Guest Columns

HUDSON: SHOULD THE WEALTHY PAY MORE?

Searching for someone to blame for the economic crisis in the 21st Century

Contributing Columnist

When I went to work for AT&T as a management intern, fresh out of college, the Bell System was a highly unionized monopoly. Lily Tomlin was launching her comedy career as Ernestine, the telephone company operator who would blithely inform callers, “We don’t care, because we don’t have to.” Americans could order their telephones in any color, so long as they were black and manufactured by Western Electric. The Communications Workers of America were a powerful force on the national stage, locked in a symbiotic collaboration with America’s largest employer. Every three years the union negotiated a nationwide contract pushing up salaries and improving benefits for more than a million members. A brief strike might occur at a test company, and then all the remaining Bell companies trooped to state regulators requesting an “adjustment” to customer rates that would accommodate their increased labor costs. It was a cozy arrangement for all concerned.

Consequently, I was surprised to find a simmering hostility towards the CWA on the part of most AT&T managers, even among those who had been promoted from the ranks. It seemed to me we were paid pretty good money, along with generous benefits and there were plentiful opportunities for promotion. It was unlikely that we would have been enjoying any of this if the union hadn’t successfully bargained for those compensation benchmarks. It seemed evident that pension benefits, vacations and sick leave were offered to managers largely because they were already guaranteed to union employees. After the break-up of the Bell System, in 1983, and the subsequent fragmentation of the telecommunications industry, the CWA soon found itself negotiating “take backs” at the Baby Bells as non-unionized competitors chipped away at revenues. Managers also found themselves victim to rollbacks in their retirement plans. With just 30 percent of VERIZON workers belonging to a union, unlike the 90 percent in Bell days, it seems unlikely their current strike will prevent further concessions.

None of this is meant to defend the monopoly practices of the Bell System. It is merely intended to point out that the restructuring of this industry, which offers expanded services and cheaper rates to consumers today, came at a significant cost. During the recently concluded debt ceiling debate in Washington, several snapshots of our national fiscal house were frequently held up for inspection. FOX News and conservative commentators made much of the fact that 51 percent of Americans no longer pay federal income taxes. There was an implication that if these slackers would pitch in their fair share it wouldn’t be necessary to consider tax increases for the valiant 49 percent who still pay, including the tiny sliver that rakes in more than half of all national income (the top 1 percent currently grabs 60 percent of earnings and holds 90 percent of economic wealth). We shouldn’t forget that even the ‘lucky’ 51 percent, who may be escaping federal income taxes, continue to pay social security and Medicare levies, as well as local sales, property and excise taxes.

During the past decade, the median income for an American family of four, when adjusted for inflation, has been stuck at around $50,000 dollars a year. In other words, half of these families earn less than $50,000 annually. While the poverty line is drawn at $20,000 for them, is it really so surprising that their personal and home mortgage deductions might prove sufficient to exempt them from federal income taxes? Does anyone really believe it is easy to raise two kids, own a home, operate a couple of cars and feed and clothe a family of four on less than $50,000? The entire rationale behind a system of graduated income taxes is premised on the notion that those who succeed in capturing the most from our economic system should return the most to it.

Another recent economic snapshot arrived from no less an authority than the chief investment officer at J. P. Morgan Chase. American corporate earnings have reached a fifty-year high, now approaching an average return of 13 percent. Chase estimates that 75 percent of this improvement stems directly from cuts in wages and benefits that have, in turn, helped create these rising profit margins. Employee compensation is, not coincidentally, now at a fifty-year low as a share of corporate revenues. Despite complaints about the inflationary impact of bargaining agreements, only 7 percent of private sector employees are actually represented by a union. In the real world, downward pressure on compensation can be traced to the two billion low wage Asians who joined the global labor pool over the past thirty years.

Much of the Tea Party’s anger appears linked to this declining standard of living for most working Americans. They express outrage with the taxpayer bailouts that rewarded corruption and incompetence at American banks and financial institutions. Once the Tea Party figures out that these trillions of dollars didn’t mysteriously vanish, but rather, that they were purloined and then sluiced into the personal accounts of the same banksters who are attempting to persuade voters that the country was brought to its economic knees by the burden of federal health care programs, environmental protections and financial regulators — there will be genuine political hell to pay. Wall Street is playing with fire when it presumes that Tea Party radicalism will never be turned against them. It is surpassingly strange when our politicians remain mute while millionaire professional athletes walk out on strike in order to negotiate ever-fatter labor agreements with their billionaire owners, but denounce schoolteachers and firemen, who simply want to earn enough to send their kids to college.

Miller Hudson is a contributing columnist for The Colorado Statesman.