Take the Rich Off Welfare

Mark Zepezauer, Take the Rich Off Welfare, 2nd ed. (Cambridge, Mass.: South End Press, 2004)

The heart of this book, which was originally published in 1996, is in its opening pages, where Zepezauer presents the formulas upon which his rich analysis devolves.  He exposes a leviathan of graft and corruption, and makes plain its meaning: the rich clobbering anyone who’s not.  He documents growing economic disparities that haven’t been as severe since 1929, and puts the lie to viewing people on welfare—as opposed to those on “wealthfare”—as social parasites.

A critical ingredient in Zepezauer’s method is comparing income and Social Security (“payroll”) taxes for rich and poor, and the concomitant government services they enjoy.  The rich pay a smaller percentage of their income in taxes than do the poor.  Capital gains taxes have shrunk drastically in the last half-century.  Dividend and investment income is not taxed, and many very wealthy corporations pay no taxes, at all.  Adding one injury to another, corporations benefit disproportionately from what Zepezauer calls the five basic types of wealthfare: tax breaks, subsidies, firesales, cost overruns, and lax enforcement against white-collar crime.

Regressive taxes, those that disproprtionately hit the poorest, have seen the sharpest increases over the last quarter-century.  The wealthy, who have seen sharp increases in income in that time, pay a vastly smaller percentage of their income in taxes than do people of lesser means.  In the 1950s corporations paid half of federal revenues.  Today they pay just 7.4%.  The lost revenue has to be made up by higher taxes for the poor and middle class, or by cuts in services.

Social Security is supposedly in crisis, even though it has perennially run a large surplus.  That surplus is supposed to be kept in trust to pay future beneficiaries.  Social Security was originally a set-aside program, but was incorporated into the “unified budget” under Lyndon Johnson.  It has thus become just another income tax to be sucked up in wasteful military spending or corporate welfare and fraud, says Zepezauer.  The Social Security Trust Fund is owed $1 trillion and interest.  The payroll tax has seen sharp increases especially beginning with Reagan.  At the same time it is capped on incomes over $87,000.  Thus Bill Gates, who has as much money as the 100 million poorest Americans, pays the same Social Security tax as as a bus driver making $87,000.  If this cap alone were removed, Social Security revenues would increase by about $80 billion annually.

According to Zepezauer’s extensive documentation, wealthfare rose from $448 billion a year in 1996 to $815 billion in 2003, an 82% increase.  In the same period welfare rose from $130 billion to $193 billion, a 41% increase.  Almost the entire increase was due to vastly higher Medicaid costs.

Wealthfare enjoyed by big business includes tax avoidance by transnationals, lower taxes on capital gains, accelerated depreciation, insurance loopholes, business meals and entertainment, tax free municipal bonds, and export subsidies.  Other corporate goodies include the savings and loan bailout, agribusiness subsidies, media handouts, nuclear subsidies, aviation subsidies, mining subsidies, oil and gas tax breaks, timber subsidies, and others.  Among other particularly egregious developments is a $100,000 “accelerated depreciation” for the largest of the gas-guzzling SUVs.

Military waste and fraud is in its own category, and accounts for about a quarter of the wealthfare.  The Pentagon budget increased by $70 billion annually from 2001 to 2003, to $393 billion.  Supplemental spending on the wars in Iraq and Afghanistan added costs of several hundred billions more.  The Pentagon loses outright billions of dollars that it often rectifies by simply making accounting write-offs.  Overpaying military contractors through cost overruns and ridiculous prices—a $2,043 nut and a $2,548 pair of duckbill pliers to name a tiny fraction of all the outrageous examples—costs scores of billions a year.  Weapons contractors are regularly convicted of felonies.  Although they often accrue fines of tens and hundreds of millions of dollars, these are relatively light, and then it’s back to business as usual.

B-2 bombers, originally estimated to cost $550 million each ended up costing $2.2 billion, literally more than their weight in gold.   Three unnecessary Seawolf subs were built at $2.4 billion apiece.  That project was eventually abandoned to build 30 of the equally redundant Virginia class of submarines, at a cost of $73 billion.  Dick Cheney, Caspar Weinberger, George Schultz, William Perry, James Baker, and Frank Carlucci are just a smattering of officials who have swung through the revolving door between high government positions and the military contractors with whom they do business.

“In 1994,” writes Zepezauer, “the murderous government of Indonesia got over $125 million in Export-Import loans to buy equipment from Hughes Aircraft.  Ex-Im [also] insured a $3 million loan to General Electric to build a factory in Mexico that cost 1,500 jobs in Indiana.  The Chinese government used an $18 million loan to modernize a steel plant—even though that company was accused of illegally dumping steel onto US markets below cost.”  The US government grants foreign governments $7 billion a year, much of which is used to pay US arms manufacturers.

Middle to lower-middle incomes—the vast majority—bear the brunt of this unfair system because they are neither qualified for the benefits of the poorest such as Medicaid and food stamps, nor are their incomes large enough to take advantage of the corporate welfare of the rich.  The already rich elite on the other hand reap criminal¾in some cases, literally windfalls.  Other tactics are technically legal such as what Zepezauer refers to as “the Bermuda Shuffle” in which corporations incorporate by opening a mail drop in, say, the Cayman Islands or Bermuda, while still enjoying the superior infrastructure of the United States where they do the bulk of their business.

Take the Rich Off Welfare is among other things, an examination of vast waste, fraud and corruption in the Pentagon and its budget. I was disappointed, however, at Zepezauer’s tacit acceptance of the necessity of a strong military.  He doesn’t fully deconstruct the fact that military spending has, by the very nature of its size, engendered massive corruption for generations; and even when put to the uses for which it was intended, has bred war crimes of historically unprecedented proportions. Nor does he consider that the increasingly deadly firepower of modern weaponry has made it too apocalyptic to use.  Martin Luther King’s words are more apt than ever: our choice today is nonviolence or nonexistence.

It is obvious that only organized popular resistance could counter the trends documented by Zepezauer.  The isolated individual would be crushed by the magnitude of corruption rampant in this society.  Lamentably uninformed, the vast victimized majority is thus unable to imagine, much less institute, genuine democratic reforms that would be to their advantage and thus, by definition, just.  As long as that’s true, the status quo of corporate hegemony will continue to dominate us with its nihilistic values, to the economic advantage of the very few and disadvantage of the many.  This doesn’t happen by chance.  Those who manipulate this exploitative and cruel system know precisely what they’re doing, to whom, and for whom.

Reviewed by Tracy McLellan
Chicago area

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