Why so many of us resent the "elites"
by Peggy Noonan
If you write a column, you get a lot of e-mail. Sometimes, especially in a political season, it's possible to discern from it certain emerging themes – the comeback of old convictions, for instance, or the rise of new concerns. Let me tell you something I'm hearing, in different ways and different words. The coming rebellion in the voting booth is not only about the economic impact of spending, debt and deficits on America's future. It's also to some degree about the feared impact of all those things on the character of the American people. There is a real fear that government, with all its layers, its growth, its size, its imperviousness, is changing, or has changed, who we are. And that if we lose who we are, as Americans, we lose everything.
This is part of what's driving the sense of political urgency this year, especially within precincts of the Tea Party.
The most vivid illustration of the fear comes, actually, from another country, Greece, and is brilliantly limned by Michael Lewis in September's Vanity Fair. In "Beware Greeks Bearing Bonds," he outlines Greece's economic catastrophe. It is a bankrupt nation, its debt, or rather the amount of debt that has so far been unearthed and revealed, coming to "more than a quarter-million dollars for every working Greek." Over decades the Greeks turned their government "into a piñata stuffed with fantastic sums" and gave "as many citizens as possible a whack at it." The average government job pays almost three times as much as the average private-sector job. The retirement age for "arduous" jobs, including hairdressers, radio announcers and musicians, is 55 for men and 50 for women. After that, a generous pension. The tax system has disintegrated. It is a welfare state with a cash economy.
Much of this is well known, though it is beautifully stated. But all of it, Mr. Lewis asserts, has badly damaged the Greek character. "It is simply assumed . . . that anyone who is working for the government is meant to be bribed. . . . Government officials are assumed to steal." Tax fraud is rampant. Everyone cheats. "It's become a cultural trait," a tax collector tells him.
Mr. Lewis: "The Greek state was not just corrupt but also corrupting. Once you saw how it worked you could understand a phenomenon which otherwise made no sense at all: the difficulty Greek people have saying a kind word about one another. ... Everyone is pretty sure everyone is cheating on his taxes, or bribing politicians, or taking bribes, or lying about the value of his real estate. And this total absence of faith in one another is self-reinforcing. The epidemic of lying and cheating and stealing makes any sort of civic life impossible."
Thus can great nations, great cultures, disintegrate, break into little pieces that no longer cohere into a whole.
And what I get from my mail is a kind of soft echo of this. America is not Greece and knows it's not Greece, but there is a growing sense – I should say fear – that the weighty, mighty, imposing American government itself, whether it meant to or not, has for years been contributing to American behaviors that are neither culturally helpful nor, as we now all say, sustainable: a growing sense of entitlement, of dependency, of resentment and distrust, and an increasing suspicion that everyone else is gaming the system. "I got mine, you get yours."
People, as we know, are imperfect. Governments, composed top to bottom of imperfect people wielding power, are very imperfect. There are, of course, a million examples, big and small, of how governments can damage the actual nature and character of the citizenry, and only because there was just a commercial on TV telling me to gamble will I mention the famous case of the state lotteries.
Give government the right to reap revenue from the public desire to gamble, and you'll soon have government doing something your humble local bookie never had the temerity to try: convince the people that gambling is a moral good. They promote it insistently on local television, undermining any remaining reserve among our citizens not to play the numbers, not to develop what can become an addiction. Our state government daily promotes what for 2,000 years was understood to be a vice. No bookie ever committed a crime that big.
Government not only can change the national character, it can bizarrely channel national energy. And this is another theme in my mailbox, the rebellion against what government increasingly forces us to become: a nation of accountants.
No matter what level of life in which you operate, you are likely overwhelmed by forms, by a blizzard of regulations, rules, new laws. This is not new, it's just always getting worse. Priests are forced to be accountants now, and army officers, and dentists. The single most onerous part of Obamacare is the tax change whereby spending $600 on goods or services will require a IRS 1099 form. Economists will tell you of the financial cost of this, but I would argue that Paperwork Nation is utterly at odds with the American character.
Because Americans weren't born to be accountants. It's not in our DNA! We're supposed to be building the Empire State Building. We were meant, to be romantic about it, and why not, to be a pioneer people, to push on, invent electricity, shoot the bear, bootleg the beer, write the novel, create, reform and modernize great industries. We weren't meant to be neat and tidy record keepers. We weren't meant to wear green eyeshades. We looked better in a coonskin cap!
There is, I think, a powerful rebellion against all this. It isn't a new rebellion – it was part of Goldwaterism, and Reaganism – but it's rising again.
For those who wonder why so many people have come to hate, or let me change it to profoundly dislike, "the elites," especially the political elite, here is one reason: It is because they have armies of accountants to do this work for them. Those in power institute the regulations and rules and then hire people to protect them from the burdens and demands of their legislation. There is no congressman passing tax law who doesn't have staffers in his office taking care of his own financial life and who will not, when he moves down the street into the lobbying firm, have an army of accountants to protect him there.
Washington is now to some degree the focus of the same sort of profound resentment that Hollywood liberals inspired when they really mattered, or seemed really powerful. For decades they made films that were not helpful to our culture or society, that were full of violence and sick imagery. But they often brought their own children up more or less protected from the effects of the culture they created. Private schools, nannies, therapists, tutors. They bought their way out of the cultural mayhem to which they'd contributed. Their children were fine. Yours were on their own.
This is part of why people dislike "the elites" and why "the elites," especially in Washington, must in turn be responsive, come awake, start to notice. People don't like it when they fear you are subtly, day by day, year by year, changing the personality and character of their nation. They think, "You are ruining our country and insulating yourselves from the ruin. We hate you." And this is understandable.
The Wealth Inequality Mirage
While most Americans are concerned about the country's high unemployment rate, a few elitists seek to use it as a pretext for their leveling agenda. Whether the country is prosperous or struggling to climb out of recession, as now, they complain about an economic inequality that they exaggerate.
These "levelers" care more about equal outcomes than equal opportunity. They misunderstand the dynamic of the American economy. Their "remedies" would do more harm than good.
Chief among them is Robert Reich, Secretary of Labor for President Bill Clinton and now a professor at the University of California, Berkeley. A few days ago, in a radio interview on National Public Radio, he said this:
"Unless we understand the relationship between the extraordinary concentration of income and wealth we have in this country and the failure of the economy to rebound, we are going to be destined for many, many years of high unemployment, anemic job recoveries and then periods of booms and busts that may even dwarf what we just had."
Mr. Reich is wrong. He and other levelers exaggerate economic inequality, eagerly, because they rely on pretax income, which omits the 97% of federal income taxes paid by the top half of income earners and the many "transfer payments," such as food stamps, housing assistance, Medicaid and Medicare. This exaggerated portrait of inequality undergirds the present effort by the Democrats to raise income tax rates for people with taxable incomes of $209,000 a year on joint returns and $171,000 a year on single returns.
A more meaningful measure of inequality comes from an examination of spending. On Wednesday the Labor Department presented 2009 data on consumer spending, based on income quintiles, or fifths. This analysis shows that economic inequality has not increased, contrary to what the levelers contend.
Differences in per-person spending from the lowest income fifth to the highest are not dramatically different from 20 years ago. These measures of spending show less inequality than do measures of income.
These data are important because the mirage of expanding income inequality is being touted by some Democrats as an excuse for tax increases on upper-income people, and to justify to Americans a European-style social contract of higher government spending and taxes.
That's the main battle between Republicans and Democrats in the November 2 congressional election. Republicans want to keep current tax rates to encourage businesses to expand and hire workers. Democrats want to raise taxes for the top two brackets, and point to rising income inequality as justification.
The Democrats say they would use the additional tax revenue to shrink the budget deficit, but inevitably some of that additional revenue would be spent on programs that redistribute income.
The Labor Department data, which are published every year, track spending by income group. Spending is vital because it determines our current standard of living and our confidence in the future. It shows how much purchasing power Americans have. The usual pretax measures of income, on which most inequality studies are based, don't show how much purchasing power some Americans have because they omit other benefits, and so don't provide an accurate measure of purchasing power inequality.
Further, income quintiles have different demographic characteristics, so comparisons of quintiles can be misleading. In 2009, households in the lowest fifth had an average of 1.7 people, and in half these households there were no earners. The highest fifth, however, had 3.1 persons per household, with 2.0 earners.
Household size at the bottom has been shrinking faster than at the top, adding to a false perception of inequality. Over the past 20 years, the size of households in the bottom quintile has declined by 5.6% and the middle quintile by 3.8%, whereas the size of the top-quintile household has been unchanged. This is due not only to the increased longevity of today's seniors, but also to the higher numbers of divorced couples and single-parent households.
Calculating spending on a per-person basis (these are my calculations, from the official data) produces comparable measures. The average annual spending for a household in the lowest quintile was $21,611, or $12,712 per person. In contrast, the average spending for a household in the top quintile was $94,244, or $30,401 per person.
On a per person basis, the new Labor Department numbers show that in 2009 households in the top fifth of the income distribution spent 2.4 times the amount spent by the bottom quintile. That, Professor Reich might note, was about the same as 20 years ago. The top quintile spent 1.8 times what the middle quintile spent per person. And that ratio has not been increasing.
On a per person basis, those in the bottom group spent 2.8% less in real terms in 2009 than in 2008 due to the recession. In contrast, those in the top quintile spent 0.6% more, and those in the middle quintile spent 0.7% more.
But compared with 1989, the big winners are the lowest-income group, which spent 9.1% more per person in constant dollars. In contrast, the highest group spent 2.6% more, and the middle group increased its spending by 1.1%.
Income and spending do not tell the whole story about how well Americans are doing. A higher percentage of low-income Americans own their homes free of mortgage debt than do upper-income Americans. Twenty-six percent of households in the lowest income group and 31% in the next-to-lowest group owned their homes debt- free in 2009, compared to 27% in the middle quintile and 18% in the top quintile. There are more seniors in the lower two quintiles, and many have paid off their homes.
Tens of millions of Americans are unemployed, underemployed, or have given up looking for work. They and their families simply want a chance to work, a hope that tomorrow will bring better employment prospects than today. The two major political parties have diametrically opposed policy prescriptions to appeal to Americans in search of a better tomorrow.
The choice is clear. One party offers lower taxes and less regulation as a means to allow businesses to expand and hire new workers and to make it easier for more Americans to start their own businesses. The other party seeks to punish those who have a job and doubly punish those who employ them.
Odds are on Supreme Court striking down healthcare reform
A top Republican said Friday that he expects the U.S. Supreme Court to strike down key parts of the new healthcare reform law as unconstitutional. Rep. Mike Pence (R-Ind.), the third-ranking House Republican, who serves as conference chairman, said he saw enough votes on the high court to strike a blow to President Obama's signature domestic initiative. "It's going to the Supreme Court, and the Supreme Court's going to decide whether or not the Constitution of the United States permits the government to order the American people to purchase goods or services, whether they want them or need them or not," Pence said Friday on WLS radio in Indiana.
The Indiana lawmaker, and potential 2012 presidential candidate, has been among the crowd of Republicans to question whether a central part of Democrats' healthcare reform bill is constitutional. The crux of their argument is that the individual mandate - the section of the law requiring individuals to have health insurance of some sort - violates the Constitution.
A federal judge in Michigan dismissed a major case on Thursday challenging the healthcare law's constitutionality on that grounding, though other lawsuits are still being litigated in other federal districts. If courts in different areas of the country end up issuing different rulings, it could heighten the chances that the Supreme Court would take the case.
If it gets to that point, Pence said, he could envision five of the court's member voting to rule the bill unconstitutional. "I rather like our chances when this thing gets to the U.S. Supreme Court," he said. "I think there could be a narrow majority on the court that recognizes that you cannot compel the American people to purchase health insurance just as a function of being an American citizen."
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