely beneficial to them because that gave them legitimacy to cut entitlement programs, such as welfare and Medicaid. However, those programs with middle-class support such as Social Security and Medicare had too much popular support to cut. There have been several attempts to privatize Social Security that have failed miserably. At present, the Republicans have plans to destroy Medicare. After the debacle of George W. Bush attempting to privatize Social Security, they have stepped away from that issue, although in the budget offered by Rep. Paul Ryan includes a means test.

Means testing, that is, excluding more affluent recipients from the service is the first step in destroying a program. Means tested programs lose powerful advocates in the upper class, making it easier to identify them as "welfare," which delegitimizes them and makes them easier to defund. The most successful social welfare programs, such as Social Security and Medicare have no means tests. All one has to do is look what is happening to the Medicaid program – which is means tested – in the most recent budget.

The Republicans have found new ways to access government largesse. President George W. Bush applied the Reagan recipe with steroids, conducting two wars off the books while simultaneously granting tax breaks that overwhelmingly benefited the wealthy, creating a ballooning federal debt (more about the Bush Administration in a subsequent blog.) When the wheels came off the economy in 2008, the accumulating class literally raided federal coffers to the tune of $720 billion in bailouts to Wall Street and major banks. Then they turned around and used some of that money to hire hordes of lobbyists to make sure that consequent regulatory efforts were toothless. Meanwhile, they fought every effort to expend funds in ways that did not directly help them. Workers were thrown out of jobs, mortgage holders were foreclosed upon, and what little help they received was begrudged by the Republican Party, which sometimes obstructed such help, such as Sen. Jim Bunning's delaying of the expansion of unemployment benefits to 99 weeks.

Of course, the bailout, the wars, and the tax breaks have ballooned the federal debt. The stimulus package temporarily helped state governments to maintain services. But that only postponed the disaster for them. Using what Naomi Klein has referred to as "the shock doctrine," the accumulating classes have decided to destroy public unions, which make up an important and organized base of the Democratic Party. Given that privately employed workers have faced stagnating wages, declines in benefits, and the shouldering of their own retirement systems, the talking heads at Fox News, the official voice of the Republican Party, have attempted to capitalize on their misery by vilifying public employees as fat cats with high wages, generous benefits, and obscene retirement programs that are bleeding state governments dry.

Especially in the Midwest, Tea Party Republicans have decided that the fiscal crisis of the state is a glorious opportunity to defang public unions. If they could reduce union workers in the private sector by half over 30 years, then why can't they take on public unions as well? If public employee unions are destroyed, states can run lower budgets. Taxes, which are the second most powerful claim on the surplus, will remain low. This will allow more capital to flow into the coffers of an already bloated accumulating class.

With the globalization of capital and the rise of the multinational corporation, the accumulating class no longer needs an expanding American middle class, which after all, is not materially productive. It consumes on the job and in the private sphere. What does a teacher produce? A cop? A fireman? Public employees are paid out of the accumulated surplus. Although the American middle-class exists at the material level of social reproduction as surplus absorbers – that is, as excuses for capital to produce more goods and services in the search for profit, there is no reason why they can't get surplus absorbers that are cheaper in places like India and China. The American middle class is now viewed as an impediment to the accumulation process by the accumulating class. Therefore, they have every incentive to disinvest in the main mechanism by which upward mobility into the middle class is achieved – education.

Increasing sections of America look like a postindustrial nightmare. The great industrial cities of the Midwest are hollow shells of themselves, with blocks of abandoned buildings, empty factories with broken windows, and sad, shrunken communities that consist of people who could not or would not move out: Flint, Detroit, Cleveland, Buffalo, Rochester. I'm sure you could add your own to the list. If capital abandons the American middle class, will urban rot invade the surrounding suburbs as middle-class Americans are squeezed with declining work conditions, lower salaries, and smaller pensions?

Roots of the Current Fiscal Crisis of the State: New Class Wars: 1980-1992

The overthrow of the Eastern Establishment by capitalists from the Southern rim was called by my friend Danny Foss, "The Revolt of the Needy Rich." As I noted in my previous blog, this particular sector of capital became wealthy through the largess of the federal government. Take, for example, Southern California; on the surface, we think of Hollywood, real estate, and all those wonderful prepared environments that tourists like to visit, such as the San Diego Zoo and Safari Preserve, Disneyland, Universal Studios, Knotts Berry Farm, and so forth. In actuality, these economic activities sit upon an infrastructure of oil and natural gas exploration and military expenditures. There are several large oil companies based in California including Union Oil, Standard Oil of California (Chevron), and Occidental Petroleum. Los Angeles is ringed with military installations, from Vandenberg Air Force Base, Point Arguello Naval Base, Point Hueneme Naval Base, and Edwards Air Force Base to the north, the Marine Air Force combat Center in 29 Palms and March Air Force Base in Riverside to the east, the Naval Air Facility in El Centro to the southeast, and San Diego is the home port of the Pacific Fleet. Moving north along the coastline, we see the Marine Corps Air Station at Miramar, El Toro Marine Base (now decommissioned), and Camp Pendleton. And these are only the larger ones. There are literally thousands of military-related industries in Southern California, from small arms and ammunition manufacturers to producers of major weapons systems. Major Southern California military-based industries are or have been Boeing Aircraft, Lockheed-Martin Marietta Aircraft, McDonnell Douglas Corporation, Northrop Aviation, and TRW. Those used-car salesman who fly giant American flags on their car lots next to Interstate 405 could not have become rich if there had never been a California oil boom or the Defense Department hadn't set up shop in Southern California.



Historical Tax Rates



The other key state in the southern rim is Texas, another state with an oil and Defense Department infrastructure. The Reagan-Bush ticket was one that was made in accumulating class heaven. Not only did Ronald Reagan represent his California right wing/oil magnate/leisure industry/military constituency, but George HW Bush was the perfect vice presidential candidate with a foot in both the Eastern establishment and the Southern Rim. The scion of a wealthy Connecticut family whose wealth originally came from steel, he decided to strike out on his own as a Texas oilman. His presence on the national ticket provided a semblance of unity between both sectors of the accumulating class.

Once in power, Ronald Reagan pursued four policies that enhanced the power of the accumulating class overall and his personal constituency in particular. Practically his first act as president was the decertification of the striking air traffic controllers union, PATCO. This was a signal to corporate America that the social contract established between big labor and the Eastern establishment would no longer be enforced. Second, he ramped up the Cold War by falsely claiming that the Soviet Union was expanding its military when in actuality it was experiencing its own fiscal crisis. This was an excuse to funnel more federal dollars to the military contractors who backed his candidacy. Third, Paul Volcker pulled the plug on the economy by dramatically raising interest rates to 21%! This was an absolute boon to big capital, that could shut down marginally profitable industries that had unionized workers and move productive enterprises to the antiunion South, or better yet, to countries that had little or no labor protection whatsoever and who paid their workers a fraction of what American workers cost. Fourth, the Reagan Administration passed the Kemp Roth tax cuts, which benefited high income earners over low and generated a shift of wealth up the system. Not only did it decrease marginal rates by 23%, it cut corporate taxes by $150 billion, and reduced estate taxes. In 1986, the top tax rate was reduced again from 50% to 28% and the bottom tax rates were raised from 11% to 15%. This is an incredible transfer of wealth up the system. The current top tax rate is 35%, exactly half of what it was in 1980.

Simultaneously, the Reagan Administration was tearing away the social safety net and removing support for poor people. All people on Social Security disability were thrown off the rolls and had to reapply, confirming their disability. Federal-aid to welfare was cut, the war on drugs was ramped up, and federal support public housing was ended.

So, how could this newly emerging elite that it taken over the state so successfully implement its program of enriching the rich to the detriment of the rest of society? We have all heard of the term "Reagan Democrats" which refers to an older white working-class predominantly male constituency that shared Ronald Reagan's antipathy toward privileged youth in the counterculture and black Americans. Richard Nixon, in an earlier phase, referred to them as the "silent majority." By using cultural appeals to this constituency, the Republican Party found that it could gain conservative white males on wedge issues of drugs, women's rights, abortion, and "family values." As Thomas Frank pointed out in his enlightening book, What's the Matter with Kansas?, that cultural appeals could actually get white working-class males to vote for candidates who would work against the material interests of the working class.

The tax cuts can be viewed as a sacking of the public treasury by the rich. The tax cuts plus the increase in the military budget in peace time and the war on drugs created a deficit that lasted through the Bush I Administration. Tax breaks for the rich, welfare for corporations in the form of military expenditures, and shoving it to the poor created greater inequality. During the 1970s, the Gini coefficient, and index of economic inequality averaged around 36. In the 1980s, it jumped to around 40. Wages stagnated and the rich got richer. Hmm, sounds like a strategy. And Reagan is one of the most popular of recent presidents!