The New York Times Pushes the Doctrine of Class Warfare

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My last post showed how The New York Times promotes the Green party line. The one before that showed how it has supported the Red party line. Like a traffic light, The New York Times alternates between Red and Green. (There is actually little fundamental difference between the two. The Reds want to abolish the individual’s pursuit of happiness on the grounds that it results in exploitation, monopolies, and depressions. The Greens want to abolish it on the grounds that it results in acid rain, destruction of the ozone layer, and global warming.)

Today we are back to Red, with two transparent attempts of The Times to promote the doctrine of class warfare.

In a January 8, 2007 article titled u201CWorking Harder for the Man,u201D Times columnist Bob Herbert writes:

[T]he top five Wall Street firms (Bear Stearns, Goldman Sachs, Lehman Brothers, Merrill Lynch and Morgan Stanley) were expected to award an estimated $36 billion to $44 billion worth of bonuses to their 173,000 employees, an average of between $208,000 and $254,000, u201Cwith the bulk of the gains accruing to the top 1,000 or so highest-paid managers.u201D … There are 93 million production and nonsupervisory workers (exclusive of farmworkers) in the U.S. Their combined real annual earnings from 2000 to 2006 rose by $15.4 billion, which is less than half of the combined bonuses awarded by the five Wall Street firms for just one year.

As if to answer the question of whether his intention is to provoke a riot or revolution inspired by the notion of class warfare, Mr. Herbert concludes his article with these words:

There’s a reason why the power elite get bent out of shape at the merest mention of a class conflict in the U.S. The fear is that the cringing majority that has taken it on the chin for so long will wise up and begin to fight back.

I provide an exhaustive
critique of Marxism and the doctrine of class warfare in my book Capitalism.
Here I will observe only that the activities of businessmen and capitalists
are the driving force of virtually all increases in real wages. It
is their savings that pay the wages of workers and buy the capital
goods with which they work and on which the wage earners’ productivity
depends. It is the innovations of the businessmen and capitalists
that underlie both continuing capital accumulation and the continuing
rise in the productivity and real wages of the workers. To the extent
that real wages fail to rise, the explanation is to be found in the
frustration of the activities of businessmen and capitalists
by misguided government policies that undermine capital accumulation
and the rise in the productivity of labor.

In this brief space, I only want to concentrate on challenging Mr. Herbert’s assertions alleging a gross disparity between the earnings of a comparative handful of Wall Streeters and the great mass of wage earners.

As soon as I saw that Mr. Herbert was comparing the alleged meager growth in real earnings of wage earners with the alleged very substantial current monetary earnings of the Wall Streeters, a warning flag went up in my mind, simply because such a thing is not a legitimate comparison. It’s comparable to comparing one entity’s net gain with another entity’s gross revenues, e.g., Toyota’s net profit with General Motors’ sales revenues.

To compare apples with apples, I was immediately curious to know what the growth in wage earners’ monetary earnings had been between 2000 and 2006. To find the answer, I turned to the Survey of Current Business, which is the leading source of statistics on national income, wages, and profits, and gross domestic product. Page D 15 of the January 2007 issue of that publication reports total annual compensation of employees as $7524.4 billion as of the 3rd quarter of 2006, which is the most recent quarter for which data have been published.

At the same time, page 197 of the August 2005 issue of the Survey of Current Business reports total compensation of employees as $5837.4 billion as of the 3rd quarter of 2000. Subtracting this number from the total compensation of employees in 2006 gives a difference of $1687.0 billion. If this, apples-to-apples number is compared with the alleged $36 billion to $44 billion of Wall Street bonuses, it is 38 to 47 times larger, not half as large.

But what about the growth in wage earners’ real earnings, their earnings adjusted for the rise in prices? Might that not turn out to be a mere $15.4 billion, as alleged by Mr. Herbert? The answer is no, far from it.

To calculate the change in real earnings, it’s necessary to allow for the rise in prices between 2000 and 2006. According to the Bureau of Labor Statistics, which is the source of the data, the Consumer Price Index for Urban Wage Earners and Clerical Workers stood at 168.9 for 2000 and at 196.8 as of November of 2006, the most recent month for which data are available. This is an increase of 17 percent. If this rise in prices is applied to the employee compensation of $5837.4 billion in 2000, that number is raised to $6801.7 billion. The difference between this inflation-adjusted figure and 2006′s total employee compensation of $7524.4 billion is $722.7 billion. This is the rise in real total employee compensation over the period. This number is more than 47 times larger than the number alleged by Mr. Herbert. It also ranges from more than 16 to more than 20 times the Wall Street bonuses alleged by Mr. Herbert.

Mr. Herbert needs to explain how he arrived at his numbers. Until he provides a reasonable explanation, I leave it to the reader to judge his honesty and to decide whether or not and to what extent the culture of The New York Times has changed since the days of Jayson Blair, The Times’ reporter who simply fabricated claims.

I turn now to The Times’ second attempt to promote the doctrine of class warfare. This occurs in an article which appeared on the same day titled u201C[Bush] Tax Cuts Offer Most for Very Rich, Study Says.u201D (u201CBushu201D is in brackets because it appeared only in the title of the print edition of the article.)

The article opens in a way that easily suggests that while tax rates at the very top are being dramatically reduced, they are actually being increased for middle-class taxpayers.

WASHINGTON, Jan. 7 —Families earning more than $1 million a year saw their federal tax rates drop more sharply than any group in the country as a result of President Bush’s tax cuts, according to a new Congressional study.

The study, by the nonpartisan Congressional Budget Office, also shows that tax rates for middle-income earners edged up in 2004, the most recent year for which data was available, while rates for people at the very top continued to decline.

If one reads the article very carefully, from beginning to end, one learns that what is actually being complained about is merely the fact that the tax rate of the top 1 percent of taxpayers was reduced by a larger number of percentage points than the tax rate of middle-income tax payers. One also learns that the rise in the tax rate on the middle class, so prominently featured by The Times, was a very minor one that took place in the course of a four-year sustained decline in tax rates on the middle class amounting to more than 40 percent. In the article’s own words:

Families in the middle fifth of annual earnings, who had average incomes of $56,200 in 2004, saw their average effective tax rate edge down to 2.9 percent in 2004 from 5 percent in 2000…. (My italics.)
It may have escaped
The Times’ reporter, and his editor, but 2.9 percent is less
than 60 percent of 5 percent, which implies a reduction in middle-class
tax rates of more than 40 percent. This is a decrease, relatively
speaking, compared to what the rate was in 2000, a huge decrease.
It is not an increase. This decrease deserves to be featured,
not presented as the very opposite of itself.

The article goes on to complain that

Households in the top 1 percent of earnings, which had an average income of $1.25 million, saw their effective individual tax rates drop to 19.6 percent in 2004 from 24.2 percent in 2000. The rate cut was twice as deep as for middle-income families….

What is allegedly
unfair here is that while the tax rate of the top 1 percent falls
by 4.6 percentage points from 24.2 percent to 19.6 percent, the tax
rate on the middle income tax payers falls only by 2.1 percentage
points from 5 percent to 2.9 percent. Not only does The Times’
reporter, and his editor, choose to ignore the very substantial, more
than 40 percent reduction in middle-class tax rates from 2000 to 2004,
but also to completely ignore the fact that relatively speaking the
reduction in rates on the top 1 percent was far less than
the reduction on the middle class. A tax rate that is still 19.6 percent
is approximately 81 percent of a tax rate of 24.2 percent. Thus, relatively
speaking, while the income tax rate on the middle class fell by more
than 40 percent, it fell by less than 20 percent on the top 1 percent
of taxpayers.

Apparently, the only thing that would satisfy The Times (and the authors of the u201Cnonpartisanu201D Congressional Budget Office study) would be if the tax rate on both groups were reduced by the same number of percentage points. In that case, the middle income tax payers would pay a tax rate of only .4 percent, while the top 1 percent paid 19.6 percent.

Such logic implies that the elimination of the income tax can simply never be fair, unless by some magical means it could be accompanied by the ex nihilo creation of a correspondingly large subsidy for everyone else. Thus if the income tax paid by the middle class were .4 percent, while the tax rate on the top 1 percent of taxpayers were 19.6 percent, fairness would allegedly require that reduction of the 19.6 percent rate to zero be accompanied by the subtraction of 19.6 percentage points from .4 percent. This, of course, would mean the creation of a negative income tax rate of 19.2 percent for the middle class. That is the logic of The New York Times.

The Times and its reporters and editors regard the doctrine of egalitarianism as an axiomatic truth and insinuate it at every turn in all aspects of the newspaper. With respect to egalitarianism and all that goes with it, there is no distinction between news column and editorial at The New York Times. Apart from such features as classified advertising, the entire paper is one huge, day-in and day-out editorial for egalitarianism, collectivism, and Marxism.

When one reads The New York Times, one should know what one is getting. It is not unvarnished news, but the news as seen through the lens of a distinct philosophical and political doctrine, a doctrine that is hostile to the freedom, prosperity, and happiness of the individual, and thus to the foundations of the United States.

George Reisman [send him mail] is Pepperdine University Professor Emeritus of Economics, and is the author of Capitalism: A Treatise on Economics. Visit his website.

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