Nov 26th 2012

Why Lame Duck Budget Battle is Really a Struggle Between the 1% and Ordinary Americans

by Robert Creamer

Robert Creamer is a long-time political organizer and strategist and author of the recent book: "Stand Up Straight: How Progressives Can Win," available on
To hear some pundits tell it, the Lame Duck budget battle is about the “unsustainable federal deficit,” or “entitlement reform,” or even “tax rates.”  These characterizations make it sound like a contest between two competing sets of policies and programs.

But underlying all of the policy-speak, the Lame Duck budget battle is really about one question.  Will the 1% of Americans who had the party that caused the deficit be asked to pay the bill?
The pain of “fixing” the deficit should not be distributed widely.  It should be distributed fairly – to the people who caused the problem and reaped the benefit – the wealthiest people in America.
The Lame Duck battle goes right to the most important question facing our political and economic decision-makers at this moment in American history: will we continue to allow the wealthiest 1% of Americans to siphon off all of our economic growth for themselves, or will the benefits of that growth be widely spread to ordinary Americans?   What portion of the goods and services produced by our society will go to the wealthiest 1% of Americans – and how much goes to everyone else?
From what some right wing pundits and “wise men” from the business community say, you’d think that America is poorer today than it was fifty years ago, when Medicare and Medicaid became part of our social contract – or 70 years ago when we created Social Security.  Some of the “entitlement programs” we’ve had for decades are now “unsustainable” they say.  
We no longer can afford to guarantee seniors a decent retirement?  We can’t afford to guarantee every American the right to decent health care?  We can’t afford to provide guaranteed pensions – or to provide a living wage to our workers so they can look forward to providing a better standard of living for their kids? We just can’t do big things anymore like build the Interstate Highway system, or send someone to the moon, or create the Internet? They claim that “we” – meaning most of us but certainly not the 1% -- have to get used to the new “normal” of austerity and lowered expectations.
To put it bluntly, that is simply ridiculous.
To understand what is really going on all you have to know is three critical facts:
      1). First, for the last three decades our per-person gross domestic product – the amount that the average person in America produces in goods and services -- has consistently increased.  That increase has been slowed by several economic downturns and by the Great Recession, but over time, we have more to go around today than we did thirty years ago.
In fact, real (adjusted for inflation) per capita gross domestic product (GDP) increased more than 80% over the period between 1975 and 2005.  In the last ten years, before the Great Recession, it increased at an average rate of 1.8% per year.  That means that if the benefits of economic growth were equally spread throughout our society, everyone should have been almost 20% better off (with compounding) in 2008 than they were in 1998. 
     2). But ordinary people weren’t better off.  In fact, median family income actually dropped in the years before the recession.  It fell from $52,301 (in 2009 dollars) in 2000 to $50,112 in 2008. And, of course it continued to drop as the recession set in. In fact, as a group, ordinary Americans haven’t had a raise in about 30 years. 
How is that possible? 
Was it – as the Right likes to argue – because of the growth of the Federal Government?  Nope. In fact, the percentage of GDP going to federal spending actually dropped during the last four years of the Clinton Administration. When Bush took office it began to increase again as the Republicans increased spending on wars.  Over the last 28 years, federal spending has averaged about 20.9% of the GDP and varied within a range of only about 5%, with the high being in 1983 (in the middle of the Reagan years) and the low in 2000 before Bush took office.  It has never even come close to the 43.6% of GDP that it consumed during World War II in 1943 and 1944, or the 41.9% it consumed in 1945.   The percent of GDP that goes to Federal spending went up in 2009 and 2010 – but that was mainly because the economy shrunk on the one hand, and a major, temporary stimulus bill was need on the other to prevent another Great Depression.
Was it because taxes have skyrocketed?  No again.  In fact, Bureau of Economic Analysis data indicates that Americans now pay 23.6% of income for state, local and federal taxes compared to 27% from the 1970’s through the 1990’s.  In fact, the overall tax burden is the lower today than it has been since 1958.
Was it that labor became less productive?  No.  In fact, there has been a major gap between the increase in the productivity of our workforce and the increase in their wages.  Even when wages were improving at the end of the Clinton years, productivity went up 2.5% per year and median hourly wages went up only 1.5%. 
From 2000 to 2004, worker productivity exploded by an annual rate of 3.8% but hourly wages went up only 1% and median family income actually dropped .9%.
The bottom line is that people who work for a living (most of us) are getting a smaller and smaller slice of the nation’s economic pie. 
In fact, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government started keeping records in 1947.  And corporate profits have climbed to their highest levels since the 1960’s.
Which brings us to fact number three.
      3). Virtually all of the increase in our gross domestic product over the ten years before the Great Recession went to the wealthiest 2% of the population. 
These changes in income distribution are not the result of “natural laws.”  They were the result of systems set up by human beings that differentially benefit different groups in the society.
And that is what the Lame Duck budget battle is all about.  The wealthiest people in America want to continue to siphon off all of the growth in productivity and economic production – it’s that simple.
When George Bush took office from Bill Clinton we had a massive budget surplus.  The reason was that Clinton had passed a tax bill that mainly increased the tax rates paid by the wealthiest Americans.  Republicans made dire predictions that these new taxes on the wealthy would cause a recession.  Instead, the economy expanded like gangbusters.  Under Clinton the economy created 22 million new jobs.  The tech boom contributed mightily to increased productivity of the American work force.   And, notwithstanding the increase in taxes, the rich weren’t hurting.  Many fortunes were made during the 1990’s.
But the wealthiest Americans and their representatives in the Republican Party wanted more.  After the Supreme Court handed George Bush and the Republicans the election victory in 2000, they insisted that tax rates for the wealthy be slashed. And when the Republicans launched two wars they refused to increases taxes on the rich – or anyone else – to pay the bill.
Now they insist that cost of fixing the deficit they created, should fall upon the poor and the middle class and they should be asked to pay nothing.  Instead, they want Social Security recipients who make $15,000 per year to have their Medicare benefits cut.  Instead, they want to cut our spending on education and new roads and transit systems.  Instead they want to cut food stamps and unemployment benefits that help prevent ordinary people from falling into poverty when they are laid off by a company like Sensata, that is making money manufacturing its products in the U.S. but wants to make even more by shipping its jobs to China.
The increasing costs of the country’s health care programs are not driven by greedy seniors, or by “unsustainable entitlement programs.”  They are driven by rising health care costs – that result in large measure from the fact that our insurance company-driven health care system led us to pay twice as much per capita for health care than any other society on earth – even though we are 37th in health care outcomes.

You bet we have to control health care costs, but we don’t do that by transferring those costs to ordinary people whose share of the economic pie has been stagnating for years.  We need to do that by creating a more rational system for financing and delivering health care – a project that has finally begun with the passage of ObamaCare.
Changes to Medicare or Medicaid that actually control health care costs are a great idea.  We might start by allowing Medicare to negotiate with drug companies to get lower rates on prescriptions – which was explicitly prohibited under the law that created Republican-crafted Medicare Part D drug benefit.
But Democrats should not agree to any change in Medicare or Medicaid that cuts benefits for ordinary Americans.  Ordinary Americans didn’t benefit from the party that caused the deficit, and they shouldn’t be asked to pay the bill.
Maybe the most outrageous proposal coming out of the “big thinkers” who flack for Wall Street and the CEO class, is the proposal to raise the Social Security retirement age.
Remember that Social Security has absolutely nothing to do with the deficit.  In fact the Social Security Trust Fund has been in surplus since it was reformed in 1980.  Regardless, the one percent crowd insists that Social Security is  “unsustainable” in its current form and the way to fix it is to require that everyone retire later.
That may make sense to editorial writers or business executives who love their jobs, make big salaries and have no intention of retiring at 65.  It makes no sense at all to people who do manual labor or clean hotel rooms and are paid a minimum wage.
The people making these proposals will never be affected by increasing the retirement age.  The people who are being asked to sacrifice are generally the people who work the hardest for the lowest pay and have not benefited at all from the economy growth that their labor helped to fuel over the last 30 years.
This proposal is particularly outrageous when you realize that the payroll taxes that finance Social Security and Medicare don’t apply to income over $110,000 per year.  If everyone paid the same percentage of their income in payroll taxes as a the average American that earns $50,000 per year, the Social Security Trust Fund would be solvent for the next 75 years. 
When wealthy executives who make millions say that America can’t “afford” the current Social Security and Medicare programs, what they really mean is that they don’t want to pay their fair share to support these critical programs.   What they are really saying is that they have a right to take all of the increased economic growth that our society generates over the next three decades the same way they have for the last 30 years.
It is up to Democrats – to all everyday middle class Americans -- to just say no to the greed and arrogance that underlies their proposals that everyday Americans should have to sacrifice more, so that the 1% doesn’t have to pay its fair share. 
It’s time we refuse to give any credibility whatsoever to their absurd assertions that increasing taxes on the rich will slow the economy by punishing “job creators.”  In fact, economic history – and most recently the Clinton years – demonstrated beyond the shadow of a doubt -- that economies grow from the middle out, not the top down.  Economic history demonstrates that the best way to grow an economy is to make sure that ordinary American consumers have growing incomes that will allow them to buy the goods and services that their increased productivity can produce.   Middle class consumers with money in their pockets are the true “job creators.” 
Republican policies that allow the wealthy to continue siphoning off all of our growth in national income are the true enemy of long-term economic growth.  They are a formula for economic stagnation because they are a recipe for the destruction of America’s middle class.
It’s up to us to demand that Wall Street gamblers who don’t make anything of value should no longer be allowed to pay a smaller share of their income in taxes than teachers or firefighters or the millions of Americans who go to work every day and actually create the goods and services that people need to live more fulfilling lives.
And it’s up to the media to understand that in the final analysis, the Lame Duck budget battle is not about policies and programs at all – it’s about right and wrong.

Browse articles by author

More Current Affairs

Jun 12th 2021
EXTRACT: "China’s recently published census, showing that its population has almost stopped growing, brought warnings of severe problems for the country. “Such numbers make grim reading for the party,” reported The Economist. This “could have a disastrous impact on the country,” wrote Huang Wenzheng, a fellow at the Center for China and Globalization in Beijing, in the Financial Times. But a comment posted on China’s Weibo was more insightful. “The declining fertility rate actually reflects the progress in the thinking of Chinese people – women are no longer a fertility tool.” "
Jun 12th 2021
EXTRACT: " I remember recounting fellow leaders of the story of a Rwanda schoolboy caught up in the genocide of the 1990s and now immortalized in the Kigali Genocide Memorial museum, where, in a section devoted to children, one can find his photograph and a plaque that reads: ----- David, age 11 ...... Ambition: to be a doctor ...... Favorite sport: football ...... Favorite hobby: making people laugh ...... Death: by mutilation ...... Last words: the UN are coming to save us ----- In his idealism and innocence, David believed the international community would save him and his mother. We didn’t. "
Jun 8th 2021
EXTRACT: " While many conservative Republicans opposed Trump and saw that he posed a danger to their party and democracy itself, they were hesitant to buck the mass movement they had created, fearing that it would turn against them. Some of these same conservatives assumed that with Trump's defeat, the horror of January 6th, and the former president's banishment from social media, the time had come to restore sanity to their party. But the GOP leadership’s continued cowering in the face of what they now call "Trump's base" has caused them to circle the wagons and purge their ranks of those who call for sanity. "
May 26th 2021
Editor's Note: This article is about the Federal Reserve, inflation in the 1970's, and possible similarities to today.
May 25th 2021
EXTRACT: "Netanyahu claims to be acting in the name of the Jewish people. He certainly is not. Many Jews around the world, including me, despise Netanyahu’s racist politics. As an American, I am also deeply troubled by the US government’s knee-jerk support of Israel. Fortunately, I am not alone in this view. A growing number of Democratic Congressmen, Jews and non-Jews alike, have called on the United States to stop supporting Israel’s lawlessness. The truth is that the US government’s uncritical support for Israel has come to depend more on evangelical Christians, such as former US Secretary of State Michael Pompeo, than on American Jews, who are deeply divided by Netanyahu’s actions. And the evangelicals’ real interest in Zionism is not Jews’ security, but Armageddon, the end of the world, which they believe will come only when all Jews are in Israel."
May 18th 2021
EXTRACT: "This period in US history could go down as the moment when America’s democratic system for electing a president – the most consequential duty of US citizens – was broken, perhaps for good."
May 16th 2021
EXTRACT: "While reading Human Rights Watch’s (HRW) monumental report “A Threshold Crossed,” I felt a range of emotions. It also left me with one big question. I was deeply impressed by the report’s rigorous scholarship. At the same time, it brought to the surface feelings of anger and profound sadness. It’s an extraordinarily complete study detailing not only the many ways Israel has violated a broad range of Palestinian human rights, but the ideology of racial superiority and entitlement that Israel has used to justify its repression." ..... "My advice to both Israel’s defenders and weak-kneed liberals is​, “Read the damn report.” "
May 16th 2021
EXTRACTS: .... "He transformed a transitioning market economy into a stable statist project that rests on an alliance of his inner circle," ..... "He transformed Russia from a respected member of the international community into a rogue state" .... ". He energized NATO by providing it with the adversary it lacked after the end of the cold war," ..... "He befriended hopelessly corrupt, dysfunctional, and unstable dictatorships..." ..... "He forged a quasi-alliance with China, thereby enhancing Russia’s dependence on the one country that might have reason to appropriate those Russian territories inhabited by Chinese."
May 15th 2021
EXTRACT: "On the face of it, the latest escalation of violence is following the template of all inter-ethnic wars. Muslims observing Ramadan shouted nationalist slogans and clashed with Israeli right-wing groups chanting “Death to the Arabs.” The Israelis haughtily marched with their national flag on Jerusalem Day, marking Israel’s capture in 1967 of East Jerusalem and the Temple Mount, the site of the biblical Second Temple, and of Al-Aqsa, completed in the year 705. Battles in and around the Al-Aqsa compound erupted, with worshipers inside throwing stones at the Israeli police, who responded by firing rubber-tipped bullets and other projectiles, wounding hundreds."
May 13th 2021
"Regardless of how the current and future violent conflicts between Israel and the Palestinians in Jerusalem will end, there will be no Israeli-Palestinian peace unless East Jerusalem becomes the capital of a Palestinian state while the city remains united."
May 7th 2021
EXTRACT: " Would the United States be prepared to risk a catastrophic war with the People’s Republic of China to protect the Republic of China, better known as Taiwan? "
May 5th 2021
EXTRACT: "Human history, ancient and contemporary, is replete with instances of genocide – that is, the effort to eradicate a people, erase their history, denigrate their culture, and destroy their physical presence. Many of these atrocities have been recognized by the victims and other nations who support them. But, with the notable exception of the German acknowledgment of the Holocaust, rarely have the perpetrators of these crimes accepted responsibility and offer recompense "
May 2nd 2021
EXTRACT: "The best way to defend liberal democracy is to practice it at home and abroad with the “courage and self-confidence” that Kennan touted at the dawn of the Cold War. This is also the best way to ensure the survival of our own conception of human freedom. And survive it will."
May 1st 2021
EXTRACT: "Ann Arbor (Informed Comment) – Sammy Roth at the LA Times/ Boiling Point Newsletter reports that California’s main power grid was powered for several hours last Saturday by 90% renewables. For just four seconds that day, the grid, which covers 4/5s of the state, reached 94.5% generation by green energy. California is the world’s fifth largest economy. The main grid does not cover Los Angeles County. On the other hand, these figures do not include the electricity generated by the Diablo Canyon nuclear plant, which is not counted as renewable but which is also very low-carbon."
Apr 23rd 2021
EXTRACT: "It is no accident that there has been an economic divergence in Central and Eastern Europe. Those countries that have joined the European Union have improved their economic governance, and GDP has begun to converge with Western Europe. Between 2014 and 2019, Hungary, Poland, and Romania grew at an annual average rate of 3.9%, 4.1%, and 4.7%, respectively. Meanwhile, Belarus and Ukraine experienced minimal growth during this period, and Russia’s economy expanded at an average annual rate of just 0.7%. Though Russia had a higher per capita GDP (in terms of purchasing power parity) than Croatia, Poland, Romania, and Turkey as recently as 2009, all of these countries have since overtaken it. Russians today are shocked to learn that they are worse off than Romanians and Turks. Among EU member states, only Bulgaria is still poorer than Russia. With its close proximity to the EU single market, Russia could have had higher growth if it had pursued sound economic policies. Instead,..... "
Apr 22nd 2021
EXTRACT: "As far as anyone can tell, the US military is not on the verge of an internal breakdown, let alone primed to stage a coup d’état. But few predicted anything like the US Capitol riot before protesters equipped with body armor, stun guns, and zip-ties breached the building. Before the US is blindsided again, its leaders must act resolutely to root out extremism in the military."
Apr 17th 2021
EXTRACT: "The new report on 2020 by the International Renewable Energy Agency reveals that the world’s renewable energy generation capacity increased by an astonishing 10.3% in 2020 despite the global economic slowdown during the coronavirus pandemic." .... "In 2020, the global net increase in renewables was 261 gigawatts (GW). That is the nameplate capacity of some 300 nuclear power plants! There are actually only 440 nuclear power plants in the whole world, with a generation capacity of 390 gigwatts. So let’s just underline this point. The world put in 2/3s as much renewable energy in one year as is produced by all the existing nuclear plants!"
Apr 16th 2021
EXTRACT: "When we examined the development of nations worldwide since 1820, we found that among rich Western countries like the United States, the Netherlands and France, improvements in income, education, safety and health tracked or even outpaced rising gross domestic product for over a century. But in the 1950s, even as economic growth accelerated after World War II, well-being in these countries lagged.
Apr 11th 2021
EXTRACT: "Some presidents indulge in the “Mount Rushmore syndrome” making an obvious effort to achieve greatness. Normally soft-spoken and apparently modest Biden is making his own bid for immortality."
Apr 9th 2021
EXTRACT: "New ways of thinking about the role of government are as important as new priorities. Many commentators have framed Biden’s infrastructure plan as a return to big government. But the package is spread over eight years, will raise public spending by only one percentage point of GDP, and is projected to pay for itself eventually. A boost in public investment in infrastructure, the green transition, and job creation is long overdue."