Tax cuts over the past 30 years have shifted more than $4 trillion into the hands of the super rich, who have flooded Washington with money, ensuring that the political system will continue to benefit America’s top 1 percent.
Pulitzer-Prize winning journalist Hedrick Smith outlined that idea – which he called “very disturbing and very troubling” – Thursday night at Flagler College in St. Augustine, Fla.
Washington won’t fix it. They like it the way it is. Government is working for the people who are paying for it.
In sharp contrast, corporate bosses in the 1950s spread the wealth, Smith said. They thought that made good business sense. They figured that if the middle class prospered, their companies would, too.
Charlie Wilson, the former president and chief executive of General Motors, underscored that view during a confirmation hearing before the Senate Armed Services Committee in 1952.
Wilson had been nominated to be defense secretary. Lawmakers asked if he could envision making a decision as defense secretary that might hurt GM. He replied:
I cannot conceive of one, because for years I thought what was good for our country was good for General Motors and vice versa. The difference did not exist. Our company is too big. It goes with the welfare of the country.
Back then, Smith said, America had a stakeholder economy. Money flowed to bosses, workers and others – everyone who had a stake in the economy. Now, though, there’s a shareholder economy, which puts profits above all else.
The shift began in the 1970s, Smith said. A corporate lawyer named Lewis Powell wrote a confidential memo to a friend, Eugene Sydnor Jr., then head of the U.S. Chamber of Commerce.
The 34-page memo was entitled “Attack on American Free Enterprise System.” It said the enterprise system was “in deep trouble.” The memo stated:
…What concerns us now is quite new in the history of America. We are not dealing with episodic or isolated attacks from a relatively few extremists or even from the minority socialist cadre. Rather, the assault on the enterprise system is broadly based and consistently pursued. It is gaining momentum and converts.
The sources are varied and diffused. They include, not expectedly, the Communists, New Leftists and other revolutionaries who would destroy the entire system, both political and economic. These extremists of the left are far more numerous, better financed, and increasingly are more welcomed and encouraged by other elements of society, than ever before in our history.
…Much of the media – for varying motives and in varying degrees – either voluntarily accords unique publicity to these “attackers”, or at least allows them to exploit the media for their purposes. This is especially true of television, which now plays such a predominant role in shaping the thinking, attitudes and emotions of our people.
One of the bewildering paradoxes of our time is the extent to which the enterprise system tolerates, if not participates in, its own destruction.
Powell urged business interests to fight back.
There should be not the slightest hesitation to press vigorously in all political arenas for support of the enterprise system. Nor should there be reluctance to penalize politically those who oppose it.
It is time for American business – which has demonstrated the greatest capacity in all history to produce and to influence consumer decisions – to apply its greatest talents vigorously to the preservation of the system itself.
Someone leaked the Aug. 23, 1971, memo to syndicated columnist Jack Anderson. It became a call to arms for business leaders and prompted the Chamber of Commerce and other pro-business groups to dramatically boosted their lobbying efforts in Washington.
The effort paid off. In 1978, Congress passed a series of laws that wound up benefitting the rich. One law slashed the taxes that the wealthy pay on capital gains, which are increases in profits from stocks, bonds, real estate and other investments.
Pro-business policies accelerated during the Reagan administration, Smith said, and the gap between rich and poor continued to widen.
Productivity rose in America, but 84 percent of the resulting wealth went to the top 1 percent for more than three decades, Smith said.
We’re really two Americas. We’re divided by money. We’re divided by power.
Corporate leaders and others in the top 1 percent today no longer see it as smart to share the wealth with the middle class. Instead, they spend money to help elect pro-business politicians who will protect their interests, Smith said.
Much of the financing is so-called “dark money,” that can’t be traced, he said.
Politicians who say they are looking out for the middle class form camps of their own and have their own financiers.
Each side is increasingly entrenched, electing candidates who are more and more extreme in congressional districts that are increasingly safe from incursions from the opposing side. Said Smith:
Washington is split… polarized.
He contends that “something’s wrong structurally” with the political system. And unless there’s massive grassroots pressure, like the kind that fueled the environmental movement in the 1970s, he doesn’t believe it will change anytime soon.
The title of his speech at Flagler College was “Who Stole the American Dream.” That’s also the name of his 2012 book, available on Amazon.
Smith spoke in St. Augustine as part of the college’s Forum on Government and Public Policy. He was a reporter and editor at the New York Times for 26 years, covering the civil rights movement in the 1960s, the Vietnam War, the Cold War and other momentous events.
In 1971, he was part of the New York Times team that won the Pulitzer Prize for its reporting on the Pentagon Papers. In 1974, he won a Pulitzer Prize for international reporting in Russia and Eastern Europe.
Smith has also created 26 primetime specials and series for PBS. Flagler College President William T. Abare Jr. praised him, saying:
Over the past 50 years, he has established himself as one of America’s most distinguished journalists. He is one of the most impressive and entertaining gentlemen we’ve ever had at Flagler College.