With his Cabinet of billionaires and trickle-down CEOs, President-elect Donald Trump has set the stage for the second “Revolt of the Bosses,” ignoring that the first Revolt of the Bosses produced the gaping economic inequalities that plague America today and ignited his own working-class base.
The timing is terrible. One new economic study documents the cost of the first revolt – 115 million adults, the lower half of the income ladder, got next to “zero growth” in real income from 1980 to 2014. Another new study finds that only 41 percent of 30-something males today earn as much as their fathers at the same age.
That yawning economic gap opened up after corporate America captured Washington in the late 1970s, mobilized by a largely unknown call to arms by Lewis Powell, then a highly influential corporate attorney and soon to become a Supreme Court justice.
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In a confidential manifesto circulated secretly in late 1971 by the U.S. Chamber of Commerce, Powell told U.S. business leaders that our free enterprise system was under “massive assault” from middle-class power – strong labor unions, a women’s movement pushing for equal pay, consumer and environmental movements demanding protective laws, and a civil rights movement demanding opportunity for African Americans.
To stem the tide, Powell laid out an action blueprint, urging business leaders to mobilize their resources for a long-term power struggle and to fight “aggressively and with determination” to take over the policy high ground in Washington.
The response was immediate. Major corporate CEOs formed the Business Roundtable, now the most potent lobbying arm of U.S. multinationals. Hundreds of businesses rushed to open lobbying offices in Washington. The number shot up from 175 in 1971 to 2,445 a decade later. By 1980, there were 9,000 registered business lobbyists and 50,000 more people working for business trade associations.
President Jimmy Carter was the first to feel the muscle of Powell’s army. Business lobbyists turned Carter’s proposed corporate tax increase into a tax cut, helped the wealthy by cutting the personal capital gains tax from 48 percent to 28 percent, changing corporate bankruptcy laws, and winning deregulation of trucking and telecommunications.
Under President Ronald Reagan, corporate power scored huge gains – deregulation of more industries, greatly eased rules for banking, the shift from employer-funded pensions to largely employee-funded 401(k) plans and the bonanza of Reagan tax cuts in 1981.
While the Reagan years saw another 16.1 million jobs added, the middle class stagnated. Economists calculate that the Reagan tax cuts added $1 trillion to the wealth of America’s richest 1 percent in each decade since the 1980s, and the tax cuts of President George W. Bush in 2001 added another $1 trillion – $4 trillion in all, while the lower half was stuck with zero growth and America’s income divide grew canyon-wide.
Today, again, President-elect Trump proposes massive tax cuts for business and the wealthy, plus whacking deregulation for business and he is putting some of America’s fiercest corporate downsizers and cost-cutters in charge – Wilbur Ross as secretary of commerce, Andrew Puzder as secretary of labor, and Steven Mnuchin as secretary of the treasury.
Ross became a billionaire by pursuing what Wall Street calls “distressed investing” – preying on companies sinking into bankruptcy, buying them at fire sale prices, shucking off their contract obligations to their workforce and retirees, and selling off the amputated torso at a huge profit.
Ten years ago, after Ross bought LTV Steel for $325 million as it fell into bankruptcy with $2.5 billion in assets, I asked Ross about the jobs of LTV’s steel workers. Ross said he was “creating jobs,” but only for part of LTV’s workforce. And, he indicated, there was a hooker: “We were able to work out with the United Steelworkers of America a radically new labor agreement.”
Translation: The steelworkers union, stripped of bargaining power by the bankruptcy law pushed through Congress by the Revolt of the Bosses in 1978, was forced to accept lower wages and lower benefits in order to save a fraction of LTV’s jobs.
Ross went on to buy four more troubled steel companies, rolled them all together and sold them for a profit of more than $2 billion, while thousands of employees were laid off or took lower pay or saw their retirement pay cut in half.
Instead of offsetting a pro-business secretary of commerce with a pro-worker secretary of labor, Trump chose another cost-cutting, trickle-down corporate chieftain for the Labor Department – Puzder, CEO of CKE Restaurants that runs fast food chains, Hardee’s and Carl’s Jr. Puzder adamantly opposes raising the federal minimum wage and maintaining new federal overtime rules that make 4 million more workers eligible for time-and-a-half pay
At his chains, pay scales for cashiers and short order cooks run below McDonald’s, Subway and Wendy’s. In an interview this year, Puzder touted automation over human workers, observing that machines are “always polite, they always upsell, they never take a vacation, they never show up late, there’s never a slip-and-fall or an age, sex or race discrimination case.”
At treasury, Trump has tapped Mnuchin, a hedge fund manager and former Goldman Sachs banker. Like Ross, Mnuchin made a huge financial killing by catching California’s IndyMac bank in its death throes, buying it with a syndicate of wealthy investors for a bargain price of $1.6 billion, rebuilding it and selling it off for nearly double the cost.
One of his bank’s strategies was driving stiff foreclosure terms with beleaguered middle-class homeowners – among them, one 90-year-old woman faulted for a 27-cent payment error. Mnuchin’s home in the Bel Air area of Los Angeles became a target of protesters.
Taxes are Mnuchin’s bailiwick. Trump’s website calls for a whopping cut in corporate taxes from 35 percent to 15 percent, an ever lower 10 percent rate on $2.3 trillion in corporate profits held overseas, and trimming the top rate for the rich from 39.6 percent to 33 percent. Mnuchin says Trump will deliver “a big tax cut for the middle class, but any tax cuts we have for the upper class will be offset by less deductions that pay for it.”
Independent tax experts at the Tax Policy Center and the Tax Foundation are skeptical. They calculate that Trump’s formula will deliver skimpy tax cuts to the middle class, while the 1 percent will get cuts worth up to $1.1 million apiece. If so, that would be the fanfare for the second Revolt of the Bosses and a new wave of ballooning economic inequalities.
Hedrick Smith is former Washington bureau chief of The New York Times, author of “Who Stole the American Dream?” and executive editor of reclaimtheamericandream.org. Contact him at email@example.com.