L.A. Times On Budget: Fair Taxes Or Class Warfare?

The Republicans have been pushing the "class warfare" theme since Obama released his budget. The cable talking heads and the Beltway bobbleheads have mostly swallowed it whole and regurgitate the GOP talking points, but this L.A. Times article actually takes a look at the facts:

"Throughout our history, the United States has grown and prospered when all Americans have shared in the opportunities created by our economy," Obama said in the budget overview. (A more detailed formal budget will be sent to Congress in April.)

Some Republicans denounced the priority shift in Obama's budget as class warfare, and the budget is sure to face several tests as it works its way through Congress. Also, some economists warned that higher taxes on the affluent could reduce their entrepreneurial energy and were unfair because upper-income Americans already pay a large share of the government's total revenue.

It would be nice if they made a distinction here: Namely, that many of the economists in this group are in the employ of right-wing think tanks. But not many media types ever bother to point that out.

Many other economists think history supports Obama's argument that the country's overall prosperity has generally increased when those in the middle did better.

During the economic boom that followed World War II, income inequalities eased as the middle class prospered. One reason was the availability of increasingly well-paying jobs in manufacturing and other booming sectors of the economy. Strong unions were able to negotiate contracts that gave even relatively unskilled workers more than such workers had earned in earlier times.

Also, those in the upper income brackets were heavily taxed. Until the 1980s, the top tax bracket was 70%, though most wealthy Americans found ways to shelter much of their income from the highest rates.

In the 1990s, as manufacturing gave way to an economy based on services and technology, incomes would have become more unequal even without government action, said William G. Gale of the Brookings Institution. But the tax cuts enacted under George W. Bush accelerated the trend.

"If inequality was growing because everyone's income was growing a lot -- but the rich were just growing faster -- then it might not be that much of an issue," Gale said. "But what has happened in the last 10 years is that incomes at lower and medium levels have stagnated while the rich have gotten really rich."

In 1980, the richest 1% of Americans claimed 10% of all national income. In 2004, they claimed more than twice as much -- 22%.

"There's nothing wrong with making money," Obama's budget document said, "but there is something wrong when we allow the playing field to be tilted so far in the favor of so few."

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