Tyranny of the Majority, Corporate Welfare and Complicity

by Charles Hugh Smith

When 60% of the employed citizenry pay no Federal income tax, then the nation is in danger of sliding into the Tyranny of the Majority: we vote for more largesse, and you pay more tax. Complicity has consequences.

Sometimes I am accused of going out of my way to annoy people. That is not the case, though I understand how it may seem so. After all, there is an undeniable allure in being contrarian. But I am just "calling 'em as I sees 'em," and it is the Status Quo which is the source of the outrageous insanity, not the person who points it out.

With great hesitation, today I voice a very unpopular point of view: that citizenship should mean something other than a free meal ticket or other give-away. No, I don't mean listening to fine speeches and bothering to vote every two years--I mean citizenship where it hurts: paying taxes.

I am drawing upon key arguments made by James Madison in the Federalist Papers. I know civics lessons are also politically incorrect--though simulacra civics coursework is given lavish lip-service by the educational Elites and fiefdoms--but please read this brief excerpt by Madison to get a flavor for the Tyranny of the Majority:

"A pure democracy can admit no cure for the mischiefs of faction. A common passion or interest will be felt by a majority, and there is nothing to check the inducements to sacrifice the weaker party. Hence it is, that democracies have ever been found incompatible with personal security or the rights of property; and have, in general, been as short in their lives as they have been violent in their deaths."

The Tyranny of the Majority is the primary topic of the Federalist Number 10, in which Madison tackles the Achilles Heel of democracy: undesirable passions can very easily spread to a majority of the people, which can then enact its will through the democratic government without difficulty.

Put another way: the Power Elites of a democracy can buy the complicity of the majority by showering them with government giveaways and extracting no income tax from them. For 60% of the American public, the Federal government is a source of welfare/entitlements/giveaways. Yes, workers pay a modest 7% in Social Security taxes, but that is understood to be a "pay as you go" retirement system in which their modest contributions (the 7%) pays their elders' Social Security payments.

The Federal government--the global Empire, the source of Medicare and Medicaid, the grantor of Section 8 housing vouchers, the funder of missions to Saturn, the entity which spends $3.5 trillion while collecting only $2 trillion, etc.--gets essentially little funding from workers' Social Security contributions. Yes, surpluses go to the general fund, but those surpluses have dried up.

So 61% of the populace is all in favor of more largesse and more taxes on the 19% who pay most of the taxes. The 60% who pay little to nothing are delighted to receive "what's owed to me" and the top 1% which receives the vast bulk of corporate welfare and tax giveaways--recall that the top 1% own about 43% of all the wealth of the nation--are also delighted to shift the tax burden to the 19% below them who earn most of the wages and thus end up paying most of the taxes.

Here are the numbers. Nearly half of US households escape fed income tax Recession, new tax credits have nearly half of US households paying no federal income tax

This article outlines how a family of four (with two children under 17) and an income of $50,000 ends up receiving a small tax credit; they pay zero tax but get a small refund anyway.

This document from the Congressional Budget Office (CBO) displays the Effective Tax Rates (CBO) for American households.

After including earned-income tax credits, the bottom 60% of households paid less than 1% of all Federal income taxes, and the households between 60% and 80% paid 13%.

The top 20% paid 68.7% of all Federal taxes: Income taxes, Social Security and Medicare, excise and corporate taxes. The top 10% of households paid fully 72.7% of all Federal income tax, the top 5% paid 60.7%, and the top 1% paid 38.8%.

In essence, this is a vote-buying scheme by the Status Quo: the top 1% control the policies of the State in alliance with the State's own Elites, and together they buy the complicity of the bottom 60% to passively accept their dominance.

This is the worst of all possible simulacra of democracy. In the Wikipedia entry linked above, Mancur Olson is cited as arguing in The Logic of Collective Action that narrow and well organized minorities are more likely to assert their interests over those of the majority.

In other words, the top 1% Financial Plutocracy asserts its interests over the 99% and then buys the complicity of the bottom 60% with largesse paid for by the top 19% of earners.

In Who Rules America?, Sociologist G. William Dumhoff draws an important distinction between the net worth held by households in "marketable assets" such as homes and vehicles and "financial wealth." Homes and other tangible assets are, in Dumhoff's words, "not as readily converted into cash and are more valuable to their owners for use purposes than they are for resale."

Financial wealth such as stocks, bonds and other securities are liquid and therefore easily converted to cash; these assets are what Dumhoff describes as "non-home wealth" on his website "Wealth, Income, and Power in America."

As of 2007, the bottom 80% of American households held a mere 7% of these financial assets, while the top 1% held 42.7% and the top 20% held fully 93%.

In a classic "divide and conquer" tactic, the State's Power Elites have sold a slew of new taxes to fund the guaranteed-to-implode "healthcare reform" (a.k.a. increased funding of sickcare cartels) on those earning $250,000 or more.

Everyone earning 10%-20% of that sum loudly applauds "sticking it to the rich" (the Tyranny of the Majority in full flower) while failing to note that the truly wealthy--the ones who don't have any earned income because they don't work in salaried jobs, the ones who own roughly half the nation's productive assets--pay nothing but a slice of their unearned income--much of which is protected by various tax breaks.

Complicity has consequences. This entire strategy of operating the State as a fiefdom for the Financial Power Elites--and by that I mean the people earning not $600,000, but those earning $600 million or more each a year--yes, they do exist-- and then buying the silence and complicity of the lower 60% with enough largesse to keep them quiet or at least distracted, has costs which are simply being shunted forward.

Most importantly, citizenship has devolved to advocacy for a larger share of the Federal government's swag. The government "should" do more for me/us because it's giving away so much swag to some other fiefdom/cartel.

Meanwhile, the slow poison of gargantuan deficits is eating away the soul of the nation.The Federal government gets $900 billion in individual income taxes and borrows $1.56 trillion each year. That is a rather stark number: the government borrows almost double what it collects in individual income taxes.

The "deal" is obvious: the costs of borrowing that $1.5 trillion are hidden from both the bottom 60% who are recipients of government funds and also from the top 1%, who believe that socializing risks and bailouts and privatizing profits is the ideal system of governance.

When interest rates rise and the payments on this exploding debt rise, then the "solution" will be "obvious"--borrow more money from somebody, anybody, and pay whatever it takes so keep the corporate welfare, subsidies and tax breaks flowing, and also the giveaways to the bottom 60% to buy their votes, silence, passivity and complicity in the fiscal destruction of the nation.

Madison feared the Tyranny of the Majority; I fear we are already living it.

If you want to read more about the partnership of the Power Elites and the State, you'll have to slog through the 396 pages of Survival+: Structuring Prosperity for Yourself and the Nation or the abridged 134-page version Survival+ The Primer.


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