What Romney talks about in quiet rooms

>>> i'm curious about the word "envy." do you suggest that anyone who questions policies and practices of wall street and financial institutions , anyone who has questions about the distribution of wealth and power in this country is envious? is it about jealousy or is it about fairness?

>> you know, i think it's about envy. i think it's about class warfare . i think when you have a president encouraging the idea of dividing america based on 99% versus 1% and those people have been most successful will be in the 1%, you've opened up a whole new wave of approach to this country, which is entirely inconsistent with the concept of one nation under god.

>> are there no fair questions about the distribution of wealth without it being seen as envy, though?

>> you know, i think it's fine to talk about those things in quiet rooms.

>> joining me now in tonight's quiet room segment, timothy noet, the author of the new

book, "the great divergence: america 's growing inequality crisis and what with we can e can do abo ut it." tim, before we get started on the book, my twitter question for my audience, which of my guests tonight is related to a former west wing writer, do you want to answer that for them?

>> that would be me, actually. i am the brother of your former colleague on "the west wing ," peter noah.

>> there you go, the twitter people have their answer. tim, this notion of romney 's that we really, we really shouldn't be talking about what you have written a book about, where could that possibly come from? of course, the tax structure is about income distribution . there's so much that government's focus has been on for the better part of a century on this issue of income distribution , and romney doesn't seem to know that.

>> well, this issue is a real loser for the republicans. they keep trying to figure out a way to come at this. first they tried to deny that the inequality trend existed. then they tried to say, well, it's justified my tby the fact that upward mobility in the states is so much swifter than elsewhere, which turns out to be not true. the u.s. lags other industrial democracies when it comes to mobility. finally they've just given up and said, let's just not talk about it at all. and when i hear talk about how sort of any discussion of class constitutes class warfare , i think to myself, geez, you know, these people really don't know what class warfare -- we had real class warfare in the united states a hundred years ago, and, you know, there was bloodshed. you know, there were killings. i mean, that's warfare. this is discussion.

>> and we've also had much, much higher tax rates . i mean, here you have republicans today saying it's class warfare . if you take what is now the top income tax rate and you push it up by 4.5 percentage points, they call that class warfare , if you push it up to 39%. we had rates, even when reagan was in office, that were much higher than that.

>> oh, it's preposterous. they were 70% when reagan came in, twice what they are today.

>> and they pushed them down to 50%, they pushed them down below that. but then if you go back into -- i remember, you know, when babe ruth was playing baseball, the top tax bracket cut in around $5 million. not these $100,000 maximum -- you know, top tax brackets measured in hundreds of thousands of dollars, where we are now. what happened to all of that progressivity we used to have in the tax code , recognizing much, much higher incomes?

>> well, it's interesting. tax is actually a complicated situation , because weirdly enough, the income tax is slightly more progressive today than it was in 1979 . which is pretty amazing, considering how far down the top marginal rates have come. and that's because the people at the lower end have been taken off the tax rolls, which was a conservative idea to reward the working poor . now, of course, republicans want to put all those people back on the tax rolls. so the one good trend we've had in the midst of this growing income inequality , republicans want to eliminate. but, yes, i mean, we had a real long period from about 1934 to 1979 when incomes in the united states were growing more equal, not less equal, and there were a number of causes for that, but it had a lot to do with government policy . it had a lot to do with the rise of labor unions , and, you know, we had higher -- a growing high school graduation rate, which leveled off in the 1970s . and, of course, we had some serious regulation of wall street , which started to deteriorate in the 1970s .

>> and we also used to believe in trying to, as much as possible, pay for wars while we were raging them. during world war ii , we had wage and price controls in this can country, and fdr actually, and i learned this from your book, this i did not know, fdr actually tried to raise the top income tax rate to 100%.

>> that's right.

>> that was news to me, thanks to your book. tell us about that.

>> yeah, he had instituted the first minimum wage about a decade before, and then during world war ii , he said there should be a maximum wage . i forget what the precise level was, but he said there was a point above which the marginal rate should be 100%. congress didn't let him do it, but the fact that a president would even raise such a notion gives you some idea of how different the political environment was back then.

>> yeah, congress didn't let him do it, but they compromised, in effect, at 94%, which became --

>> that's right.

>> which became the top rate, up from 88. you know, fdr was saying the top rate is 88, but now in this situation, in war, we should really have 100% above, what was about, i believe, as i recall from the book, somewhere around the equivalent of $350,000 today.

>> i think that's right. and that 90 -- you know, the rates stayed, the top marginal rates stayed above 90%, not just through world war ii , but through the 1950s and until the tax cut in 1964 . and during those years, with a 90% top marginal tax rate , we had a level of prosperity that we would kill for today.

>> and henry ford knew that the workers in his factory had to make enough money to be able to buy the product that was rolling out of his factory, in order for his business to grow and be as successful as he dreamed of it being. what has happened to that understanding of consumer demand being the real driver of our economy, being the real job creator of our economy, and you can't have consumer demand without significantly better distributed middle class incomes.

>> that's right. well, that idea has gone out the window. and there's very little concern for the welfare of middle and lower income workers on the part of bosses. the unions, you know, union density was about 40% back in the 1950s . it's dwindled down in the private sector to 7%. only 7% of the workforce, private workforce, is unionized today. you know, there's very little interest in what happens at the middle, which is very ironic to me, because, you know, we hear an awful lot about how the job creators at the top need to be incentivized. but there's no talk about why the middle income worker doesn't need to be incentivized. middle incomes have been stagnant, actually declined slightly over the last dozen years, and stagnant over the past 33 years, relative to the period before. there's very little concern about that. and you know, i'm worried that workers at the median will feel no great motivation to improve their productivity, as they have done spectacularly in the last decade. they haven't seen any benefit from it, personally. you know, where's the benefit?

>> timothy noah , brother of peter noah and columnist for the "new republic," and most importantly, the author of the new book that mitt romney is hoping you cannot afford to buy,

"the great divergence: america 's growing inequality crisis and what we can do about it," timothy, thank you very much for joining me tonight.

>> thank you, lawrence.

>>> coming up, the romney campaign uses a diner in iowa to stage a phony roundtable discussion and while they're at it, the romney staff trashed the diner. you'll hear from the owner of the diner and see more video of mitt romney in his struggle to be human.

>>> and in the "rewrite" tonight, barack obama has been known to play a game of horse on the basketball court and mitt romney owns a horse that may be on its way to the olympics, which once again raises, and we think answers, the question, who's the real american ? that's in tonight's "rewrite." [ male