Chapter 1
I cannot imagine what the men who wrote these words would think of America today: We hold these Truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed. I don't know about you, but I haven't consented to much of what government has done in the past twenty years.
Our declaration states unequivocally that all men are created equal, and that governments derive their just powers from the consent of the governed. Our country was founded with the intent that class distinction and rigid social structure were things left behind in the old world and had no place in the new. The American Dream was, from the beginning, the promise of political democracy, a wide range of civil liberties, and the opportunity for economic prosperity...for each and every citizen.
The men who signed our Declaration of Independence were a mixture of the wealthy and the poor, the well educated and the uneducated. Revisionist history would have us believe that our nation's founders were uniformly elitists, wealthy and entitled men who were the only individuals capable of grasping the enormity of what it took to govern a new country. This was born of a very European notion that the aristocrats were born, or entitled, to public service. They point to Thomas Jefferson, a landowner with extensive holdings. Or John Hancock, who inherited one of the largest estates in the colonies. Or Samuel Adams, owner of a brewery. They rarely cite the fact that Benjamin Franklin was one of seventeen children of a candle maker, and spent much of his youth as an indentured printer's apprentice and clerk. Or that George Taylor worked in an iron mill. Or that William Whipple was a merchant seaman. Or that George Walton was an orphan who apprenticed as a carpenter.
The fifty-six men who signed the declaration were a diverse group, consisting of doctors, lawyers, soldiers, farmers, and merchants. Their backgrounds were varied. Some were born in one of the colonies, others came from disparate parts of Britain. Some went to Harvard, some went to Yale, some were schooled in England, some were schooled at home, others were entirely self-taught. Together these men forged a collective understanding of the needs and desires of the entire country, not of a few select and special interests.
Today the politically powerful and wealthy dominate our society, economy, and government. Never has social class been more distinct or disturbing in American society than it is now. As well as having become a nation sharply divided by partisan politics, race, religion, culture, and age, we are divided by what we do and what we have—or don't have. Our social, economic, and political divisions are all the more troubling because we Americans, or at least the vast majority of us, still truly believe in the democratic principles that have defined our nation from its founding: equality, individual freedom and responsibility, and economic opportunity.
Now a new reality is being forced upon us, a reality that is being shaped by elites who care little for the common good and the success of the great American experiment as it's been defined for two hundred years. Political, business, and academic elites have embraced a vision of the world that supersedes our mere nation, and what they apparently consider to be quaint notions of citizenship. Those making the rules, and often breaking them, are less representative of our country than at any time in our history. Elites are not interested in working people. They are dedicated to attaining power and money, and in the process deprive the middle class of economic opportunity, fair wages, and a voice in Washington. The arrogance and indifference of our elites not only give lie to the notion of America as a nation without class distinction, but their abuse of power has actually brought class division in America into stark relief. We ignore the clash between classes at our own peril.
Our reluctance to address the reality of what has become a class structure in the United States is born in part of our long-standing ideals of American society. Interestingly, the U.S. Census Bureau makes no mention of class but simply divides the population into five groups, in descending order of income. While the census's top quintile is comprised of families who make an average of more than $150,000 a year, for the purposes of this discussion let's consider our upper class as consisting of the top 1 percent of income earners, those making more than $400,000. The top 1 percent of our population earns, on average, more than $1 million per year, and is a heterogeneous group, including CEOs, Wall Street bankers and brokers, a lot of Hollywood actors and actresses, entertainers, professional athletes, and entrepreneurs.
The bottom 20 percent, or our lower class, includes families scraping by on just over ten thousand dollars a year. They are called the working poor, and barely survive.
The remaining three quintiles make up what is commonly understood to be our middle class, making between $26,000 and $150,000 per year. In purely economic terms, it's the people in the middle income brackets, between the richest 20 percent and the poorest 20 percent, who make up our middle class. The average U.S. income, interestingly, is $60,529, due to the fact that people making millions of dollars dramatically offset the income of those at the poverty level. In actuality, half of all Americans make more than $44,000, and half make less.
I would argue that the middle class includes Americans from all walks of life, working at almost every kind of job, and includes all but the very rich and the very poor. Most people in the middle class are from families in which one or both parents worked and strived for the best possible lives for their children. For generations, middle-class families have been able to rely on public schools to be the great equalizer. Even the poorest people in our country could rely on that same public education system—where intelligence and talent were often discovered and nurtured.
The breakdown in the public education system means that the meritocracy in our society has been compromised, and in some instances eradicated. And without a strong public school system that serves all of us regardless of wealth or poverty, a class system will become ever more firmly entrenched.
Some critics believe that money should not be the only index of class distinctions, and have proposed other definitions. Elizabeth Warren, a law professor at Harvard who has done extensive research on the issue, argues that finances alone don't provide enough information, and that using a scale that divides the population into fifths is too confining and doesn't take into account that some people move freely between those various quintiles. Instead, she's developed this baseline criteria for membership in the middle class: property ownership, higher education, and occupational prestige. People in the middle class have been to college, but have not necessarily graduated. They have, or have had, a "good job"—a job in the upper 80 percent of occupational prestige scores. And they have bought a home.
A recent comprehensive series on class by the New York Times identified occupation, income, education, and wealth as four criteria that—when viewed in various combinations—determine class status. Moving up the class ladder, according to the Times series, can be achieved by overcoming shortcomings in one area with strong showings in others. For instance, too little wealth can be offset by a superior education, while too little education can be offset by a prestigious job. Think Bill Clinton in the former case (poor upbringing in Arkansas offset by an education at Yale and Oxford), Steve Jobs in the latter (dropping out of college offset by founding Apple). In addition to income, education, and occupation, mobility is another factor that economists and sociologists take into account when examining America's class structure. Mobility, of course, is the ability of people to move between income groups. Being American once meant being "upwardly mobile": using energy and talent to improve our lot in life. Unfortunately, a rapidly changing postmodern economy is less uplifting, and is putting more downward pressure on millions of our fellow Americans. For the first time in our history, Americans aren't dreaming of a better life for their children—they're desperately hoping that their children won't be forced into a lower standard of living and lower quality of life.
If you have a couple of kids, a couple of cars, and you're still married, then it's likely that you and your spouse both work, and your family never has enough time because you're all busy just trying to catch up in this hyperactive, overwrought, consumer society that we've created. No matter what your personal circumstance, there is never enough time, never enough money, never enough sleep, and never enough opportunities to reflect on the America we've created.
As a practical matter the America we've created has become so culturally, socially, and economically diverse that class distinction has become a little like art: We know it when we see it. And as Americans we cringe when we see its manifestation in our society. Nonetheless, most people consider themselves to be part of the middle class. They base this personal assessment on yet other criteria: their upbringing, or their financial situation, or where they live.
While we can debate and define forever those elements that make us part of a given class, big government, big business, and big media have already done the slicing and dicing, categorizing the middle class by its consumption habits, by statistics, and by demographics. Big business looks at you as either a unit of labor or a consumer. Big media sees you as a consumer, and as a unit of audience measurement for whatever message it is bombarding us with. And government? If you're in the middle class, you're just a taxpayer. Every ten years, however, you become yet another unit of measurement, when the bureaucracy takes an official count of the population of the state you live in to determine how many congressional seats that state gets. Those estimates are usually wrong—but usually close enough for government work.
The middle class finds itself in the enviable position of being the largest segment of society, but unfortunately, it is also the least well served by big business and big government. While the middle class contains the largest number of citizens and voters, it has the least effective representation in Washington. I've asked a number of senators and congressmen over the past year to name even a single piece of legislation that they've enacted on behalf of working men and women. Their response has typically been a blank stare, followed by some stammering, and not one example came to their minds. As a matter of fact, it was clear that each of them was surprised that I would even pose such a silly, offbeat question. A few of our legislators offered, "What about the Bush tax cuts? Those helped the middle class." In fairness, they did help, indirectly. In -reality, however, they were designed to accommodate the very wealthy. And the very wealthy derived more than three times as much benefit from them as did the middle class that, incidentally, pays the largest amount of taxes.
We are increasingly at the mercy of institutions that only appear to be serving our interests. In reality, these institutions are the breeding ground for a new type of upper class, made up of those who simply want to enrich themselves at the expense of the people who work for them or vote for them. These people, and their institutions, are the commanders in a type of class warfare never before seen in America. To them, the middle class is a target.
Warren Buffett is not only one of the richest men in the world, he is also one of the smartest. He has chosen to live in the heart of America. Warren said to me almost two years ago, regarding recent economic measures, "This is class warfare," and, he added, "My class is winning, but they shouldn't be." By winning, Buffett was referring to the efforts to roll back the estate tax for wealthy Americans, to the calls for tougher bankruptcy laws, to the lower taxes on capital, and to the disproportionately higher taxes on labor.
The legislation to roll back the estate tax still sticks in Buffett's craw. The estate tax affects barely 2 percent of the American population, but it accounts for more than $20 billion a year in taxes. Those who are helping to fund the effort to overturn it include the very rich corporate families behind Gallo wines, Campbell's soup, and Mars candies. If they wind up paying less taxes, you will most assuredly pay more. And if you don't, your children will. In other words, the resulting huge federal budget deficits will effectively function as an estate tax on the middle class and their children.
Over the last twenty-five years, median family income has risen by 18 percent while the income of the top 1 percent—the very wealthiest families—has gone up by 200 percent. In 1996, the organization United for a Fair Economy looked at the Forbes 400 list, an annual ranking of the four hundred richest people in the United States. It found that approximately 43 percent of the individuals on the list had inherited enough money outright to qualify for inclusion. Nearly 7 percent had originally inherited more than $50 million, which they subsequently used to build more wealth (thereby gaining inclusion to the top four hundred). Another 6 percent had inherited more than $1 million but less than $50 million; 14 percent were raised in wealthy or upper-class homes, but did not initially have assets in excess of $1 million. Only 30 percent of the richest people came from families who did not have great wealth or own a small business. That means that less than a third of the richest people in the United States started out their lives in the middle or lower classes on the economic scale. If you have any doubts about whether our classless American society is firmly in the grip of a class structure, remember that the best way to have money in this society is still to be born into wealth.
In recent years, the ranks of the upper class have changed; they have swelled with a new kind of wealth. Highly paid CEOs and company founders with millions of dollars in stock have become rich based on the performance of their businesses. To that end, they are willing to do almost anything to protect their companies. It is this group of people, along with their compatriots in the government and the media, who are using their newfound status to keep the interests of the middle class from getting in the way of their own.
It is the members of this business elite, this new upper class, that pose the greatest danger to our American way of life. They are the ones who've bought and paid for members of both political parties, and who pursue so-called free trade policies for the benefit of U.S. multinationals that remain uncompetitive in the global marketplace. They have put American middle-class workers in direct competition with the world's poorest workers. And they have the temerity to blame America's lack of competitiveness on the poor education of working Americans, while having done nothing to improve our educational system. In fact, their greed in pressing for tax cuts has exacerbated the decline of our public schools.
Instead of leadership from big business on the nation's paramount need to address the decline in public education, they have offered only inaction and neglect. There was a time when we could count on the great leaders of business for philanthropy, for seeing to the needs and well-being of the American people. George Peabody established schools and museums; Andrew Carnegie funded schools and public libraries; Milton Hershey built schools and roads. Today we are confronted by a business establishment that is far more concerned with big compensation packages, restricted stock options, and claiming a share of the global marketplace. And while the pay of CEOs skyrockets, the average worker's wages stagnate.
Greed and self-interest in the nation's executive suites and boardrooms are major weapons in the war on our middle class, and have often led to outright criminality. Tyco chief executive Dennis Koz-lowski, WorldCom founder Bernie Ebbers, and Enron CFO Andrew Fastow are only some of the executives sentenced to prison in the corruption scandals of the early twenty-first century. They all claimed they were just doing business as usual, and in too many cases, they're exactly right: They had no qualms about cooking the books, lying to their colleagues and friends, and defrauding investors.
While the vast majority of business executives in this country are honest, they are also frequently monomaniacal, and serve their own personal financial interests. They are quick to become defensive and cloak themselves in the colors of capitalism and their corporate responsibilities. When was the last time you heard an American business leader talk about the civic and community responsibilities of a corporation? When was the last time you heard the phrase "good corporate citizen"? What you do hear is the former CEO of Hewlett-Packard, Carly Fiorina, declaring that "no American has a God-given right to a job." You hear Google executives speak proudly of cooperating with government censorship in communist China. And you see the executives of Northwest Airlines increase their compensation by $2.5 million while the financially beleaguered airline attempts to slash the pay of its pilots, flight attendants, mechanics, and baggage handlers. Unfortunately for all of us, the CEOs, COOs, and CFOs of corporate America are not joined by chief courage officers, as an IBM commercial famously put it. The shame is that in corporate America today, it requires great courage to constrain self-interest and commit to the good of the nation.
