Rise of the "Investor Class"
"Ah, what, you are all leaving? But I just got—" Alas, it's true, I'm late to the party again. This time, by party, I mean the discussion
over the burgeoning "investor class" that John Zogby claims to have found via his secret and awesome polling methods. The investor class, you see, votes Republican (by which we mean, leans that way by a few measly percentage points, and never mind the millions of investors who do otherwise). More investors, therefore, means more Republicans. And look! Privatizing Social Security will create more investors, so that
Now this is all, in fact, very silly. In the age of ultra-refined polling and whatnot, the two big political parties are always going to hover around the 48-52 percent mark as far as levels of support go. No
reform or demographic trend will ever create a Permanent Republican Majority or a Permanent Democratic Majority—the median voter theorem simply won't allow it. Parties, hyper-conscious of their poll numbers, will simply shift stances or triangulate or fine-tune their message and pick off increasingly thin voter "blocs" in order to maintain parity. Such is life.
Nevertheless, there's a theory out there that Republicans believe that they can win themselves a permanent "investor class"-based majority by privatizing Social Security, and that's why they're so maniacally pursuing phase-out, even when it looks like political hari-kiri, and even when public opinion is stacked against them. Well, maybe that theory's right, though I don't think that's the main political motivation here. The "well-connected Republican lobbyist" who talked to
Elizabeth Drew had, I think, the correct take: "What [privatizers] want to do is break the hold of the Democrats on Social Security." The new Republicans, you see, don't want the Democrats to be able to stand
for anything. So they've co-opted democracy-promotion abroad, they've co-opted Medicare, and now they want to co-opt Social Security. We liberals like to complain about how the Democrats are wet noodles that don't take a stand on anything, but it truly seems that the modern-day GOP is actively trying to enforce this state of affairs.
That said, however, I think Social Security privatization—and the expansion of the "investor class" that will come with it—would
have real effects, effects rather amenable to certain, shall we say, "core" GOP constituents. (And I'm not talking about evangelicals, who as usual get nothing out of voting Republican.) To understand what I'm getting at, we need to hark back to 2001, when conservatives managed to pass some of the most mind-bogglingly inequitable tax cuts in history. They even managed to slash the estate tax! Say what you want about the estate tax, but there's no
rational reason why a tax that affects less than 2 percent of the population should ever have been repealed, especially with broad bipartisan support. And yet it was, and the public went along with it—something like 70 percent of voters though the tax was unfair. It was breathtaking. Same thing went for the dividend tax cuts of 2003; the act benefited very few people, yet it got broad bipartisan and popular support.
Both of these tax disasters went through, in part, because of accidents of history. Congress never would have touched the estate tax had not the roaring '90s plus Clinton's fiscal rectitude created massive budget surplus projections. Meanwhile, the 2003 dividend tax cut depended largely on Bush's wartime popularity, an unusually deep recession that could be blamed on 9/11, and of course, GOP control of all branches of government. Fun times, but economic right-wingers can hardly expect those happy coincidences to help them out all the time.
But what conservatives no doubt have
noticed, and what Zogby shows-without-realizing-it in his polling data, is that the rise of the "investor class" correlates very well with public willingness to support tax cuts on wealth. An estate tax repeal would have been unthinkable back in the Reagan era, when only 20 percent of voters were investors. It was
unthinkable. So was a whopping dividend tax cut. But today, only two short decades later, both are realities. So, I'll get to the point: If the ultimate goal
of the economic right-wing is, in fact, to eliminate all taxation of wealth—and that looks like a fair bet—then wealth needs to be something everyone
has, in however small an amount, so that the great bamboozling can continue.
One important, half-sketched corollary. Obviously it's a good thing for people to have wealth. It's also a good thing to get everyone investing, so long as they have a safety net to fall back on. But it is the brutal reality, it seems, that more investors will lead to a public more willing to stomach tax cuts on wealth, even if 95 percent of the population doesn't really benefit from those cuts, or are hurt by the cuts. In the long run, liberals and anyone else who cares about either a)
fiscal sanity or b)
progressive taxation will need to figure out some way to counter this trend. A philosophical case for taxing wealth seems in order, for one. A friend reminded me the other day that, in 2001, Democrats tried to attack this or that minor aspect of the estate tax repeal, quite willy-nilly, and they tried in vain to appeal to various constituencies on the subject, but they never outlined the overarching case for why
they thought progressive taxation was a good thing, or why repealing the estate tax would undermine that. More on this later.