Years and years ago, back when I was actively involved in national politics, a scholar of politics made the observation that, “Where you stand on anything depends on where you sit.” The converse is also true, in that the positions one takes reveal the true nature of one’s views.
The “negotiations” surrounding the “fiscal cliff” illustrate the above point fairly clearly. The positions taken by each side do indeed reveal where each side sits, so to speak, and whom they represent, regardless of the window dressing of the rhetoric thrown out by each side. The Democrats are demanding that the “rich” pay more in taxes. Interestingly enough, their definition of “rich” includes all of what has historically called the upper middle class and even a fraction of the mid-middle class, i.e., moderately salaried two-earner families in high-cost-of-living cities. The definition of “rich” has been muddied over time by inflation, but consider that a family income of $42,000 in 1970 is equivalent to more than $250,000 today, yet in 1970, forty percent of all families made more than $42,000. Today, only 2% make more than $250,000. President Obama classifies those in the top 2% as the rich, but those in the ninety-ninth percentile have family incomes of between $250,000 and $350,000, and that one percent pays ten percent of all federal income taxes. Well-off certainly, but rich? All this does suggest that Obama and the Democrats, rhetoric aside, are out not only to soak the rich, but also to soak the upper middle class.
The Republicans, of course, aren’t exactly blameless. For all their rhetoric about controlling spending, they haven’t. In fact, they’ve more than helped it along, and then they’ve coped with the erosive power of inflation by simply pushing for lower tax rates. After all, in the end, what matters isn’t what you make, but what you keep. So, as inflation has decreased the purchasing power of the dollar, so that the real income of most families is only some 60% of what it would have been without inflation, federal income tax levels on the top ten percent, and especially on the top one percent, have been more than halved since the 1950s. The result? Although all income levels have suffered in loss of comparative purchasing power, the greatest burden has fallen on those in the middle two quintiles of income, what generally might be referred to as the working class, because their tax rates have not decreased as much as those with higher incomes, and because federal programs have tended to cover most of the impact on the very poorest. The Republicans’ “Plan B” was even more deceptive in that, while it would have protected the upper middle class from a tax increase, it not only did that, but it would have removed the few limitations that do exist on restricting tax exemptions for the very wealthy… and Boehner couldn’t even get the enough Republicans to support that.
When all the math and tax policies are considered, the politicians have been paying for federal programs through deficit spending that has reduced the purchasing power of all incomes, although, like it or not, those families in the lower 50% of income only pay 3% or so of federal income tax. The Democrats have done their best to shield the very poor, because programs such as food stamps are essentially indexed against inflation, and the Republicans have done their best to shield the very richest one percent, and continue to do so, even with the fiscal cliff looming, and everyone in between has taken a hit of some degree… and both Obama and Boehner are holding out in the fiscal cliff negotiations for the best deal they can get for the very rich and the very poor – and if they do come to an agreement, they’ll call it a benefit for the middle class.