“If there is a class war in America, my side is winning”

-Billionaire investor Warren Buffet 2004

Buffett’s words jolted American mass media, which generally does about as much as it can to conceal class conflict, or to deride it as immoral and un-American. To close observers of the US, however, Buffett’s comments are striking not for their candor, but for their euphemism. As a cursory review of recent and current trends will show, class conflict in the US has acquired alarmingly one-sided characteristics. Comparative indices of inequality rank America at or near the top of industrialized nations, a condition carrying real costs and dangers to American society.¹ Further, the inequality is now deeply entrenched, and has fostered features akin to kleptocracy in the US, with a few privileged elites drawing off huge amounts of public wealth. Worse still, the two sectors of the economy most entwined in the kleptocratic process are finance and the military--precisely the two sectors most capable of sowing turmoil in the wider world, as this decade has shown so clearly. No matter how clearly we may identify the dangers, however, it is not so clear we can do much to avert them, and international observers should not assume that the arrival of Barack Obama’s administration guarantees security against fresh outbursts of financial or military adventurism.

An Intensifying Class Hegemony

Quite beyond working to rig the distribution of wealth as per an old-fashioned class struggle, wealthy interests have managed in recent decades to rig the political system in the US in such a way as to cement their advantages more securely than ever before. The key has been the nearly wholesale cooptation of national-level politicians—including the Democratic Party, not just the openly pro-corporate Republican Party-- to the service of large corporations, potent special interests, and the bloated military. To be sure, prominent leftists have been accusing the Democratic Party of capitulation to corporations for a long time (Ralph Nader has made a career of it since the 1990s, and the tradition is much older). But for a number of reasons—in particular the fast escalating cost of running for office, and the lure of lucrative employment with corporate sponsors or lobbying firms upon leaving office—elected (and appointed) officials in both parties now surrender their autonomy well before taking their seats in Washington. A “For Sale” sign seems to hang ever more prominently above the heads of national officials in recent years: lobbyist spending in Washington more than doubled from 1999 to 2007, and jumped another 15-20% in 2008.³ The lobbyists are thriving like never before, precisely because their corporate paymasters are using them to exert ever more control over how Washington works.⁴

The large corporations and the privileged few atop them have profited enormously from the efforts they have expended to dominate Washington. The share of Federal tax receipts coming from corporations shrank from 26.5% in 1950 to 10.2% in 2000 (taxes on working people filled the gap).⁵ As a share of GDP, corporate taxes fell from 6% in the 1950s to a low of just 1.8% in 2001. ⁶ Further, Washington has slashed tax rates on the wealthiest Americans by 50% or more from the late 1970s. ⁷ The wealthiest 1% of the population now appropriates close to 70% of nationwide returns to wealth – dividends, interest, rent, and capital gains – as compared to 37% ten years ago, and 58% five years ago. This is the highest proportion ever recorded in the US.⁸

As if the upward flow of money was not disturbing enough, the lopsided distribution of this flow to the financial sector is more alarming still. From 1998 to 2008 Wall Street and insurance companies poured $1.7 billion into political campaign contributions and spent at least another $3.4 billion on Washington through lobbyists. ⁹ Wall Street got what it wanted. It achieved relaxation of important regulations over its operations, and the sector’s share of US corporate profits has duly soared: it topped 40% in this decade, up from a range of 21-30% in the 1990s, and just 8-20% in the 1980s. ¹⁰

Expropriating the Expropriated: the Elite Loots the Nation

The extraction of wealth through the defense sector has been much more sinister than the matter of subsidies to business. The major defense contractors have made a science of lobbying Congress (to the tune of $149 million in 2008), and achieved a 70% rise in base Pentagon budgets (not counting the cost of conflicts) during this decade. ¹² Moreover, shocking amounts from these budgets are winding up in unidentified people’s pockets. As Secretary of Defense Donald Rumsfeld himself lamented back in 2001, the Department of Defense could not account for as much as $2.3 trillion of its funding.¹³ Massive leakage continues, judging from the Department’s announcement in 2006 that it cannot produce auditable financial statements any earlier than 2016!¹⁴ And the theft extends even more broadly. Over the last decade Congress has developed a system to channel tens of billions of dollars a year to preferred sponsors through unmonitored by attaching last-minute—and therefore unmonitored and unchecked--amendments to appropriations bills (so-called “earmarking”, about half of which nowadays pertain to the defense sector).¹⁵

The kleptocratic zenith—to this point in time, at any rate—has come with the recent financial crisis. In the last year the US Treasury Department and the Federal Reserve have shoveled trillions of taxpayer dollars Wall Street’s way, often without requiring standard levels of accountability for the use of the funds, and generally without extracting fair value in compensation for the taxpayers.¹⁶ Calculating the size of all the giveaways to the big banks has proved elusive, but no one doubts the total is prodigious, and climbing.¹⁷ Direct assistance to the broader population, in contrast, has been trivial in comparison. ¹⁸

The Curse of the Giant