Terrance Heath

Newt's First Rule of Dysfunctional Politics

Filed By Terrance Heath | December 03, 2011 10:00 AM | comments

Filed in: Politics
Tags: GOP voters, Newt Gingrich, presidential candidates, Republican candidates

The cardinal rule of dysfunctional politics, it turns out, it identical to the cardinal rule dysfunctional families: Don’t talk about it. Whether “it” is mom’s boozing, dad’s mistress, junior’s drug problem, or sister’s sex life -- or any other problem that families either deal with or don’t -- the rule remains the same. Don’t talk about it. Don’t even think about it. Just keep pretending everything is fine, and it will be. At least, as anyone who grew up in a dysfunctional family knows, until it’s not.

The cardinal rule of dysfunctional politics was recently invoked when GOP presidential candidate and front-runner-du-jour Newt Gingrich insisted that everyone stop talking about economic inequality.

I repudiate, and I call on the President to repudiate, the concept of the 99 and the 1. It is un-American, it is divisive, it is historically false...You are not going to get job creation when you engage in class warfare because you have to attack the very people you hope will create jobs.

The Fed handed the very banks that caused the financial crisis $1.2 trillion, under the table, and unconditionally. Meanwhile most of the institutions that drove the economy into a ditch have suffered little in the way of consequences. Instead, they made $13 billion in profits on the Fed’s virtually free money, which they used to get even bigger rather than to make credit more available, and used some of their profits to influence congress and fight financial reform. And, despite what Newt says, “the concept of the 99 and the 1,” is accurate: Wall Streeters pretty much are the 1 percent.

The Occupy Wall Street protesters have focused attention on rising income inequality in the United States, and they are right to do so.

…Why have incomes of those in the top 1 percent soared? Their occupations provide some clues. From 1979 to 2005, nonfinancial executives, managers and supervisors accounted for 31 percent of the top 1 percent, medical professionals for 16 percent, financial professionals for 14 percent and lawyers for 8 percent.

Together, executives, managers, supervisors and financial professionals accounted for 60 percent of the increase in the top 1 percent's income, with a widening compensation differential between those in the financial sector and those in other sectors of the economy after 1990.

Superstar athletes, actors and musicians, often portrayed among the super-rich, accounted for about 3 percent of the top 1 percent from 1979 to 2005, far less than the less glamorous people (mostly men) who lead and advise America's businesses.

But Newt says, “Don’t talk about it!”

Foreclosures have doubled since last year.

Foreclosures on U.S. houses with delinquent mortgages have doubled since 2010, as more and more consumers are considering filing for bankruptcy to help solve their mortgage woes.

According to a report from MSN Money, Fitch Ratings recently announced that banks have been much more aggressive in foreclosing on homes owned by people who have fallen behind on their mortgage payments.

The new statistics show that the rate of home foreclosure for people with overdue mortgage loans has reached the lofty height of 10 percent each month. This figure is almost double the low mark reached last year, although it has grown closer to the typical 10 to 14 percent mark that has been the norm in the past decade.

The 1 percent receives about $30 billion a year in welfare.

Class warfare is a politically charged term these days, from the Wall Street protests to the Capitol Hill negotiations over curtailing the nation's debt. But a new congressional analysis, obtained by Newsweek, may fuel populist outrage by showing the extent of government subsidies that go to the wealthiest people in America.

From unemployment payments to subsidies and tax breaks on luxury items like vacation homes and yachts, Americans earning more than $1 million collect more than $30 billion in government largesse each year, according to the report assembled by Sen. Tom Coburn, a Republican from Oklahoma, who is so often at odds with members of both parties that colleagues call him "Dr. No." The Internal Revenue Service provided the data showing how much money was going to the much-referenced top 1 percent.

In all, millionaires receive hefty help from Uncle Sam. The $30 billion in handouts, to put it in perspective, amounts to twice as much as the government spends on NASA, and three times the budget of the Environmental Protection Agency. On the other hand, it would only cover the cost of fighting about three months in Iraq and Afghanistan. Still, eliminating them would help make a small dent in the $1.5 trillion congressional leaders are trying to find by Thanksgiving.

But Newt says, “Don’t talk about it!”

Conservatives want to cut unemployment, food stamps, Social Security, Medicare and Medicaid for the rest of us -- and make us pee in a cup to get whatever’s left. Meanwhile they ignore the “enshrined entitlements of America’s wealthy,” and  let the rich keep “using the social safety net as a luxury hammock.”

The super committee on deficit reduction has now disbanded without even having managed to agree on scaling back tax expenditures. These social welfare policies that are hidden in the tax code bestow their greatest benefits on high-income taxpayers, as I have shown elsewhere. They amount to over 7 percent of GDP, more than what we spend on either defense, Social Security, or Medicare and Medicaid combined, not to mention domestic discretionary programs, which cost far less than any of these.

Its inaction means that regular spending priorities -- with the exception of those that policymakers explicitly agreed in advance to shelter -- will now be made subject to automatic, draconian cuts. But tax expenditures, which no one has even mentioned, will remain completely immune to such reductions. This is because these policies enjoy a protected status granted to no other entitlement programs. Unlike other forms of direct spending, they are not subject to the annual budget process; they grow undeterred and lawmakers do not take account of their costs.

While in recent weeks lawmakers did at least advance (unsuccessfully) some proposals to reduce tax expenditures, what remains remarkable is that the privileged status of these policies has not provoked greater scrutiny.

But Newt says, “Don’t talk about it!”

According to recent statistics, 49.1 million Americans are living in poverty, including 15.9 percent of Americans over 65.

By now you’ve probably heard about the new supplemental poverty measure produced by the Census Bureau, which says 49.1 million Americans are living in poverty, compared to 46.2 million under the official measure. But did you know that the supplemental measure blows a big hole through the right’s favorite “greedy geezer” talking point?

... The supplemental poverty measure actually shows a higher rate of poverty among Americans 65 and older than the official measure. In fact, under the new supplemental poverty measure, older Americans sustained the largest increase in poverty -- nearly doubling from the official measure, to 15.9 percent.

The reason is because the supplemental measure takes into consideration the impact of various forms of government aid to the elderly and low-income households, as well as realities that the official measure doesn’t. (Like the fact that the price of food has increased sevenfold since 1963, when the official poverty thresholds were established, or that the cost of living is higher some places than others.) In the case of seniors, the official measure doesn’t take into consideration rising Medicare premiums, increasing deductibles, and expenses for prescription drugs.

The supplemental poverty measure makes clear what we already knew: that “what we spend” on various forms of government aid keeps millions of people out of poverty.

But Newt says, “Don’t talk about it!”

The Census Bureau says that another 2.6 million people slipped into poverty last year, while middle class household incomes fell lower than they’ve been in over a decade.

Another 2.6 million people slipped into poverty in the United States last year, the Census Bureau reported Tuesday, and the number of Americans living below the official poverty line, 46.2 million people, was the highest number in the 52 years the bureau has been publishing figures on it.

And in new signs of distress among the middle class, median household incomes fell last year to levels last seen in 1996.

Economists pointed to a telling statistic: It was the first time since the Great Depression that median household income, adjusted for inflation, had not risen over such a long period, said Lawrence Katz, an economics professor at Harvard.

"This is truly a lost decade," Mr. Katz said. "We think of America as a place where every generation is doing better, but we're looking at a period when the median family is in worse shape than it was in the late 1990s."

But Newt says, “Don’t talk about it!”

Another 51 million Americans are what the census called “near poor” -- living just this side of poverty -- and most of them fell into that status from higher income levels.

What is it like to be poor? Thankfully, most Americans do not know, at least not firsthand. And times are tough for the middle class. But everyone needs to recognize a chilling reality: One in three Americans -- 100 million people -- is either poor or perilously close to it.

The Times's Jason DeParle, Robert Gebeloff and Sabrina Tavernise reported recently on Census data showing that 49.1 million Americans are below the poverty line -- in general, $24,343 for a family of four. An additional 51 million are in the next category, which they termed "near poor" -- with incomes less than 50 percent above the poverty line.

As for all of that inspirational, up-by-their-bootstrap talk you hear on the Republican campaign trail, over half of the near poor in the new tally actually fell into that group from higher income levels as their resources were sapped by medical expenses, taxes, work-related costs and other unavoidable outlays. [Via Tom Englehardt.]

But Newt says, “Don’t talk about it.”

According to a recent report, 45% of Americans live with economic insecurity, meaning that they don’t earn enough to take care of basic expenses.

A new report from Wider Opportunities for Women, a nonprofit group that previously produced an index of what it takes to do more than survive while working, shows that 45 percent of United States residents live without economic security. That means they are not earning enough income to cover basic expenses, plan for important life events like college or save for emergencies like unexpected health bills.

"What does it take for households in this country to get by and be able to plan for their own futures based on the work that they do?" said Donna Addkison, president and chief executive of Wider Opportunities for Women. "We're really looking at not just the lowest of the lowest income households but that slice of households that live somewhere above the poverty line but are constantly in danger of being thrown into financial catastrophe, and that's a much larger slice of the American public than we are currently talking about."

...The report showed that 55 percent of children live in households where families do not earn enough to achieve economic security. Even among those households with two full-time workers, 22 percent of those families with children earn less than is necessary to guarantee economic security.

But Newt says, “Don’t talk about it.”

Corporate profits are at record highs, while workers’ wages are a record lows.

In the eight decades before the recent recession, there was never a period when as much as 9 percent of American gross domestic product went to companies in the form of after-tax profits. Now the figure is over 10 percent.

During the same period, there never was a quarter when wage and salary income amounted to less than 45 percent of the economy. Now the figure is below 44 percent.

For companies, these are boom times. For workers, the opposite is true.

The government's first estimate of corporate profits in the third quarter was released two days before Thanksgiving, at the same time it revised the rate of G.D.P. growth in the quarter down to an annual rate of 2.0 percent.

The report showed that effective tax rates, both corporate and personal, are well below where they were during most of the post-World War II era.

But Newt says, “Don’t talk about it!”

The top 1 percent now make more than 25% of national income, and control over 40% of its wealth, while the rest of us have seen our incomes fall.

It's no use pretending that what has obviously happened has not in fact happened. The upper 1 percent of Americans are now taking in nearly a quarter of the nation's income every year. In terms of wealth rather than income, the top 1 percent control 40 percent. Their lot in life has improved considerably. Twenty-five years ago, the corresponding figures were 12 percent and 33 percent. One response might be to celebrate the ingenuity and drive that brought good fortune to these people, and to contend that a rising tide lifts all boats. That response would be misguided. While the top 1 percent have seen their incomes rise 18 percent over the past decade, those in the middle have actually seen their incomes fall. For men with only high-school degrees, the decline has been precipitous--12 percent in the last quarter-century alone. All the growth in recent decades--and more--has gone to those at the top. In terms of income equality, America lags behind any country in the old, ossified Europe that President George W. Bush used to deride. Among our closest counterparts are Russia with its oligarchs and Iran. While many of the old centers of inequality in Latin America, such as Brazil, have been striving in recent years, rather successfully, to improve the plight of the poor and reduce gaps in income, America has allowed inequality to grow.

But Newt says, “Don’t talk about it.

The media U.S. wage in 2010 was just $26,363. Not only were there fewer jobs, but they paid less -- except for at the very top.

The government has released the first official payroll data for 2010. As you might expect, the numbers aren't too encouraging. The "raw" average wage–net compensation divided by total number of workers–was $39,959.30, according to the data from the Social Security Administration. But the median wage is far lower: 50 percent of workers earned less than or equal to $26,363.55 for 2010.

As the SSA explained, "The reason for the difference is that the distribution of workers by wage level is highly skewed." Almost 66 percent of U.S. workers earned below the average wage in 2010 because of income disparity. In other words, looking at the difference between average and median wage is another way to gauge the growing income gap. And the recession has only exacerbated the problem.

But Newt says, “Don’t talk about it.”

Long-term unemployment is wiping out the middle class.

At the moment, there are roughly 13.9 million unemployed workers in the United States. Of those, 42.4 percent of them have been out of work for more than six months -- a new postwar record for the United States. We should be especially worried about this group of long-term unemployed workers, because research shows that the longer they go jobless, the more likely it is that they'll lose their skills, that companies will refuse to hire them, and that they'll drop out of the workforce entirely. And that, in turn, can have deeper implications for the country as a whole.

In the National Journal this month, Michael Hirsh has an important in-depth look at the broader impact of the long-term unemployed, putting the current disaster in historical context. "What Bernanke and others rarely mention, though, is that this trend has been building for at least three decades," he notes. "The share of left-behinds has generally ratched up with every economic downturn since the early 1980s." We've reached the point where long-term unemployment is now at an all-time high.

Yet conservatives can’t be bothered to keep teachers, firefighters and police officers on the job.

But Newt says, “Don’t talk about it.”

The benefits of “recovery” are all going into the pockets of the rich.

Whether or not this feels like a recovery, we're technically in one. And it's true that some money is flowing again. But where exactly is that money going? Not necessarily to those who need it.

It's going to corporations. The recovery began in the second quarter of 2009, and between then and the fourth quarter of 2010 national income rose by $528 billion -- and $464 billion of that, or 88%, went to pretax corporate profits, according to economists at Northeastern University. In fact, corporate profits have been growing quite rapidly in the post-crash period. The NYTimes reported in November of 2010, "Since their cyclical low in the fourth quarter of 2008, profits have grown for seven consecutive quarters, at some of the fastest rates in history." In the third quarter of 2010, they grew at an annual rate of $1.659 trillion, the highest figure recorded in noninflation-adjusted terms.

It's going to the pocketbooks of the richest of the rich. The Guardian reports: "The globe's richest have now recouped the losses they suffered after the 2008 banking crisis. They are richer than ever, and there are more of them -- nearly 11 million -- than before the recession struck." According to the annual world wealth report by Merrill Lynch and Capgemini, the wealth of high net worth individuals -- those who have more than $1 million in free cash -- rose nearly 10% last year and surpassed 2007's peak of $40.7 trillion, topping out at $42.7 trillion. It was even better for "ultra-high net worth individuals," those with $30 million to spare, as their numbers surged by 10% and the total value of their investments rose by 11.5% to $15 trillion.

Where is it not going? To wages and salaries. As compared to corporate profits, household incomes only saw 1% of the $528 billion in national income growth, or $7 billion. The NYTimes reports, "The share of income growth going to employee compensation was far lower than in the four other economic recoveries that have occurred over the last three decades." In fact, the Bureau of Labor Statistics reports that average real hourly earnings declined by 1.1% percent from the beginning of the recovery to May 2011. This comes on top of the fact that real wages have been faring worse in the last ten years than during the Great Depression -- incomes fell by almost five percent and wages barely budged. These facts don't escape the public. In a recent poll by Democracy Corp, 43% of likely voters said that either they or someone in their family had experienced "reduced wages, hours or benefits at work" in the last

But Newt says, “Don’t talk about it.”

Our level of economic inequality is not only unsustainable, but it’s unhealthy.

America’s past penchant for income inequality, however, is not financially sustainable, let alone morally excusable or philosophically justifiable by capitalists who claim this to be inherent in the system. This is where Wilkinson and Pickett’s data is useful. It shows that with income inequality comes with a host of health and social problems. The higher a country’s income inequality, the higher its infant mortality rates, obesity rates, homicide rates, illiteracy rates, mental illness rates, teenage births, incarceration rates, drug addiction rates, social immobility and lower life expectancy. In other words, the bigger the gap between a nation’s rich and poor populations, the greater dysfunction in that nation’s society.

It may come as no surprise to some that America has the highest income inequality among the entire rich world. It was developed largely in the last 30 years, exacerbated by tax policies that benefited the rich at the expense of the poor. It became increasingly difficult for Americans to get ahead, get insured, get educated and get a job, all of which helps with getting respect. Consequently, the bulk of America’s economic growth over the last 30 years has gone to the top one-100th of 1%, who make $27m annually per household, leaving 90% of American households to subsist on roughly $30,000 a year.

Name a rich country and our inequality rates beat them by a long shot - though it’s hardly something to brag about. We also have the highest rates of homicide, infant mortality, teenage births, drug addiction, mental illness, incarceration, social immobility and illiteracy. Name the social ill and we excel at it.

These health and social problems wreak financial havoc on our society - not only in terms of lost productivity and potential, but also in terms of costs associated with containing the violence, healing the sick, and fixing the dysfunction...

But Newt says, “Don’t talk about it.”

After all, that’s the first rule of dysfunctional politics. The problem with the first rule of dysfunctional politics is identical to the problem with the first rule of dysfunctional families: It guarantees that everything stays dysfunctional, because problems that don’t get talked about don’t get solved.

When it comes to conservatives like Gingrich, however, that seems to be the whole point.


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