Throughout the IBM Pension heist, Ellen E. Schultz, a Pulitzer Prize winning investigative reporter with the Wall Street Journal, exposed IBM's and other companies shenanigans that have cost retirees millions and millions of dollars, while enriching corporate executives.
Ms. Schultz has just published a book that every IBMer should read: Retirement Heist: How Companies Plunder and Profit From the Nest Eggs of American Workers. Many IBMers are aware of the "cash balance heist" of 1999. However, IBM has been stealing money from the pension plan dating back to 1991, well before the Gerstner era.
"Ellen Schultz documents the biggest heist in history, all the more horrifying because it is legal. Accounting tricks, perverse tax incentives, and bonus- hungry executives have taken the retirement money American workers have saved over decades. Meticulously researched and as gripping as a crime novel, this is essential reading for anyone who has, had, or hopes to have a job." -Nell Minow, co-founder of The Corporate Library and author of Watching the Watchers: Corporate Governance for the 21st Century
As Ellen E. Schultz, an investigative reporter for the Wall Street Journal, reveals in her new book, "Retirement Heist," it wasn't the dire economy that led these companies to plunder their own employees' earnings, it was greed. Over the last decade, some of the biggest companies -- including Bank of America, IBM, General Motors, GE and even the NFL -- found loopholes, abused ambiguous regulations and used litigation to turn their employees' hard-earned retirement funds into profits, and in some cases, executive compensation. Schultz's book offers a relentlessly infuriating look at the mechanisms they used to get away with it.
Selected reader comments concerning this article follow:
And now, the final blows come raining down. As Baby Boomers, we saw our parents in their later years taking advantage of pensions from their secure life-long jobs. We don't get pensions. We don't get retirements. We're a pain in the ass for younger workers mostly because many of us simply cannot retire. Xers and Millenials are NOT the first generation to have it worse than their parents. Baby Boomers are. We were pulled by force out of our college classes and sent to a jungle to die on the other side of the world. We met a working world of continual booms and busts with no job security. Our working years were characterized by a long downward slide in buying power which was brought on by the "bait and switch" scam they call "supply-side" economics. And now many of us will work till we drop.
Yes, I know some around here will call this "whining." You can call it whatever you want. I call it an explanation and a clarification. And I would ask X-ers and Millenials to stop demonizing us and blaming us for their problems. Bill B.
Again, the architects of the modern Supply-side dogma which has ruined the futures of working-class Americans were either members of the "Greatest Generation" or they were the kinds of Boomers who cheered their daddies on while they pulled us out of our classrooms to fight a war on the other side of the globe for no apparent reason. If you check back, you'll find out the vast majority of us didn't agree and we've been paying for it in one way or another ever since. Bill B.
It’s hard to distill the book’s far-flung elements into a single narrative, but it appears to come down to this: After the huge run-up in stocks during the 1980s, American corporations were sitting on billions of dollars in pension funds that weren’t going to be paid to retirees anytime soon. They began pushing to use the money themselves, an effort that resulted in a series of new accounting guidelines and federal regulations that, in time, allowed them to put pension monies to all sorts of uses never before envisioned. Financing corporate restructurings. Paying for retiree health benefits. Paying for golden parachutes. Some companies simply eliminated the pension plan altogether and took the money themselves. At the same time, Ms. Schultz shows, companies like I.B.M. steadily cut back on pension and health benefits while assuring employees that it was making the plan more “modern.”
The mind-boggling complexity of many pension statements prevented most employees from understanding what was going on; a notable exception came at I.B.M., where a handful of older workers figured it out and began protests. Corporations, of course, rarely if ever acknowledged that they were shortchanging their retirees. Everything they were doing, some pointed out, was not only completely legal but also a boon to shareholders.
Schultz says the gradual decline of traditional pension plans has little to do with the pig-in-the-python demographic trend of baby boomers all retiring at once. She blames the retirement crisis on top executives, benefits consultants and others in the retirement industry who "played a huge and hidden role in the death spiral of American pensions and benefits."
They have not been held to account for it, she says, and, "if anything, they are viewed as beleaguered captains valiantly trying to keep their overloaded ships from being sunk in a perfect storm. In reality, they're the silent pirates who looted the ships and left them to sink, along with the retirees, as they sailed away safely in their lifeboats." Her provocative words are backed by scathing accounts of how hundreds of large companies deliberately and deceptively cut back the pension and retiree health care benefits of the rank and file while improving their own bottom lines and the pension benefits of company executives. ...
Schultz goes into detail about what happened to specific employees at such companies as Cigna, IBM and AT&T, and how the benefits consultants and actuaries behind the scenes designed their marketing campaigns to deflect the truth with broad claims about the new plans' enhanced features. She then explains how pension cutbacks and surpluses as well as retirement health liabilities can be used to manipulate a company's earnings. Even financial analysts couldn't tell that the increase in income had nothing to do with widget revenues.
But that's only the tip of the iceberg. "Retirement Heist" shows how pension benefits for the privileged few have skyrocketed in recent years at the expense of the proletariat. It is a must-read for everyone who has a pension as well as their spouses.
Cutting benefits provided employers with an additional windfall: income. Because the benefits are recorded as debts on a company's books, reducing the debt generates paper gains, which are added to operating income right along with income from selling hardware or trucks. Thanks to these accounting rules, which all companies adopted in the late 1980s, retiree plans have become cookie jars of potential earnings enhancements: Essentially every dollar owed to current and future retirees—for pensions, health care, dental, death benefits or disability—is a potential dollar of income to a company. ...
Employers' ability to generate profits by cutting retiree benefits coincided with the trend of tying executive pay to performance. Intentionally or not, top officers who greenlighted massive retiree cuts were indirectly boosting their own compensation. As their pay grew, executives deferred more of it. Supplemental executive pensions, which are based on pay, also ballooned. These executive liabilities account for much of the "spiraling" pension costs many companies complain about.
Selected reader comments for this article follow:
Today many companies are instituting health care benefits that include deductibles that require the employee to pay the first $3K, $4K, or $5K of medical expenses including child birth. In other words, the young employee making minimal salary will have to pay huge payments to have a child while the expense has no impact on corporate officers making 7 figure salaries or more. These same executives are not fired when they perform badly, they are given a soft landing representing millions in termination benefits. The low salary employee will get a modest termination severance.
As this nation addresses it's economic crisis we read of class warfare and taxes but this article is just another example of how and why such warfare exists. for 3-decades the top has squeezed out everything they can from the bottom while adding more and more company paid personal perks to their own arsenal (Club memberships, private jets for travel, vacation laden "office" space to write off vacations as a business expense, etc. ...)
Inside RAMAC there were two independent access arms which moved vertically up a stack of 50 disks, 24-inches in diameter, to the right disk, and then sideways across the target disk's surface to read and write data from the destination track. It took, we understand, 600ms to find a record in a RAMAC. The data capacity was 5MB (8-bit bytes, 7-bits for data plus a parity bit) and it would cost a business $38,400 a year to lease it. There was no popping out to your local Fry's to buy one...
FSSA is suing IBM to recover more than $400 million it paid before Daniels canceled the 10-year contract in 2009 amid complaints about the automated welfare system IBM installed. IBM argues FSSA owes the company about $100 million for costs including computer equipment the state has held onto.. Indiana House Minority Leader Patrick Bauer, D-South Bend, called the higher costs ""wasted money, good money after bad." Indiana Senate Minority Leader Vi Simpson, D-Bloomington, said FSSA should be spending the money to help vulnerable people who have seen their benefits cut because of budget cuts. FSSA spokesman Neal Moore said Armonk, N.Y.-based IBM "is doing all it can to run up the costs in hopes the state will give up."
At the time, due to my particular family situation, (I had kids in elementary, junior high and high school) I assumed that I'd probably work until age 66. And my assumption was correct. I just turned 62, and I'm still working, but of course, I'm not employed by IBM. Fortunately for me, I had 32 years of service in March of 2009 when my manager informed me that I had been "selected to participate in today's Resource Action."
So now it 2011, I've been receiving a pension check for more than two years, and lately I've been wondering what my check might have been had The Heist not happened. Does anyone know if that can even be calculated, much less how the hell to do it? Maybe I'm better off NOT knowing, because there ain't much love for IBM left in my heart.
One other thing, and then I'm done. I recently read that some corporations had (unbeknownst to their employees) purchased life insurance on their employees, naming the corporation as the beneficiary, and plowed any death benefits received into a fund used to pay out executive pensions. Does anyone know if IBM did that?
I assume you were a second choicer and stayed with the PCF pension plan. Based on your age and years of service, then pension you are receiving should be about 30% of your 5 year final average salary.
Had IBM not discontinued the old Service and Earnings plan in 1995, your pension would have been 1.35% times your years of service, times your 10 year final average salary, or about 40%. The switch to the PCF plan took away about 25% of your pension. Had you chosen to go with the Cash Balance plan and selected the annuity option, your pension would be even less.
Selected reader comments follow:
I’ll spare you the suspense. Amassing $1 million in an 401(k) plan is possible, but up to this point not very probable. Recently, I contacted both Fidelity and Vanguard retirement plan services to determine how many individual 401(k) account balances exceed $1 million dollars. While Vanguard was unable to provide any definitive statistics, Fidelity noted that, while million-dollar qualified account balances do exist, they make up less than 1% of all their accounts.
Amid the pervasive job market blues, this is the kind of report that gets my attention. Doing good has a real appeal to career changers over 50. Garvey’s announcement backs up what a new Idealist.org survey heard from 3,000 U.S. nonprofit organizations who responded to their poll this past summer. The nonprofit jobs web site concluded: “while the economy is still fragile, and while the whole sector is being very careful with its spending…there is reason for optimism about hiring.” In other words, organizations are planning on hiring more people. Of those who replied, forty-two percent plan to hire new positions and nearly half will fill positions that become vacant. Program or service staff are top of the list. But if you’re a go-getter fundraiser and can whip up creative and diverse funding streams, they want you. Administrative, communications, accounting and finance personnel, and technology experts are on the to-be hired scrolls too. The Idealist.org site, too, has had a significant jump in job postings in 2011.
The number of underinsured adults—those with health insurance, but high medical expenses relative to income—rose by 80% between 2003 and 2010, from 16 million to 29 million, according to the Commonwealth Fund. The study defined underinsured adults as those who reported at least one of the following conditions:
Nearly half (44%) of U.S. adults, or 81 million people, were either underinsured or uninsured in 2010, up from 75 million in 2007 and 61 million in 2003. Low-income families were most at risk of being underinsured, according to the Commonwealth Fund. Seventy-seven percent of those with incomes below 133% FPL, and 58% of those with incomes between 133% and 250% FPL were either underinsured or uninsured. If the ACA succeeds in reaching these individuals (those with incomes lower than 250% FPL), the number of underinsured could be reduced by 70% once the law is fully implemented.
This was despite deep hardship imposed by the recession, which has left young adults unemployed at nearly double the rate of older Americans, with incomes sliding far faster than the national average.
The Obama administration, intent on showcasing the benefits of a law that has been pilloried by Republicans, attributes the improvement to a provision of the Affordable Care Act that permits parents to cover dependents up to their 26th birthdays. Until that measure took effect one year ago this week, children typically had to roll off their parents’ family policies at 18 or 21 or when they left college. ...
Because entry-level jobs frequently do not have health benefits, and individual policies can be unaffordable on a starting salary, the rate of young adults without coverage is nearly double the national average. A Commonwealth Fund survey found that 45 percent of young adults reported delaying medical care because of cost in 2010, up from 32 percent in 2001.
"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.
Fleming is himself a businesses owner, so Jansing asked, “If you have to pay more in taxes, you would get rid of some of those employees?” Fleming responded by saying that while his businesses made $6.3 million last year, after you “pay 500 employees, you pay rent, you pay equipment, and food,” his profits “a mere fraction of that” — “by the time I feed my family, I have maybe $400,000 left over.” ...
And how hard does the congressman work to make the equivalent of eight median household incomes? Fleming told the Wall Street Journal that “he spends very little time on day-to-day management, though he weighs in on broad strategy decisions.” “I monitor the reports. I’m certainly in communication with the managers,” he told the paper.
The millionaires’ tax is among several changes Mr. Obama will propose in urging Congress to overhaul the federal income tax code next year, both to raise revenues for reducing deficits and to make the tax system simpler and fairer, said the administration officials, who agreed to speak in advance of the president’s announcement on the condition of anonymity. The millionaires’ rate would affect only 0.3 percent of taxpayers, they said. That would be fewer than 450,000; 144 million returns were filed for 2010.
Mr. Obama’s proposal comes a month after Mr. Buffett began reviving his long-standing objection that he and “my megarich friends” pay a significantly lower percentage of their income in federal taxes — income and payroll taxes — than everyone else, thanks to the tax code’s favoritism toward the rich, and especially toward investors like him. “My friends and I have been coddled long enough by a billionaire-friendly Congress,” he wrote in an opinion article in The New York Times, a complaint he has repeated in talks and media interviews since. “It’s time for our government to get serious about shared sacrifice.” ...
The marginal tax rate is the percentage paid on the last dollar a person earns. The current system has six marginal tax rate percentages — 10, 15, 25, 28, 33 and 35 — and each applies to a progressively higher amount of income. In theory, a wealthy filer pays the lower rates on income within each bracket, but the bulk of their income is taxed at the top 35 percent rate. Middle-class taxpayers generally pay marginal rates of 15 percent or 25 percent.
But investors like Mr. Buffett pay no more than 15 percent on most of their income because that rate applies to capital gains, dividends and “carried interest,” which is the compensation paid to hedge fund partners and investment managers like Mr. Buffett.
Another reason many wealthy Americans pay a smaller share of their income in federal taxes is that the Social Security payroll tax does not apply to income above $106,800; most people do not reach the cutoff and pay the tax on all their income.
Counting income and payroll taxes, Mr. Buffett has said he paid an effective tax rate of 17.4 percent for 2010 compared with an average 36 percent rate for many employees of his company, Berkshire Hathaway.
Under Mr. Obama’s proposal, Mr. Buffett and others with taxable income of more than $1 million would pay a minimum tax rate closer to his employees’ rates. But Mr. Obama will leave the details of how such a rate would be calculated — whether to focus on the overall federal tax burden of middle-income individuals generally, or their marginal rates — to the debate over rewriting the tax code.
Appearing on CNN’s “State of the Union,” Sen. Lindsey Graham (R-S.C.) echoed Ryan’s characterization of the plan as class warfare, adding that it was “political move” that would do little to reduce the debt. “The tax code should be reformed for one purpose: to generate more revenue to help run the government and create jobs,” Graham said. “When you pick one area of the economy and you say, ‘We’re going to tax those people because most people are not those people,’ that’s class warfare.”
Democrats, meanwhile, defended the idea and criticized House Speaker John A. Boehner’s (R-Ohio) absolute refusal to consider any tax increases. “I wonder if Boehner knows what it sounds like when he continues to say the position of the Republican party in America is that you can’t impose one more penny in taxes on the wealthiest people. I wonder if he understands how that sounds in Ohio to working families who are struggling paycheck to paycheck.”
Whether the taxes on the rich in Europe raise enough money to close much of their budget shortfalls, they are being promoted as a step toward economic fairness at a time when governments are cutting spending on social programs like pensions, health care and education. Mr. Obama — whose millionaire’s tax would probably raise a modest amount of revenue over the next 10 years by collecting more from several hundred thousand Americans — has also framed his plan as a way to make the system more equitable.
Specifically, the proposal would counteract decades of tax reductions for most Americans that have given the wealthy the most benefit. But the idea being embraced by much of the world faces strong opposition in the United States from Republicans and other conservatives who say it would harm the economy and cost jobs. ...
Until the recent financial crisis and worldwide economic downturn, individual tax rates had fallen substantially in most developed countries over several decades. In 1980, the top federal rate on Americans was 70 percent, and most European countries were above 60 percent. Today most European countries have rates below 50 percent. The United States has a top rate of 35 percent, but many wealthy Americans pay considerably less because their earnings are derived from dividends or capital gains, which are taxed at no more than 15 percent.
In 2007, the Supreme Court blew aside spending restrictions (weak as they were) by ruling that corporations, unions and other groups could spend unlimited amounts up to Election Day on “issue” ads that mentioned a candidate’s name, as long as they did not explicitly urge a “vote for” or “vote against” a candidate. Soon after that, 501(c) groups (like trade associations, unions and social welfare advocacy groups) became the vehicle of choice; unlike other types of groups, they are allowed to collect unlimited anonymous donations.
The legal changes of the last decade have contributed to the flood of money in the political process. Corporate campaign donations through 501(c)s and Super PACs hit around $140 million in 2010 from zero in 2006, according to estimates by the Center for Responsive Politics. For interest groups and wealthy individuals, the shifts have meant more direct influence in elections. For American democracy, the effect may well be disastrous.
As a result, the effective federal tax rate, including payroll taxes, for the wealthiest 0.01 percent of earners fell to 31.5 percent in 2005, from 42.9 percent in 1979, according to data from the Congressional Budget Office. Over the same time, effective rates for taxpayers in the center of the range fell to 14.2 percent, a decrease of just 4 percentage points.
A 2008 poll of 1,400 Americans by the Cornell Survey Research Institute found that when people were asked whether they had “ever used a government social program,” 57 percent said they had not. Respondents were then asked whether they had availed themselves of any of 21 different federal policies, including Social Security, unemployment insurance, the home-mortgage-interest deduction and student loans. It turned out that 94 percent of those who had denied using programs had benefited from at least one; the average respondent had used four. ...
Individuals’ political views partly account for their perceptions. In the Cornell poll, a respondent who self-identified as “extremely liberal” was 20 percentage points more likely to acknowledge using a government program than someone who used the same number of programs but was “extremely conservative.” Also, those who believed that the nation spent too much on welfare were less likely to admit that they had used a “government social program,” perhaps because that term had pejorative connotations. ...
Until political leaders reveal government benefits for what they are by talking openly about them, we cannot have an honest discussion about spending, taxes or deficits. The stipulation in the new health care reform law that W-2 forms must indicate the value of untaxed employer-provided health care benefits is a step in the right direction. The government should also provide “receipts” that inform people of the size of each benefit they get through the tax code.
But it obscures a far more pernicious form of “class warfare” being waged from above – a war of attrition against the upward economic mobility of ordinary working people. We live in a country where most people believe their opportunities are limited only by their innate talents and appetite for hard work, but over the last four decades, while decrying a wholly imaginary class war from below, conservative policies have undermined many of the ladders by which working people once achieved a middle-class lifestyle. Taking pot-shots at another class isn't war, nor is imposing a modest tax increase on those who have been showered with tax cuts for the last decade. Genuine class warfare is those at the very top working to keep everyone else far beneath them. ...
It's an undeniably true statement: in 1979, those in the top 10th of 1 percent of the American economic ladder took in 1.11 percent of the nation's income, but by 2008, they were grabbing 5 percent. Those extremely wealthy few didn't become five times smarter and aren't working five times harder than they were in the late '70s, and the seismic shift in our economic structures wasn't an accident: the upward redistribution of wealth in this country has been a direct result of policies for which those at the top have lobbied hard – labor policies, trade deals, cuts to the social services that lifted some of those at the bottom out of poverty and a tax structure that shifted a big chunk of the burden from corporations and the wealthiest to ordinary working families. ...
But, contrary to that popular notion, the United States is not a meritocracy, and Americans are getting the worst of both worlds—not only is a significant portion of the middle class hanging on by the narrowest of threads, not only do fewer working people have secure retirements to look forward to, not only are nearly one in seven Americans uninsured, but working people also enjoy fewer opportunities to pull themselves up by their bootstraps than do the citizens of other advanced countries.
In reality, the United States’ much-ballyhooed upward mobility is a myth, and it appears to be getting worse with each new generation. Several studies released in recent years suggest that Americans enjoy significantly less upward mobility than do the citizens of a number of other industrialized nations. German workers have 1.5 times the upward movement of Americans, Canada’s economy is nearly 2.5 times as mobile, and Denmark is three times as mobile. Norway, Finland, Sweden, and France (France!) are all more upwardly mobile societies than the United States. Of the countries included in the studies, the United States ranked near the bottom; only in the United Kingdom was it tougher to shake off a low social status one had been born with. ...
There’s a similar dynamic in terms of health care: people with access to paid sick leave and other health benefits switch jobs less frequently than those who don’t enjoy those bennies, and as a result, they have longer average tenure and higher earnings. In these areas, the United States has felt Jacob Hacker’s “great risk shift.” Hacker described how the U.S. “framework of security has unraveled, leaving Americans newly exposed to the harshest risks of our turbulent economy: losing a good job, losing health care, losing retirement savings, losing a home—in short, losing a stable, financial footing.” All of those hardships offer unique opportunities to fall out of the middle class—opportunities for downward mobility that simply don’t exist for the Canadian or French worker, people who can rely on a more progressive state to help preserve their income levels when disaster strikes.
Real conservatives would understand that we cannot maintain our vital defense budget without an appropriate tax base. Real conservatives would understand that we can simplify the tax code, get rid of all the special-interest giveaways and raise revenues at the same time. Real conservatives would never cut taxes and add a new Medicare entitlement in the middle of two wars. And real conservatives would understand that the Tea Party has become the Tea Kettle Party. It is people in real distress about our predicament letting off steam by trying to indiscriminately cut everywhere. But steam without an engine — without a strategic plan for American greatness based on spending cuts, tax reform and investments in tomorrow — will take us nowhere. Countries that don’t invest in the future tend to not do well there. Real conservatives know that.
Americans need to take a close look at what Mr. Obama is calling for: a broad tax reform that raises $1.5 trillion over a decade but allows for lower rates on businesses and individuals by cutting tax breaks and loopholes for special interests, and that restores some fairness to a system in which millionaires and billionaires pay lower tax rates than middle-class families.
There is nobody in this country who got rich on his own. Nobody.
You built a factory out there—good for you! But I want to be clear.
You moved your goods to market on the roads the rest of us paid for.
You hired workers the rest of us paid to educate.
You were safe in your factory because of police forces and fire forces that the rest of us paid for.
You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.
Now look, you built a factory and it turned into something terrific, or a great idea—God bless. Keep a big hunk of it.
But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.
But, yes, this was socialism -- or, perhaps, "state capitalism" -- because the government temporarily took substantial ownership in the companies when no one in the private sector was willing to put up enough capital to prevent them from going under. Today, the companies are thriving. More than that: the auto industry exemplifies how unions can do their best to protect the interests of their members while also ensuring the prosperity of the companies that employ them. ...
Franklin Roosevelt described the other way in 1932: "Our Republican leaders tell us economic laws -- sacred, inviolable, unchangeable -- cause panics which no one could prevent. But while they prate of economic laws, men and women are starving. We must lay hold of the fact that economic laws are not made by nature. They are made by human beings."
Once human beings throw off the chains imposed by the idea that all economic laws are "natural," they discover the capacity to change things and can use the tools of democratic government to do so when all else fails.
How about applying that same standard to Wall Street? How about we pass a law allowing the federal government to raid 15% of Wall Street’s investment capital over and above corporate taxes to help fund the government and then give that exact same, inflation-eroded amount back to it in 35 years without interest? That’s what the WSJ is suggesting to “fix” Social Security. Or better yet, how about the federal government pays the expropriated investment capital back to investment firms with a negative rate of interest—i.e., pays them back less than it raided—because that is exactly what SS already does in many cases and will do even more so in future, especially if the Journal gets its way. ...
Conservatives like to pretend that Social Security is an extravagant welfare program so even these pitiful rates of return are inexcusably high. Despite the low, even negative rates of return workers realize from their payday contributions to the program, the conservative establishment in Washington considers Social Security benefits excessive as long as they comprise a real rate of return on investment in excess of zero, and even that rate of return is considered unwarranted for any retirees GOP politicians deem “too rich to deserve” them. The position of the Republican establishment in Washington is not to convert Social Security from a financial house of cards into an actuarially sound retirement program that would improve everyone’s retirement income, but instead to scrub its rolls and transform it into a real welfare program by means testing it, reducing benefits and making people work longer.
The conservative establishment can call Social Security whatever it wants to now but for decades, don’t forget, they participated with every other politician in Washington telling workers they were investing in their own retirement every payday. It is, therefore, not surprising that American workers perceive Social Security as a public retirement plan they pay into each and every payday. It is, in their eyes, forced saving in a government retirement plan, which precludes them from using their money to save and invest in a private retirement plan. That’s not welfare, and to get there from here Republicans will have to pull the biggest bait-and-switch scam in political history.
But it was a war waged chiefly by business and conservatives. They won, as we show below, and the mass of middle-income and poor Americans lost. Obama's modest proposal for tax increases on the rich does not begin a class war. On the contrary, it is a small, modest effort to reduce the other side's class war victories.
Big business and conservatives have worked to undo the regulations and taxes imposed on them in the wake of the Great Depression of the 1930s. Then, an upsurge in labor union organization (the Congress of Industrial Organizations sweep across basic US industries) and in membership in both the socialist and communist parties gave Franklin Delano Roosevelt the support and the pressure to tax business and the rich. He took their money to pay for the massive federal hiring program (11 million federal jobs filled between 1934 and 1941) and to start the Social Security Administration etc. He regulated their business activities to try to prevent devastating capitalist depressions from recurring in the nation's future.
Since the end of the Great Depression - and especially since the 1970s - the class warfare waged by business and its allies (most conservatives in both parties) was successful. For example, at the end of World War II, for every dollar Washington raised in taxes on individuals, it raised $1.50 in taxes on business profits. In contrast, today, for every dollar Washington gets in taxes on individuals, it gets 25 cents in taxes on business. Business and its allies successfully shifted most of its federal tax burden onto individuals.
Over the same period, the tax rates on the richest Americans fell from 91 percent in the 1950s and 1960s, and 70 percent in the 1970s to the current low rate of 35 percent. The richest Americans won that spectacular tax cut. Middle- and lower-income Americans won no such cuts, while paying a higher proportion of their income for Social Security that the rich were required to do.
It was, of course, nothing of the sort. On the contrary, it’s people like Mr. Ryan, who want to exempt the very rich from bearing any of the burden of making our finances sustainable, who are waging class war.
As background, it helps to know what has been happening to incomes over the past three decades. Detailed estimates from the Congressional Budget Office — which only go up to 2005, but the basic picture surely hasn’t changed — show that between 1979 and 2005 the inflation-adjusted income of families in the middle of the income distribution rose 21 percent. That’s growth, but it’s slow, especially compared with the 100 percent rise in median income over a generation after World War II.
Meanwhile, over the same period, the income of the very rich, the top 100th of 1 percent of the income distribution, rose by 480 percent. No, that isn’t a misprint. In 2005 dollars, the average annual income of that group rose from $4.2 million to $24.3 million.
So do the wealthy look to you like the victims of class warfare? ...
And one consequence of the shift of taxation away from wealth and toward work is the creation of many situations in which — just as Warren Buffett and Mr. Obama say — people with multimillion-dollar incomes, who typically derive much of that income from capital gains and other sources that face low taxes, end up paying a lower overall tax rate than middle-class workers. And we’re not talking about a few exceptional cases.
According to new estimates by the nonpartisan Tax Policy Center, one-fourth of those with incomes of more than $1 million a year pay income and payroll tax of 12.6 percent of their income or less, putting their tax burden below that of many in the middle class. ...
Republicans claim to be deeply worried by budget deficits. Indeed, Mr. Ryan has called the deficit an “existential threat” to America. Yet they are insisting that the wealthy — who presumably have as much of a stake as everyone else in the nation’s future — should not be called upon to play any role in warding off that existential threat. Well, that amounts to a demand that a small number of very lucky people be exempted from the social contract that applies to everyone else. And that, in case you’re wondering, is what real class warfare looks like.
This site is designed to allow IBM Employees to communicate and share methods of protecting their rights through the establishment of an IBM Employees Labor Union. Section 8(a)(1) of the National Labor Relations Act states it is a violation for Employers to spy on union gatherings, or pretend to spy. For the purpose of the National Labor Relations Act, notice is given that this site and all of its content, messages, communications, or other content is considered to be a union gathering.