Back in 2005, well before the onset of the 2008 campaign for the White House, the powerful right-wing Washington insider Grover Norquist predicted that the “person who runs closest to the model of Ronald Reagan will win.”

Things, we now know, didn't quite work out that way. Victory in 2008 went to the candidate who challenged the “trickle-down” essence of Reaganism — and did this challenging more consistently and more articulately than any candidate for President in over a generation.

Now what? In this week's Too Much, we look at the new Obama administration's unique opportunity for narrowing America's great divide. And we delve into a recent book that dissects the roots of Reaganism's absurdly long run.

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The Reagan era, with last week's elections, may be on its last legs. But the power-suits still have one more indignity to impose on America's working people: the unpaid vacation. Dell, the world's second-largest computer maker, last week asked workers to take five days off — with no pay — over the next three months. And if workers choose to respectfully decline? In that case, the company said last week in an email to employees, more layoffs will be coming. Dell has already axed 8,900 jobs, 10 percent of its workforce, since last year. CEO Michael Dell currently ranks 11th on the Forbes 400 tally of America's richest, with a personal fortune estimated at $17.3 billion . . .

Not all corporate giants are expecting only workers to do the sacrificing. At the Gannett newspaper chain, CEO Craig Dubow has announced that he's taking a $200,000 pay cut and freezing the salaries of the chain's other top execs. With quarterly profits down a third, Gannett is laying off over 4,000 workers next month, and Dubow apparently feels the pain. Noted the CEO last week: “I have great empathy for those employees and their families who have lost their jobs.” Dubow's pay cut represents 17 percent of his 2007 salary. That “sounds noble,” notes industry watchdog Eric Krangel, but Dubow actually took home $7.9 million last year, counting “incentive” awards. His $200,000 pay cut amounts to a mere 3 percent of his 2007 pay. Observes Krangel: “Not exactly falling on your sword.”

The total cost of 2008's campaigning for Congress and the White House, the Center for Responsive Politics reports, will total over $5.3 billion, an all-time record. But once again, ironically, wealthy candidates who spent at least $500,000 of their own money to win office generally didn't. Self-funded candidates won just seven of the 49 races they contested. Does this mean that wealth doesn't matter in elections? Not exactly. Opponents of deep-pocket candidates, to stay competitive, had to raise multi-millions for their own campaigns, a reality that had them working hard to avoid positions that might alienate big donors. The biggest self-funded candidate in Tuesday's election, General Electric heir Sandy Treadwell, spent over $5.9 million from his personal fortune to challenge Democratic incumbent Kirsten Gillibrand in an upstate New York House district. Gillibrand won — after raising $3.6 million, “an awful amount of money,” she sighed after the election, “a terrible amount of money.”

Does Connecticut Governor Jodi Rell worry about alienating wealthy donors? Or does defending privilege just come naturally? Last year Rell vetoed legislation that would have raised the top tax rate on wealthy state households. Now her state is facing a $1 billion budget deficit, and Connecticut Voices for Children, an advocacy group, is asking Rell to consider upping taxes on incomes over $200,000 by one-half of 1 percent. The average state family, the group notes, earns $65,967 and pays 11 percent of that in state and local taxes. A Connecticut family making $3.2 million pays state and local taxes at just a 4.5 percent effective rate. Rell told a reporter last week she's not “comfortable” with the Voices for Children tax-the-rich pitch. Her alternative: cutting benefits for retired state employees . . . 

Switzerland's largest trade union and the Swiss Social Democratic Party's youth wing have taken to the streets to demand a “maximum wage” at UBS, the recently bailed-out Swiss banking giant. In protests at UBS branches, demonstrators called for capping all UBS executive pay at 500,000 Swiss francs, or $431,816. Marcel Ospel, the CEO who drove UBS into a ditch investing heavily in U.S. subprime mortgages, pocketed $120 million in pay, over seven years, before his resignation this past April. UBS announced last week that none of its executives will be collecting bonuses for 2008.

Quote of the Week

“As much as anything else, the presidential campaign turned into a dispute over the wisdom of 'spreading the wealth.' Most voters were comfortable enough with the concept to send its leading advocate to the Oval Office.”
Norman Solomon, A Mandate for Spreading the Wealth, Truthout, November 6, 2008

New Wisdom
on Wealth

Andrew Simms, How Labour could fix the financial system, Guardian (UK), November 5, 2008. The policy director of Britain's New Economics Foundation cals for a maximum wage — or maximum pay ratio — “because highly unequal societies have a habit of falling apart.”

Governing from the Middle, Against the Top

The new Obama administration, House Speaker Nancy Pelosi pronounced last week, “must govern from the middle.” What exactly did she mean by that? Governing from the middle, Pelosi explained, demands a focus on priorities like “growing the economy” and “expanding health care.”

For Pelosi, in other words, governing from the middle means governing for the middle.

In a nation as deeply divided economically as the United States, that’s not easy. In America today, an administration can govern effectively for the middle — but only if that administration stands willing to take on power and greed at the top.

Barack Obama seems to understand this reality more clearly than any Democratic candidate for the White House since Harry Truman in 1948.

“I think when you spread the wealth around,” as Obama famously said to Joe the Plumber, “it's good for everybody.”

Historically, in the United States, the most effective spreading has come via the progressive income tax, and Obama has pledged to make the tax system more progressive — by raising the tax rate on top-bracket income from 35 percent to the 39.6 percent rate of the Clinton years.

This increase, if enacted, would subject America’s richest to a tax rate still far below the 70 percent top rate in place when Ronald Reagan entered the White House back in 1980. Would an Obama administration eventually be willing to move closer to that pre-Reagan rate? That remains to be seen.

But the incoming Obama administration has another powerful tool, besides income tax rates, for restraining the concentration of wealth at America’s economic summit. That tool: the billions of taxpayer dollars that are going into bailing out the nation’s financial and corporate giants.

By insisting on meaningful limits on executive pay at bailed-out companies, the Obama administration could change Corporate America’s entire executive compensation culture — and, in the process, put the brakes on American inequality's single most powerful engine.

For the new Obama administration, one outspoken business leader noted last week, jamming on these brakes needs to be job one from day one.

In a Business Week column, that leader — Leo Hindery, the former CEO of AT & T Broadband and a current private equity fund managing partner — called “excessive executive compensation” a “cancer” that sits “at the core of many of our nation's economic ills.”

Top executives, Hindery points out, now make around 400 times what their average workers take home. In 1971, his first year out of business school, top execs rarely made over 20 times worker pay.

“With the ills of our broken executive compensation system rippling through so many” of the critical issues that face the new President and Congress, Hindery contends, lawmakers should early in 2009 start “fixing the system and reestablishing its fairness.”  

The bailout could be an ideal vehicle for that fix-it — because the bailout now appears likely to involve not just banks and insurance companies, but America’s most dominant manufacturing corporations as well. Without bailout help, news reports last week indicated, General Motors may actually run out of cash in three months.

Candidate Barack Obama campaigned on a promise to make sure CEOs don’t make out like bandits in the course of the bailout. So far they are. The executive pay limits in the original bailout legislation do little to end the windfalls cascading into America’s executive suites.

The financial giants now getting bailout dollars, Wall Street Journal research last week revealed, “owed their executives more than $40 billion for past years' pay and pensions,” as of the end of last year, and the current bailout rules “won't affect” these sums that banks “already owe their executives.”

Changing all this — taking steps to end the bailout’s status as an executive pay protection program — may emerge as the first big battle royale of the Obama administration. Middle class Americans know where they stand in this battle. If Congress and the new White House truly want to govern from the middle, they’ll stand with them.

Reaganism's Rise — and Resiliency

Jonathan Chait, The Big Con: The True Story of How Washington Got Hoodwinked and Hijacked by Crackpot Economics. Houghton Mifflin. 294 pp.

Jonathan Chait, a senior editor at the New Republic, probably welcomes Barack Obama's victory as much as anyone. But you won't find Chait rushing to dash off an obituary of the Reaganism Obama challenged during his campaign. Not just yet. Chait has seen Reaganism — the notion that we owe our prosperity to policies that keep rich people rich — pronounced dead too many times before.

In early 1984, for instance, the polls had Reagan double-digits behind the Democratic candidates contesting his re-election. And pundits also pronounced Reaganism dead in 1992, after Democrats swept his heir, the first President Bush, out of the White House — and then again, in the late 1990s, when the public “rebelled” against the Clinton impeachment.

None of these moments, in the end, would break the Reaganite lockgrip on America's political discourse. Public policy debates since the early 1980s have repeatedly played out within a Reaganite frame.

“To help the poor and middle classes,” as Reaganomics flack George Gilder wrote in 1981, “one must cut the taxes of the rich.”

Before the mid 1970s, no grown-up in American political life — no opinion leader in either Republican or Democratic Party policy circles — subscribed to anything close to this nutsy doctrine. Today, this crank economics strikes movers and shakers throughout Washington as essential conventional wisdom.

Indeed, John McCain couldn't believe his luck when his rival for the White House dared to defend the notion of “spreading the wealth.” Barack Obama, the McCain team gleefully believed, had committed the ultimate political gaffe.

How did this transformation in elite Washington thought take place? Jonathan Chait explains how in The Big Con, an entertaining narrative that names names and shares one fascinating anecdotal piece of history after another.

But why do we need a history of Reaganism's rise when Reaganism now seems spent? We need this book because we need to understand how powerful a hold Reaganite assumptions still have on our national political psyche, even among careful critics of Reaganism like Jonathan Chait.

Reaganomics, says Chait, has “at its core a central insight that does have a ring of plausibility.” Tax rates on the rich can go too high, he goes on to note, citing “the several decades after World War II” as an example. For most of these years, the tax rate on income over $400,000 stood at 91 percent.

“Nearly every contemporary economist,” writes Chait, would call this rate too high. That's true. Most contemporary economists do feel that Eisenhower-era tax rates on the rich ran too high. But this consensus reflects the political legacy of the Reagan era, not the economic evidence.

Chait himself acknowledges that America's years of high taxes on the rich saw “a massive boom, fueling rapid growth in living standards across the board.”

The post-war boom, Chait concludes, came “despite” Ike's high tax rates on the rich. Maybe. Or maybe those steep tax rates on the rich helped nurture an economy of social solidarity that worked for everyone.

Thoughtful current-day analysts like Jonathan Chait haven't yet become willing to ponder this latter possibility. Reaganism won't truly be dead until they do.

Stat of the Week

Two thousand years ago, at the height of the Roman empire, the wealthiest 0.01 percent of Romans took in 1 percent of the empire's income, notes University of Chicago political scientist Carles Boix. In 2006, according to calculations by University of California economist Emmanuel Saez, the top 0.01 percent in the United States took in nearly six times that income share.

Too Much is published by the Council on International and Public Affairs, a nonprofit research and education group founded in 1954. Office: Suite 3C, 777 United Nations Plaza, New York, NY 10017. E-mail: editor@toomuchonline.org.