"Class Warfare" is a Stupid Term; Let's Dump It

          It is officially time to retire the phrase “class warfare” from our political vocabulary. 

         Back when words actually meant things, “class warfare” was a pretty scary proposition. Not just anybody could do it; it took a lot of anger and a critical mass of people—always from the lower classes of society—who were willing to, well, have warfare. The French Jacobins certainly fit this description, along with L’ouverture's Haitian slaves and Lenin’s Russian revolutionaries. By the time a society got around to “class warfare,” it was pretty much going to change one way or another.

         Now, however, “class warfare” is the first thing out of a conservative’s mouth when anybody proposes a tax increase. It comes out especially quickly when somebody wants to raise the capital gains tax, or the maximum tax rate, or let the Bush Tax Cuts Expire. We don’t want to have “class warfare,” after all, or Mitt Romney might have to pay the same percentage of his income that I do, and then he will stop creating jobs.

         The tactic of labeling tax increases “class warfare” appears to have worked well in America, mainly because very few Americans perceive themselves as being in a lower class—we are a nation full of people who aren’t millionaires yet. And as long as this is the case, we certainly don’t want to go around doing class warfare things to the people who are millionaires, lest they hold a grudge when we move in next door.

         But it is time to abandon this ridiculous terminology. It was originally designed to convey contempt for the poor, which was bad enough. Now, however, it simply conveys contempt for reality.

Here is some reality to consider:

1.   As long as there is a United States government in any form, somebody is going to have to pay expenses. There will always, therefore, be taxes.


2.   There is no such thing as a tax plan that affects everybody equally. Whatever we do, whatever we tax, there will be winners and losers. In most cases, the winners and losers will each occupy different places on the economic spectrum. Some kinds of taxes are better for people with low incomes, and some kinds are better for people with high incomes. No system can be better for everybody.


3.   Questions about how to structure our tax system are legitimate items for public debate. Talking about who benefits and who does not benefit from a given structure is not “class warfare.” Pointing out that certain tax structures benefit the wealthy more than others is not a hostile act. It is not the same as storming the Bastille. It is, rather, an integral part of the democratic process.

         Criticizing politicians for encouraging rivalries between different social classes is not new in America, of course. It was one of the primary accusations that Hamiltonian Federalists routinely leveled against Jeffersonian Republicans. But Jefferson really deserved the criticism. In his immoderate support for the French Revolution, our third president really did advocate class warfare of the “kill-the-aristocrats-in-their-sleep” variety. And he had plenty of good things to say about early armed rebellions in America (Shea’s Rebellion and the Whiskey Rebellion) as well. Jefferson had very little use for the rich, and the rich felt exactly the same about Jefferson.

         But Jefferson was not actually a Jacobin—the writings of Alexander Hamilton notwithstanding. But he did stand firmly on the side of a government that did not transfer the burden of supporting government from the wealthy to the poor. How nice it would be if the self-proclaimed “Modern Jeffersonians”—the acolytes of small government and state sovereignty—would allow a national debate on the Jeffersonian ideals they reject without resorting to the kind of martial terminology that Jefferson himself despised.

Everyone Is to Blame, but Everyone Is not Equally to Blame

          The Standard and Poor’s report came out today, and, as expected, America’s bond rating was lowered from AAA to AA+—moving us from the “good neighborhood” inhabited by Canada, the United Kingdom, and France and placing us in the company of Bermuda, Abu Dhabi, and Slovenia. The likely result of this move is that the United States will pay higher interest rates for future bond debt, making it all the more difficult to dig out of the hole we are now in.

        The eight-page report from Standard & Poor’s assigns plenty of responsibility to all of the parties involved in last month’s debt dispute. Interested readers can find reasons to be angry with Congress, the Obama Administration, Republicans, Democrats, and Tea Partiers. Honest readers will find plenty of reasons to blame themselves, their consumption patterns, and their political assumptions for, not only the downgrade, but for the thirty-year history of overspending that brought us to this position in the first place.

        However, while the report faults the actions of all of the players in the recent crisis, it does not fault them equally. The report makes very clear that the behavior of one faction bears more responsibility for today’s decision than that of the others. I do not offer this as an opinion, but as a straightforward reading of a report that makes no effort to pull its punches.

        The first thing that the report makes clear is that the size of the debt alone is NOT responsible for the downgrade. America’s current debt-to-equity ratio of 74% is lower than that of other nations with a AAA rating, such as the U.K. (80%) and will remain so through 2015. At that point, however, the ratings agency feels that the debts of other AAA countries will begin to decline. They do not believe that this will happen in America. Understanding why is key to understanding today’s action. We need not look too far for the answer, however, as it is in the first-paragraph of the report:

We lowered our long-term rating on the U.S. because we believe that the prolonged controversy over raising the statutory debt ceiling and the related fiscal policy debate indicate that further near-term progress containing the growth in public spending, especially on entitlements, or on reaching an agreement on raising revenues is less likely than we previously assumed and will remain a contentious and fitful process.

Standard & Poor’s, in other words, downgraded America’s credit rating because they do not trust our political process to reach the compromises necessary to reduce the debt—compromises that will require both “containing the growth in public spending” AND “reaching an agreement on raising revenues.”

        Taxes come up again in the report explaining that the projections behind today's decision was influenced by the perception that the Bush tax cuts would continue indefinitely:

Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.

       Finally, the report makes absolutely clear that its decision was influenced by the actions of those in Congress who openly threatened to allow a default if their demands for spending cuts, with no tax increases, were not met:

The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective, and less predictable than what we previously believed. The statutory debt ceiling and the threat of default have become political bargaining chips in the debate over fiscal policy.

     

      This is as direct a statement as S & P could have made against the arrogant, irresponsible way that the once-uncontroversial debt ceiling issue was turned into a hostage situation by a group of legislators determined to press one way of addressing the debt (entitlement cuts) while steadfastly refusing to consider the other (tax increases).

        Democrats are certainly not blameless in this mess. The entitlement programs that they love are breaking the country, and, if they can’t find ways to get those programs under control, there is probably no way that we will ever make a significant dent in our bonded indebtedness.

        That said, however, the Standard & Poor’s report makes it very clear that the size of the debt is only one of the reasons for the downgrade, and not, at the current historical moment, even the most important one. It is the state of our political process, more than the size of our debt, that produced today’s action. With that in mind, consider that

•         Only one of the parties in the recent dispute turned “the statutory debt ceiling and the threat of default” into “political bargaining chips in the debate over fiscal policy.”

•         Only one of the parties “continue[s] to resist any measure that would raise revenues.”

•         Only one of the parties signaled an absolute unwillingness to compromise its position and bragged to the media that it “got 98% of what we wanted.”

        So let the blames begin—there is certainly plenty to go around. But let us not fall for the comforting fiction that, because everybody is at fault, everybody is equally at fault. That is simply not the case, and no serious reading of the actual text of the Standard & Poor’s report could argue that it is.