Wayne O'Leary

The New Gilded Age

While the nation is preoccupied with the mental state and bizarre behavior of the current occupant of 1600 Pennsylvania Ave. — his tweets, his insults, his rants, his ravings — the far-right conservative project to radically and permanently change America continues on its merry way. The antics of the chief executive and the chaos they bring are providing Republicans with the perfect smokescreen to operate behind.

The truth is that Donald Trump, who has little interest in policy and the attention span of a humming bird, is president in name only. We’re really living through the co-presidency of House Speaker Paul Ryan and Senate Majority leader Mitch McConnell. Ryan, the ideologue, is the master strategist; McConnell, the partisan, is the day-to-day tactician. It’s congressional government at its worst, but it’s accomplishing its ends. The tax cut is already a fait accompli, and more will follow — for at least another 12 months, if not longer.

Except for a spasm of executive orders and departmental rule making, the serious work in Washington is being carried out at the legislative level by House and Senate committees operating as disciplined cadres and imposing one-party government on behalf of corporate economic interests. The White House is a sideshow, a spectacle for the media, which cooperates by giving it full attention to the neglect of everything else.

There’s been nothing quite like this before in modern times. For a true comparison, it’s necessary to go back to the late-19th century, specifically the 35-year interregnum between the death of Lincoln in 1865 and the start of the Theodore Roosevelt administration in 1901, also known as the Gilded Age, when America’s presidents were forgettable and a succession of corrupt Congresses ran the government. The closest parallel since would have to be the 1920s, another period characterized by incompetent figurehead presidents, whose appointed cronies ran Washington behind the scenes, lining their own pockets and those of private business interests, with the indulgent cooperation and overall guidance of conservative Republican Congresses.

As Mark Twain is reputed to have said, “History doesn’t repeat itself, but it often rhymes.” It’s rhyming like a deranged poet at the moment. Case in point: The New Gilded Age of today, like the one of old, is marked by the ascendancy of laissez-faire capitalism. Large business interests are back in the saddle, single-mindedly pursuing profit maximization, to the total exclusion of the public interest.

The Ryan-McConnell government is in full accord with the get-and-grab psychology, which was shifted into overdrive by its tax-cut legislation. Coming shortly will be bank deregulation, an elimination of the large-employer health-insurance mandate under the ACA, and a loosening of restrictions on predatory for-profit colleges. The general public, desperate for jobs and income after going through the wringer of the Great Recession, appears resigned. People have been conditioned to believe that only by giving big capital what it wants can prosperity be achieved; they’re waiting and hoping.

For the time being, the Republican prescription appears on the surface to be delivering some returns, even if at a terrible potential social cost. (The cost is future cuts to Social Security and Medicare to fund the tax reductions, which Paul Ryan and numerous other Republicans have said is necessary and inevitable.) Unemployment is nearly down to 4 percent (virtual full employment), although it started falling under Obama. Wages have simultaneously risen, but only by 2.5% for 2017; it will take years to make workers whole at that rate. Additionally, a number of large employers, Walmart most prominent among them, have announced small hourly pay increases and/or one-time employee bonuses — an apparently coordinated PR move to reduce the unpopularity of the tax cut.

Walmart’s action, citing its tax savings, allowed Speaker Ryan to assert (while ignoring the company’s simultaneous closing of 63 affiliated stores), “This [tax] law is helping improve people’s lives.” But that’s not the law’s primary purpose. The added money Walmart claims it will devote annually to workers’ wages ($300 million) is fully deductible and dwarfed by the $2.2 billion a year (or 40%) it will save on its corporate-tax bill, most of which will go, directly or indirectly, to executives and shareholders.

America’s retail monopolist is not alone. Overwhelmingly, the bulk of corporate tax savings are slated for ownership in the form of enhanced stockholder dividends, a fact some firms (e.g. FedEx, PNC Financial, and JPMorgan Chase) are brazenly willing to acknowledge. Others say they will invest their windfalls in “capital spending,” but much of that will be directed toward automation and other job-killing technologies. And almost all of corporate America will engage in what are called “stock buybacks” — using tax benefits to repurchase a company’s own market shares, thereby forcing up the price to reward stockholding investors and company executives.

Researchers at the University of Pennsylvania provide this further eye opener: The effective tax rate American corporations will actually pay under GOP “reform,” after exemptions and deductions (for example, immediate write-offs for investments in business equipment), will average all of 9%, not the official 21% rate just enacted and obviously not the repealed 35% rate long on the books. Keep in mind this immense rate reduction is not a gift to the corporations as such, but to their shareholders, the ultimate beneficiaries.

And who are the shareholders? The Federal Reserve Board reported last fall that in 2016, barely half (52%) of American families owned stock, and most of that was in the form of passive retirement accounts (401(k)s, etc.) worth on average about $40,000. By far, most shares (eight out of 10) were held by the top 10% of earners, whose average holdings approximated $365,000. Within that select group, the fabled top 1% (average income in 2014: $1.3 million), who get most of their income from appreciated investments, owned 40% of all outstanding market shares, which were taxed at an exceedingly generous 20% capital-gains or dividend rate.

This is the group, including two-dozen Trump administration officials and most Fortune 500 CEOs, on whose behalf economic policy is really formulated. It’s the group to whom then incoming Treasury Secretary Steven Mnuchin (assets of $300 million) referred when he duplicitously assured an interviewer in November 2016 that there would be “no absolute tax cut for the upper class.”

Wayne O’Leary is a writer in Orono, Maine, specializing in political economy. He holds a doctorate in American history and is the author of two prizewinning books.

From The Progressive Populist, March 1, 2018

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