Wednesday, October 5, 2011

Class Warfare in America?


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What is class warfare and why should we be worried about it in America?   
     Class warfare is simply defined as a conflict between social or economic classes.  America is supposed to be a land of equality but even in this country, there are three clearly defined classes: the rich, the middle class and the poor.   The problem for America in 2011 has been the steady increase in the jobless, homeless rate at a time when there is a gain of wealth for the top 20% of the country’s rich.  How do we account for the change and what, if anything, can or should we do about it?

One of the world's most successful investors has a suggestion.  Back in November of 2010, Warren Buffet gave an interview to ABC News reporter, Christiane Amanpour , in which he stated that the rich should be paying more taxes and that the Bush-era tax cuts for the wealthy should be left to expire.  [1]   Then in August of 2011, Buffet drew the ire of many wealthy Americans when he wrote a piece for the New York Times entitled, “Stop Coddling the Rich”.[2]

President Barack Obama and his economic advisors were listening to Mr. Buffet and used his advice to launch a controversial presidential campaign.  Recent Bloomberg polls showed that as many as 66% of Americans disapprove of President Obama’s handling of the economy. [3]  Can the President go wrong following the advice of a man who was 2008’s richest man in the world and still currently ranked 3rd on this year’s Forbes list the World’s Richest People?[4]

According to another Bloomberg poll, the answer is a firm maybe.  Americans seem to agree on a need to reduce the deficit by cutting spending, but are divided over the idea of raising taxes.  This data begs the question, “Why do the poor feel the need to protect the rich from paying the same rate of tax as lower and middle class Americans?”
 
A Facebook account was used to put the question to a spectrum of online friends with varying political views and economic backgrounds.  Here are a few examples of the answers received and replies are in italics:
  • ·         Rich people worked hard for their money so they deserve to keep it.  Hmmm, don’t poor and middle class workers also deserve to keep their money?  Why would poor Americans be outraged that the rich are being taxed, but empty their own wallets to the taxman with little uproar?
  • ·         Taxes shouldn’t be raised for any group, including the rich.  No one wants to raise taxes but spending cuts alone aren’t going to pay down the country’s deficit.
  • ·         If we increase taxes on the profits of rich people or corporations then they won’t invest their money in new businesses and jobs will decrease.  Historically, this statement has not proven to be true.  In 1993, taxes on the rich were raised and the economy created 22 million jobs.  [5]Yet in 2001, taxes on the rich were lowered and the economy created fewer than 7 million jobs.  [6]

It seems puzzling that the needy would argue against their self interest.  What drives the blue collar workers to defend rich people’s tax breaks?   Fear.  Fear that our country will become a mediocre socialist union.  Fear that if we take money from the rich they won’t have enough to invest in business which will end job growth.
Could it be that these same middle class and poor workers are unaware of the changes in wealth in this country? 
The majority of studies show that the rich are indeed getting richer in America, while the poor are getting poorer.  In fact, even the annual Forbes 2011 list of the 400 Wealthiest American reports that members of the list saw their net worth ($1.53 trillion combined) rise 12 percent in the past year.

The fear of losing the freedoms and the rights that our great country was built upon is justified and these rights and freedoms must be protected.  How do we find a way to build roads, schools and other infrastructure to support citizens and pay for it all without losing the values that America was built?  To find the answers and maintain our capitalist economy, the public must be aware of the difference in socialism and capitalism. 
                                                
So·cial·ism  n.
1. Any of various theories or systems of social organization in which the means of producing and distributing goods is owned collectively or by a centralized government that often plans and controls the economy.
2. The stage in Marxist-Leninist theory intermediate between capitalism and communism, in which collective ownership of the economy under the dictatorship of the proletariat has not yet been successfully achieved.
Cap·i·tal·ism  n.
An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market.

Based on the above definitions, it would seem that capitalism is failing as corporate owners are often sitting on cash reserves and not reinvesting the profits gained back into the very country that built and nourished it.  Socialism is where we are headed if the wealthy members of our country don’t assume responsibility by giving back to America in the form of investing in local jobs, taxes and even charitable programs.

But can we automatically expect the rich to take care of the less fortunate?  Not according to one class study, “ Social Class as Culture: The Convergence of Resources and Rank in the Social Realm”.   [7]  The study found that without resources and education, people from the mid to low classes rely on other people to survive.  They learn how to read one another’s facial expressions and act to help each other.  When people are needy, they tend to give more and are helpful more often.  Whereas the wealthier upper class of people have the resources and education to focus more on "self".  The upper class tend to hoard their resources and help others less than they are capable.  Dacher Keltner, co-author of the study, says, “Our data say you cannot rely on the wealthy to give back”. The ‘thousand points of light’—this rise of compassion in the wealthy to fix all the problems of society—is improbable, psychologically.”

Warren Buffet said it best:  "The rich are always going to say that, you know, 'Just give us more money, and we'll go out and spend more, and then it will all trickle down to the rest of you.'   But that has not worked the last 10 years, and I hope the American public is catching on."[8]
 
According to a September 15-18, 2011 Gallup poll, the majority of Americans are favoring the close of some tax breaks.

The number of Americans who are millionaires is approximately less than 1% of the population, while almost 50% of the members of Congress are millionaires.  How are these changes going to take effect?  Who will lead the way to tax reform, spending cuts and the creation of jobs on American soil if not those that we elected to represent the voice and vote of the people?

Warren Buffet jump-started the tax reform movement recently, President Obama took up the cause for his upcoming Presidential campaign and now it is time for "the people" to act.
Although the president has introduced the “American Job Act”, he has yet to introduce the proposed “Buffet Rule”.  Whether you agree with Obama's plan or not, it is time for spending cuts, tax reform and deficit reduction.  Contact your local representatives!  Let them know you want a proposal of the "Buffet Rule" implemented.  No action.  No changes.  No improvements.  It is time for a grass roots movement, so take the time to get involved instead of just waiting for something good to happen.
Find your local representative through the following link: https://writerep.house.gov/writerep/welcome.shtml

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[5]WALL STREET JOURNAL, August 1, 1996, A1.
[6] Source: IRS SOI Table 3.5.


[7] c.Kraus, M. W., Piff, P. K., & Keltner, D. (2011). Social Class as Culture: The Convergence of Resources and Rank in the Social Realm Current Directions in Psychological Science, 20 (4), 246-250 : 10.1177/0963721411414654
[8] ABC News interview with Christiane Amanpour of Warren Buffet from November, 2010.