The Republican Party has some potentially winning themes for America’s presidential and congressional elections in November. Americans have long been skeptical of government, with a tradition of resistance to perceived government overreach that extends back to their country’s founding years. This tradition has bequeathed to today’s Americans a related rejection of public subsidies and a cultural aversion to “dependence” on state support.
But Republican presidential candidate Mitt Romney and other leading members of his party have played these cards completely wrong in this election cycle. Romney is apparently taken with the idea that many Americans, the so-called 47%, do not pay federal income tax. He believes that they view themselves as “victims” and have become “dependent” on the government.
But this misses two obvious points. First, most of the 47% pay a great deal of tax on their earnings, property, and goods purchased. They also work hard to make a living in a country where median household income has declined to a level last seen in the mid-1990’s.
Second, the really big subsidies in modern America flow to a part of its financial elite – the privileged few who are in charge of the biggest firms on Wall Street…
No one has succeeded in the modern American political game like the biggest banks on Wall Street, which lobbied for deregulation during the three decades prior to the crisis of 2008, and then pushed back effectively against almost all dimensions of financial reform.
Their success has paid off handsomely. The top executives at 14 leading financial firms received cash compensation (as salary, bonus, and/or stock options exercised) totaling roughly $2.5 billion in 2000-2008 – with five individuals alone receiving $2 billion.
But these masters of the universe did not earn that money without massive government assistance. By being perceived as “too big to fail,” their banks benefit from a government backstop or downside guarantee. They can take on more risk – running a more highly leveraged business with less shareholder capital. They get bigger returns when things go well and receive state support when fortune turns against them: heads they win, tails we lose…
RTFA for the history and analysis behind Simon Johnson’s conclusion. Project Syndicate once again rolls out a solid article on complex political economy.