Editors’ Note: We are monitoring the decline in state and federal domestic funding and, at this point, hearing precious little that bodes well for social spending. And as Lester Salamon’s article in this issue makes clear, government is a major source of revenue for much of the sector. Although the Nonprofit Quarterly is emphatically not a partisan publication, we believe that any significant shift in political frameworks and social priorities necessarily demands close scrutiny.
To help shed some light on the current political situation, we asked Gar Alperovitz, Lionel R. Bauman Professor of Political Economy at the University of Maryland, to help us conjure up a viable political alternative. Alperovitz suggests that our sector must become involved in creating an agenda that will raise such core humanitarian assumptions as human rights, social equity, and access to human development opportunities to national priorities.
Now that both houses are clearly under the control of conservatives (on both sides of the aisle), those of us who are concerned about social equity and healthy communities are facing what may be an extended period of increasingly limited choices. This is a time when I believe concerned citizens and nonprofits need to begin to help craft an entirely different framework for the long haul even as they struggle with the hard day-to-day work of keeping their programs going.
We are likely to see continued increases in military spending, along with cutbacks in social spending and tax cuts benefiting the upper-income brackets and corporations. Deficits will continue—and continue to put pressure on all social programs. The period for people to make the transition off of welfare has ended, and with the recession, pain levels for a growing proportion of the population are going to intensify.
Funding for social programs is ultimately contingent upon economic growth, tax increases, or military budget reductions. Strong immediate economic growth is very unlikely and, frankly, in the near future I don’t think we can expect strong leadership from either party to increase taxes or cut the military budget.
Problems have already surfaced and are having their effects at state and local levels: states have no money, and the federal government is not making up the multi-billion dollar deficits they will face if they continue current taxing and spending policies.
The most interesting development of this period, however, is that some of the states are going back to the corporations and the elites. Thirty states have decoupled their tax laws from recent Bush changes favoring corporations, instead of following federal law as has been common practice. In Alabama they have begun to attack corporate giveaways, and New Jersey changed its tax laws in the last cycle to try to recoup taxes from the corporations. Many states are maintaining estate taxes. The reason they are re-targeting their tax policies is there’s no place else to go—politically or economically.
In recent years the distribution of income has become increasingly concentrated at the highest level. The top one percent has far more income than the bottom 40 percent—more than 100 million people! At the same time tax rates for the top groups have been reduced over recent decades. This is an issue that can and should be dramatized if we are committed to changing the political-economic framework. The facts are extraordinary:
• Those at the very top—the top one percent—garnered almost 15 percent of income for themselves in 1998—up from just over 8 percent in 1980. By some estimates the number is now 18 percent— which translates into more than doubling their share.
• Currently the top marginal tax rate is 38.6 percent, scheduled to drop to 35 percent by 2006. The top marginal rate was 91 percent throughout the Eisenhower years, from 1949 and continuing up to 1963; it was 70 percent from 1965 to 1981—including all of the Nixon years; it went to 50 percent from 1982 through 1986 (first Reagan administration).
Along with these shifts a paradigmatic cultural change has also occurred: the American elites are not of the middle classes—and the chasm between those at the very top and the middle class in general has increased dramatically.
Even as it was being distracted by calls to war, the American public was treated to a glimpse of the corruption and excesses of the same corporations and elites whose coffers have been filled by tax programs of one kind and another—Jack Welch’s retirement package, complete with the helicopter and apartment, is far from what everyday life is like in the middle class. A different world entirely. But are Americans clear that the taxes not collected affect their lives and the lives of those they love?
Some of the costs of protected corporate behavior may have been obvious in the pension losses seen last year, but the causal line is less clear between tax relief policies that benefit corporations and the very rich and the practical stuff of people’s lives. The middle class worries about how they’re going to get their kids through college and how to ensure that their parents are well cared for—even as they work additional hours and health care costs soar. This growing cultural divide and the growing pain levels, I believe, are likely to open up a strong potential for a populist economic program capable of meeting the interests of perhaps 98 percent of those who live in this country.
Given the huge increase in elite income and wealth, a progressive tax program that benefits large numbers does not have to be targeted to any serious degree at the suburbs. Though some adjustments might have to be made, with so much more money now concentrated at the top, a well developed effort can begin to advance social issues without politically alienating the white suburbs, as has often occurred in the past. Within the middle class too, there are many allies—including a much more educated and much more accessible group of people—women are a big part of this group, professionals are another.
Repealing the Bush tax cuts would return $86.5 billion from the top five percent annually when fully phased in or close to $800 billion over 10 years if, as is likely, the tax cuts are made permanent. Estimates by Brendan Leary of the University of Maryland suggest that returning to a tax structure similar to that of the first Reagan administration could potentially capture an additional $90 billion each year from the top two percent. If corporate tax rates were returned to Eisenhower levels, tax revenues could increase by roughly $110 billion. A one percent tax on wealth (with a one million dollar exemption) could bring in another $90 billion a year.
Demographic trends in some states—and nationally—are also likely to be favorable to a new approach over time. In California, non-Hispanic whites are already a minority. Nationwide, perhaps by the middle of the century or shortly thereafter, blacks, Hispanics, and Asians together will become a majority—a majority that could be mobilized around a populist agenda with the support of many others, such as seniors, women, and professionals. This is all but certain to develop step-by-step in some of the states; California has particularly interesting possibilities already, as will Texas over the longer haul of the next decades. We’re still in the early stages of change, but during the coming 20 years we should see a very different politics develop in many areas.
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Among other things, a mobilization strategy should articulate programs aiding seniors: improving and expanding Social Security, and addressing other pension crises, as well as across-the-board medical care. Tackling the range of senior issues would cost a lot of money. Howard Dean of Vermont is beginning to campaign for a single payer medical program. He’s made some very interesting connections because he is specifically talking about taxing the top one to two percent to pay for medical care. Affordable pharmaceuticals, an expansion of the earned income tax credit, daycare expansion, college tuition support across the range of income distribution—all of this could also be included in a positive program that would have appeal and could be dramatized in ways that would actually mean something to people.
But such an agenda would need to be boldly catalyzed and mobilized. This of course is not possible so long as even the “party of the working people” is playing on the margins of conservative politics. On the other hand, I believe ultimately this course will become obvious—mainly because there are simply no other real alternatives that can deal with the growing problems.
Boldness is not likely to come from within the ranks of the Democratic Party in the near future. They are playing it safe and, in doing so, have lost their direction. A fundamental, but painful, reassessment is needed. Here they may have something to learn from the Republicans.
In the 1950s the conservative wing of the Republican Party began to break away, leading to the Goldwater split and major near term losses of 1964. Ultimately, however, the split led to transformations, which produced the triumphant current party.
The Republicans were not designing their agenda in response to opinion polls. You have to mobilize sentiment to have it appear in the polls. There are some people who look at the polls and say, “By gosh, look! People don’t want X and Y. Look at my poll.” And then there are people, like the Republican Party in the early period as well as in recent years, who say, “It’s time to end the estate tax and to privatize Social Security”—which few polls at the time even considered! Shaping a new agenda—rather than reacting to polls taken before that is done—is the name of the game for the future.
The Republican Party was and is heavily dominated not just by business, but by activist grassroots conservative groups, many of them in the religious sector. These groups are not allowed to use church money, church donations, for politics, just as nonprofits are not allowed to use tax-free nonprofit money for politics. But they have found ways to get involved in shaping the country’s agenda. The Republicans have more money, but they do not have the capacity to address the real needs of the vast majority. In satisfying their ideology and their donor base, they cannot develop resources that can deal with the inequities. That’s their profound limitation, because they cannot tax the upper income groups, given their ideology, and they cannot cut back on military spending. So they are unable to solve problems when people are in great pain.
Conservative foundations have not been afraid to take on major issues, politically and ideologically. Among progressives I believe those who are concerned must begin to say what is obvious—namely that there is no way out of this bind unless foundations begin to shift too—that what is required are tough ideas and organizing over the next decade, that it’s not an easy task, that we have no illusions. Nevertheless, I believe that if an increasing number of people say, “Hey, you guys are part of the problem, come help us,” many people within the foundations will begin to respond, either individually as best they can or as part of an explicit foundation strategy at some point.
Among activists and concerned citizens, people have to get up on their hind legs and begin to say, “This is what’s important,” rather than simply seek grants and try to elbow somebody else out of the way. As long as the nonprofits themselves also do not have a positive organized voice, they will get picked off one by one.
This is a difficult process; people are doing important work and it’s hard and they need the grants. What is obvious, however, is that neither the foundation world nor the nonprofit world can achieve what must be achieved until we all confront the over-arching political economic issues.
I am an inveterate (though cautiously prudent) optimist. One reason is that in the McCarthy era I went to the University of Wisconsin, and Joe McCarthy dominated everything. Nothing could move politically in Wisconsin in the late 50s. So if you had asked what’s going to happen in the future, reading the tea-leaves of the late 50s, you would have said nothing will happen… and then, of course, the 60s happened!
As a historian, I don’t believe conservative moments are the end of the history. I do believe, however, that times will get worse before they get better. The coming period promises a huge and lengthy fight that is likely to take more than a decade, but I think there is hope for the longer haul. The simple fact is very large numbers of people are being badly hurt—and as the pain deepens so too does openness to new ideas.
Developing politics around a new paradigm is a difficult process in any society, but this is, for me, the most promising and riveting political prospect we have. I am convinced, too, that many others doing the hard day-to-day work of building and funding important efforts know in their hearts that they must also, simultaneously, begin to open a second more explicit front in the war for a decent future.