Professor of political science at Yale University and co-author with Paul Pierson of the new book Winner-Take-All Politics: How Washington Made the Rich Richer—And Turned Its Back on the Middle Class.
On Capitol Hill, Senate Republicans are threatening to filibuster every bill until the Democrats agree to extend the Bush-era tax cuts to all income groups. The Obama administration and many Democrats want to retain the lower rates only for individuals with an annual income of $200,000 or less and married couples earning no more than $250,000 a year. We speak with Jacob Hacker, Yale University professor and co-author of the new book, Winner-Take-All Politics: How Washington Made the Rich Richer—And Turned Its Back on the Middle Class. [includes rush transcript]
JUAN GONZALEZ: On Capitol Hill, Senate Republicans are threatening to filibuster every bill until the Democrats agree to extend the Bush-era tax cuts to all income groups. The Obama administration and many Democrats want to retain the lower rates only for individuals with annual incomes of $200,000 or less and for married couples earning no more than $250,000 a year. On Wednesday, all 42 Senate Republicans co-signed a letter issuing the threat. Just 41 votes are needed to filibuster legislation.
Senator Harry Reid criticized the Republican effort.
SEN. HARRY REID: With this letter, they have simply put in writing a political strategy that the Republicans have pursued this entire Congress — namely, obstruct, delay, obstruct, delay action on critical matters and then blame the Democrats for not addressing the needs of the American people.
AMY GOODMAN: To talk more about the debate over tax cuts, we’re joined by Jacob Hacker. He is professor of political science at Yale University and co-author with Paul Pierson of the new book Winner-Take-All Politics: How Washington Made the Rich Richer — And Turned Its Back on the Middle Class.
How did Washington make the rich richer, Jacob Hacker?
JACOB HACKER: Well, Washington made the rich richer most simply by slashing taxes on the richest of Americans. That’s probably the easiest part of the story to understand. If you look at the richest 400 taxpayers in the 1960s, they paid an average individual federal income tax rate of around 40 percent. By the 1990s, that was 30 percent. By 2007, it was just over 16 percent. We’re talking about a huge transfer of income to the top through tax cuts that were precisely targeted on the very highest rungs of the income ladder. In the book, Paul and I call these "economic smart bombs." They basically brought payloads of cash to carefully target recipients. And, you know, recently, Warren Buffett actually said that he thinks he pays a higher — sorry, that he thinks that his secretary pays a higher tax rate than he does. So this is one of the big parts of the story we tell in the book.
AMY GOODMAN: Let’s go to Warren Buffett, the billionaire investor, who was talking to ABC News.
WARREN BUFFETT: I think that people at the high end, people like myself, should be paying a lot more in taxes. We have it better than we’ve ever had it.
CHRISTIANE AMANPOUR: They say you have to keep those tax cuts, even on the very wealthy, because that is what energizes business and capitalism.
WARREN BUFFETT: The rich are always going to say that, you know, just give us more money, and we’ll go out and spend more, and then it will all trickle down to the rest of you. But that has not worked the last 10 years. And I hope the American public is catching on.
AMY GOODMAN: That was Warren Buffett being interviewed by Christiane Amanpour of ABC. Juan?
JUAN GONZALEZ: Well, Jacob Hacker, I’d like to ask you about the situation with this deficit commission report. Obviously there’s a little — they’re having difficulty now getting agreement by the members of the commission on a final report. Your sense of how this decision — or the recommendations that they make will have an impact on this continuing divide, economic divide, on the growing economic divide in the country?
JACOB HACKER: Yeah, it’s a great question, because if you think about it, we’ve seen a generation in which the very, very rich have pulled away from the rest of Americans. If you look at just like the top one-tenth of one percent — so that’s the top one in a thousand taxpayers — their share of national income has quadrupled — actually, more than quadrupled — over the last 30 years. And that group, which is about one in a thousand taxpayers, in 2007 was earning one in eight dollars. And that’s the backdrop against which we should understand the deficit commission report.
We no doubt have this long-term deficit problem, but we have a serious economic crisis right now, and the proposal that the deficit commission co-chairs have put forward, which may not reach the threshold of 14 votes to go forward, but which is getting some bipartisan support, basically would take this very unequal society we live in and make it more unequal. If you look at the deficit commission proposals, they basically have three elements that are going to make things worse. They are basically going to start deficit reduction efforts very quickly, which could endanger a very fragile recovery. And we have, you know, millions of Americans who are out of work and millions more who are working part-time because they can’t find a full-time job. And that — we’re consigning our country, perhaps, to a very, very long period of great hardship if we don’t try to get the economy moving rather than immediately try to impose fiscal restraint.
And the two other things — I’ll just mention in passing — is that they are focused overwhelmingly on cutting spending, which sounds good in principle, but if you look into the future, what that really means is that we’re talking about imposing most of the cost and the losses on middle-class and working-class Americans who rely more on programs like Social Security and Medicare and what the government does to encourage education and the like than do those higher on the ladder. And finally, the tax proposals that are in the deficit commission proposals are actually regressive. That is, they make the tax code even less fair. For the top —- the top one percent would actually see an increase in their after-tax income of almost two percent due to these tax proposals, whereas the bottom 40 percent of Americans would see their income fall by three percent due to these proposals. It’s a remarkable remarkable story, that we’ve basically had this huge skew in income, and yet, right now, the leading calls are for extending tax cuts for the richest and for imposing a certain kind of fiscal restraint that will be hardest on middle— and working-class Americans.
AMY GOODMAN: What about lifting the retirement age, Professor Hacker?
JACOB HACKER: Well, I think if you — first of all, it’s really important to understand that the Social Security shortfall is not a part of the long-term deficit picture. It’s really about whether the program will be put on a secure foundation so that it can pay all of its promised benefits. And everyone who’s looked at this knows that it’s going to have to include a mix of some benefit cuts and increased revenues for the program. You could close much of the shortfall simply by raising the cap on payrolls that people pay, which right now is only covering something like 85 percent of pay. So it’s really exempting the richest of the rich, who have gotten so much richer. Just extending that cap upwards quite — either to all income or to a very large share of income, would almost close the gap entirely. And then we could think about whether or not things like adjusting benefits or changing retirement age, expected retirement age, would make sense.
My main concern about the retirement age is it really works out just to be a benefit cut, because people can claim their benefits before the official retirement age of 65 or, in the future, 67. So, it’s really a benefit cut. And that benefit cut will unfortunately fall mostly on the less affluent, because they’ve not seen much of an increase in their life expectancy over the last 20 or 25 years. It’s only the well-off who have. So, I would think that if we’re going to do benefit changes, that we want to be very careful not to exacerbate a growing inequality in longevity, as well.
JUAN GONZALEZ: And finally, we only have about 30 seconds, but your sense of President Obama’s willingness to compromise on this extension of the tax cuts and what the impact, again, will be if that occurs, in terms of the economic divide in the country?
JACOB HACKER: Well, I mean, as Paul Pierson and I write in Winner-Take-All Politics, we basically have a story in which we have one party that has been completely unified in defending this unequal economy, and that’s the dilemma that we’re facing right now. If you look at that recent statement that you read a few minutes ago, Juan, basically the Republicans are saying the number one priority is making sure that we spend over $700 billion to give tax breaks to the wealthiest Americans, when there are millions of Americans out of work. I think it’s a very difficult strategic situation for the President, but politically, he’s on the side of the American people. Even the majority of Americans who went to the polls in this last election, which was a more conservative electorate, were against extending those tax cuts for the richest. So, at least he should be out there forthrightly standing on this issue.
AMY GOODMAN: Professor Jacob Hacker, we’re going to have to leave it there. Thanks for joining us.