Republicans and the Myth of Upward Mobility
In the months leading into the Republican primary a major agenda item among conservatives has been the protection of current tax rates for the wealthiest tier of Americans. This is not surprising if you consider that Republican presidential primary front-runner Mitt Romney is, himself, the product of massive generational wealth transfer. The surprising thing has been how effectively the right has sold struggling middle class voters on the notion that all Americans have equal footing when attempting to climb the economic ladder.
The idea is so strong that even the popular media isn’t exempt from aspects of this narrative. For example, the rags to riches success story of Facebook CEO Mark Zuckerberg, popularized by the film “The Social Network”, conveniently glosses over the fact that the heroic underdog of Harvard hails from an affluent family of North East doctors; not nearly as rich as the film’s antagonistic foils the Winklevoss twins, but far wealthier than a large majority of American families.
The premise of upward mobility in America is based upon education and hard work being the two greatest factors in financial achievement. If I study hard and am willing to put in as much time as possible toward my job I will be rewarded with financial health. This belief is simply no longer true. Statements like Florida Senator Marco Rubio’s, “The result is an America which is the only place in the world where it doesn’t matter who your parents were or where you came from; you can be anything you are willing to work hard to be,” are now statistical anomalies.
A recent article by Walt Gardner of Education Week, entitled “Policies Trump Schooling in Upward Mobility” states:
“In 2008, when 29.4 percent of the population held a college degree, the bottom 90 percent got less than 52 percent of the national income, according to the National Center for Educational Statistics. But in 1970, when only 11 percent of the population had a degree, the bottom 90 percent got 67 percent of the national income.”
These findings seem to be in line with the earlier international report “American Exceptionalism in a New Light: A Comparison of Intergenerational Earnings Mobility in the Nordic Countries, the United Kingdom and the United States” by Germany’s Institute for the Study of Labor, which claims:
“The main driver of the difference in the pattern of male intergenerational mobility in the U.S. from that of each of the other countries in our study is the low mobility out of the lowest quintile group in the United States. Indeed, it is very noticeable that while for all of the other countries persistence is particularly high in the upper tails of the distribution, in the U.S. this is reversed – with a particularly high likelihood that sons of the poorest fathers in the U.S. will remain in the lowest earnings quintile.”
In fact, census analysis by the Center for Labor Market Studies at Northeastern University found that in 2010 37% of young families with children were living in poverty.
Mitt Romney would have us believe this is a recent trend brought about by poor leadership in the Obama administration saying, "Over the past three years Barack Obama has been replacing our merit-based society with an entitlement society."
The downward spiral of the middle class has actually been well documented since the 1979. The Congressional Budget Office shows that the income level of the top 1% of earners has grown at three times the rate of the middle class, while the income level for the bottom 80% of our society has stayed nearly flat. This disparity has recently accelerated to a crisis point where one in three mortgage-carrying families are facing the possibility of foreclosure.
How has the idea of upward mobility been so solidified in the national consciousness that both academic analysis, and the more grass roots approach of observing friends and neighbors struggling to support multi-generation households, failed to make anything more than a dent in this powerful Republican talking point?
The answer may lie in the language used to convince voters that the true stumbling blocks to success are regulations and taxes.
The GOP’s 2011 economic policy items included:
“Empower small business owners and reduce regulatory burdens: In order to ease the regulatory burden on the economy and to promote job creation, [House Republicans] will approve legislation that requires a congressional review and approval of any proposed federal government regulation that will have a significant impact on the economy”
and “Fix the tax code to help job creators: [House Republicans] will set the top tax rates at no more than 25% for job creating businesses. This would level the playing field with our competitors and would help to generate investments and create American jobs allowing the U.S. to be more competitive in the global marketplace and attract business.”
Essentially, the GOP was able to position taxing the wealthy and government regulation of employers as being bad for the middle class by launching the now infamous “job creators” meme and applying it to small business.
The vast majority of American small businesses are closely held contracting, plumbing, auto-repair, and other service sector companies; most of which have under five employees. Small business is relatable to most mainstream voters because they regularly interact with this market segment, making a strong association between Republicans and “main street”. The truth, however, is that financial regulations and taxation caps wouldn’t impact all but a few small businesses, as the largest classifications of small businesses are limited liability companies and class “S” corporations, which allow the operator(s) to do business as a corporation while maintaining the tax status of an individual. These operators average between $35k and $75k gross annual income according to a 2010 Payscale.com report.
These business owners are hardly at an income level near that of Bill O’Reilly when he famously claimed, “If Barack Obama begins taxing me more than 50 percent -- which is very possible -- I don't know how much longer I'm going to do this. I like my job, but there comes a point when taxation becomes oppressive.”
The 2012 federal tax rate for a single small business owner making $35,350 per year is 25%, but only 35% for the same person making over ten times the income at $388,350 per year. It is also nearly double the 13.9% tax rate paid by Mitt Romney in 2010 on investment holdings that earned him over $20 million dollars.
Conservative strategists, like investment banker and GOP financier Stephen Schwarzman, have worked hard to perpetuate the erroneous idea that America’s working poor do not contribute to the tax burden, despite the amount paid in state, payroll, and sales taxes. The misleading “no skin in the game” concept, originally attributed to Schwarzman, has become another right wing battle cry used to persuade the middle class voter that the unemployed, underemployed, and those requiring assistance are somehow draining money from their pockets. The middle class would be largely unaffected by a tax hike to the rich, with several theoretical tax schemes showing that slight, and in all likelihood, unnoticeable increases to the amount paid by those earning over $1 million per year could potentially yield hundreds of billions in revenue for the federal government. This fear of an underclass draining resources from the middle as they stumble their way to wealth and prosperity is a comforting notion to the average family who is secretly terrified of their high chances of falling into poverty themselves.
Psychologically, most would prefer to believe they are somehow different from the poor as a way of coping with their own financial anxiety. This distance, created by a combination of pride and fear, is reinforced with messages like those of Schwarzman. The harder the economy becomes to navigate, the more small business owners and working class voters are likely to agree with those sentiments. They would rather think of themselves as being “closer” to the rich than the poor and with that comes a counter-intuitive acceptance of ideas that only appear to benefit the rich.
Ultimately, Americans want to believe that their situation will improve and that there will be more opportunities for their children than they themselves had. Over the last thirty years we’ve seen the American dream slowly fade into our current economic nightmare. Republicans may have engineered an antidote to the kind of “Hope” that President Obama was elected on in 2008 by reinforcing the myth of middle class upward mobility, but social movements like Occupy Wallstreet are combating this by stepping up their educational efforts around the country. This election year will be one of the most dynamic in decades as we face the continued decline of our standard of living, while publicly traded multi-national corporations continue to drive jobs overseas, realize record-breaking profits, and benefit from the lowest tax rates in modern history. How these corporations, and the super rich who manage them, will continue to be able to effectively influence the national conversation is yet to be seen.