Why Dems in Congress Should Not Compromise on the Tax Cut for the Very Rich

In my opinion, the graph above tells us just about everything we need to know about why most people are feeling a bit stressed. It shows the percentage of income received by the top 10% of income earners (I use that term advisedly) between 1917 and 2007.

First, look at the period up until WWII. The proportion of income peaked in 1929 at just under 50%. The Roaring Twenties were just great if you happened to be in this lucky cohort.

Now look at what happened in the Depression. The top 10%'s share fell, but only into the mid-forties.

The post-WWII era, known as the 'Great Compression' in the literature lasted from 1941 to 1979. The top 10%'s share fell to below 35% of total income. Later we can discuss why this occurred. I am open to your opinions in the comments section. Recall, however, that the top marginal tax rate in the fifties under Eisenhower was 90%. Hmmm...might there be a correlation between high top marginal tax rates and the creation of a middle class?

Then we had the Reagan Revolution with the Bush II effort to complete it by giving massive tax breaks to this group and, lo and behold, by 2007 we managed to top the 1929 figure. Goodbye Middle Class.

The stressed Middle Class has two options. Republicans and their propagandists on talk radio and Fox would have the Middle Class believe the shrinking share of income they receive is because Democrats tax them and give their money to poor people. Democrats claim their shrinking share is a result of the Reagan Revolution that altered a tax structure that had created the Middle Class in the first place. In other words, the Middle Class has shrunk because Republicans have taken our money and given it to the top 10%.

OK, I admit this is a bit of an oversimplification. Nevertheless, I think it is an oversimplification that drives to the heart of our current political crisis.

I am told that the current political debate over whether or not to extend the Bush tax cuts to the top 2% will not resonate in this political climate. Why? Because most people don't believe that the above graph has anything to do with their declining economic condition. I am told that this issue is too rational or too cerebral to have resonance. I am told it does not grab people emotionally. I just hope Democrats in Congress follow President Obama's lead and give us the opportunity to test this. My bet is, if they do, the Republicans will back down. This is a worthwhile goal on its own terms. The added bonus of having the tea party portion of the Republican Party become further disenchanted with their apparently 'reasonable' elected leaders is just a bonus.