The Parties of Lincoln and Jefferson Become the Parties of the Benjamins
1 July 2001
For years, the Republican Party has consistently catered to the views and desires of what might be called capital: the richest corporations and individuals in America. It is distressing to think the Republican party started as an anti-slavery party that sought to end the worst practice of nineteenth-century capitalism in America. More distressing, perhaps, is the increasing agreement of Democrats in Congress with the newfound Republican agenda.
Illustrative of the greed of capital today is a recent call for repeal of the corporate income tax by Treasury Secretary Paul O'Neill recently in the Financial Times. For much of the 19th century, the main source of revenue for the federal government was tariffs on imported goods. Not until 1913, with the passage of the sixteenth amendment, did individual taxation on income take hold. Now the Treasury Secretary wants to put the federal tax burden squarely on the shoulders of individuals. In effect, he would prefer that corporations have the same tax treatment as public charities--except that most public charities must distribute at least a portion of their earnings each year to worthy causes.
While few in Washington are openly calling for a repeal of the corporate income tax, few issues in Washington have more support than the cutting of income tax rates, especially for the wealthy. There was broad support in both the Democratic and Republican Parties for huge tax cuts, of $1.0 billion and $1.6 billion, respectively, over 10 years. In each plan, the richest Americans would enjoy the largest tax savings. The eventual compromise cut $1.35 billion of taxes over ten years. It all but eliminated the estate tax, paid only by the richest of the rich. It cut tax rates significantly for rich Americans, but by no more than $600 per year for the working poor.
Republicans in Congress will fight later this year to cut the capital gains tax, one of their favorite vehicles for favoring capital. Individuals, unless they are subject to the alternative minimum tax, pay federal capital gains taxes of no more than 20%, regardless of their income, as long as the underlying assets are over one year old. In 1998, American families with taxable income over $1,000,000 enjoyed just about half of all of the capital gains.
Many of the richest Americans are the high-ranking executives of corporations. Like baseball or basketball players, they earn astronomical amounts that seem divorced from the amount of work that they actually do. Corporate executives earn much of their money through cheap stock options, while sports stars earn their pay through salaries that are truly performance- based. Sports stars do not have contracts that mandate huge payments on termination. They do not have special retirement plans that lesser-paid players cannot enjoy. When they have a bad day at the office, Kenny Mayne of ESPN can and will make fun of them. When and if Sanford Weill of Citigroup does his job before a national audience, then he might actually earn his billion dollars of Citigroup stock.
While the two major parties have disagreed about the nuances of tax policy, they have agreed about deregulation of industries that affect every American. Republican and Democratic politicians around the country have fallen in love with deregulation for the sake of deregulation. When the federal government deregulated long distance phone service, consumers actually benefitted. It proved easy to get local phone companies to give many different long-distance companies access to their customers. The competition between AT&T, MCI, Sprint, and a host of smaller competitors lowered costs for almost every caller. A major reason for the success of long-distance telephone regulation was that long-distance phone calls are a luxury. Competition made them a cheap luxury.
But both parties fell over themselves trying to deregulate other utilities. The utilities and their suppliers saw deregulation as a way to make money: otherwise, they would have stayed regulated. Deregulation of electricity has been disastrous in California. Electric rates soared well above the levels dictated by increased fuel prices. Part of the fiasco came from the ability of power suppliers to manipulate the electric market. In that state, the suppliers have made out like bandits, and the electric companies have been bankrupted. A political party not beholden to monied interests might suggest a novel idea for the electric market: imagine if companies called utilities were all but guaranteed significant profits if they operated power plants for the benefit of the public!
Both Democrats and Republicans in Washington have supported international free trade agreements that allow multinational corporations to save on the (already small) labor costs of manufactured goods, regardless of the costs to workers and communities. NAFTA and its successors are great for companies like General Electric, because it can save a few dollars on every appliance that it manufactures in Mexico rather than in the United States. They are rotten for manufacturing workers forced to start all over again in the service sector. The treaties might be a good idea for countries like Mexico, but only if the new factories bring better conditions and wages along with them.
Corporations contribute vast amounts of money to both political parties in every election cycle. According to the Center for Responsive Politics, between 1999 and 2000, the Democratic Party raised $520 million and the Republican Party raised $716 million. The vast majority of both totals were from businesses and their executives. The days when the Republicans tapped businesses and the Democrats tapped labor are over. Now, the Democrats tap labor, but both parties are the parties of business.
What does separate the Democrats and Republicans right now if that the Republicans do not seem to mind being the overt party of capital. Cases in point are the cases of Treasury Secretary Paul O'Neill and presidential advisor Karl Rove. O'Neill did not decide until March that holding $60,000,000 in Alcoa stock could present a conflict of interest. Even after Alcoa stock almost doubled after aluminum prices rose as a consequence of the California power crisis, O'Neill took his time in selling his vast holdings. Rove thought that holdings of over $50,000 in General Electric and over $100,000 in Intel were minimal and did not require him to abstain from conversations with executives of those companies regarding possible acquisitions. The reasons that he had not sold his stock? He wanted, essentially, to avoid paying capital gains taxes on the proceeds. By contrast, Robert Rubin, President Clinton's Treasury Secretary, sold his shares in Goldman Sachs back to the firm before taking office.
Each of these issues illustrates a growing consensus in Washington that what is good for corporations in general is good for the nation. However, some of the most important legislation in American history had little to no corporate support. If these laws were good for the nation, the corporations of the time took little notice.
The two major political parties used to have strong underlying historical themes that resonated with the American public. The Republicans were the party of Lincoln, the party of individual rights and equality. The Democrats were the party of Jefferson, the party of the "little man" and the farmer. Now, the Republicans are the party of the Benjamins, the faces on $100 bills, and the Democrats are doing little to look much different.
Every capitalist society has its successes and failures. A confluence of factors have contributed to economic and social progress in the United States--capitalism, a strong labor movement, a strong national government, not to mention geography and plain luck. Political parties are aligning their interests with capital, to the detriment of the citizenry. Corporations do not, fortunately, have an unchallenged hold on politics in America. But they would love to increase their influence as much as possible, through political contributions, suppression of unions, and the homogenization of American politics.
This month, Adbusters has proposed that the American stars and stripes be replaced with a brands and bands, with corporate logos replacing the familiar stars. When I fly my altered flag on Wednesday, I do so in the hope that for the Democrats at least, it's not just about the Benjamins.
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