The White Working Class: The Most Pessimistic Group In America
Almost no one noticed, but around George W. Bush’s reelection in 2004, the nation crossed a demographic milestone.
From Revolutionary days through 2004, a majority of Americans fit two criteria. They were white. And they concluded their education before obtaining a four-year college degree. In the American mosaic, that vast white working class was the largest piece, from the yeoman farmer to the welder on the assembly line. Even as late as the 1990 census, whites without a college degree represented more than three-fifths of adults.
But as the country grew more diverse and better educated, the white working-class share of the adult population slipped to just under 50 percent in the Census Bureau’s 2005 American Community Survey. That number has since fallen below 48 percent.
The demographic eclipse of the white working class is likely an irreversible trend as the United States reconfigures itself yet again as a “world nation” reinvigorated by rising education levels and kaleidoscopic diversity. That emerging America will create opportunities (such as the links that our new immigrants will provide to emerging markets around the globe) and face challenges (including improving high school and college graduation rates for the minority young people who will provide tomorrow’s workforce).
Still, amid all of this change, whites without a four-year college degree remain the largest demographic bloc in the workforce. College-educated whites make up about one-fifth of the adult population, while minorities account for a little under one-third. The picture is changing, but whites who have not completed college remain the backbone of many, if not most, communities and workplaces across the country.
They are also, polls consistently tell us, the most pessimistic and alienated group in American society.
The latest measure of this discontent came in a thoughtful national survey on economic opportunity released last week by the Pew Charitable Trusts’ Economic Mobility Project. If numbers could scream, they would probably sound like the poll’s results among working-class whites.
One question asked respondents whether they expected to be better off economically in 10 years than they are today. Two-thirds of blacks and Hispanics said yes, as did 55 percent of college-educated whites; just 44 percent of noncollege whites agreed. Asked if they were better off than their parents were at the same age, about three-fifths of college-educated whites, African-Americans, and Hispanics said they were. But blue-collar whites divided narrowly, with 52 percent saying yes and a head-turning 43 percent saying no. (The survey, conducted from March 24 through 29, surveyed 2,000 adults and has a margin of error of ±3.4 percent.)
What makes these results especially striking is that minorities were as likely as blue-collar whites to report that they have been hurt by the recession. The actual unemployment rate is considerably higher among blacks and Hispanics than among blue-collar whites, much less college-educated whites.
Yet, minorities were more optimistic about the next generation than either group of whites, the survey found. In the most telling result, 63 percent of African-Americans and 54 percent of Hispanics said they expected their children to exceed their standard of living. Even college-educated whites are less optimistic (only about two-fifths agree). But the noncollege whites are the gloomiest: Just one-third of them think their kids will live better than they do; an equal number think their children won’t even match their living standard. No other group is nearly that negative.
This worry is hardly irrational. As Massachusetts Institute of Technology economists Frank Levy and Tom Kochan report in a new paper, the average high-school-educated, middle-aged man earns almost 10 percent less than his counterpart did in 1980. Minorities haven’t been exempt from that trend: In fact, high-school-educated minority men have experienced even slower wage growth than their white counterparts over the past two decades, calculates Larry Mishel, president of the liberal Economic Policy Institute.
But for minorities, that squeeze has been partially offset by the sense that possibilities closed to their parents are becoming available to them as discrimination wanes. “The distinction is, these blue-collar whites see opportunities for people like them shrinking, whereas the African-Americans [and Hispanics] feel there are a set of long-term opportunities that are opening to them that were previously closed on the basis of race or ethnicity,” said Mark Mellman, a Democratic pollster who helped conduct the Pew survey.
By contrast, although it is difficult to precisely quantify, the sense of being eclipsed demographically is almost certainly compounding the white working class’s fear of losing ground economically. That huge bloc of Americans increasingly feels itself left behind–and lacks faith that either government or business cares much about its plight. Under these pressures, noncollege whites are now experiencing rates of out-of-wedlock birth and single parenthood approaching the levels that triggered worries about the black family a generation ago. Alarm bells should be ringing now about the social and economic trends in the battered white working class and the piercing cry of distress rising from this latest survey.
By: Ronald Brownstein, Political Director, The Atlantic, May 27, 2011
Age Gap: The GOP’s Generational Weapon In The Medicare Fight
To senior citizens at town hall meetings angry or worried about their plan to convert Medicare to a private insurance scheme, Republicans have a simple answer: It’s not about you. You’ll be fine. This is for “the next generation.”
The next generation is everyone 55 or under, since the plan would not start for ten years and would affect only newly eligible seniors. The stated logic of the ten-year delay is that it takes time to put the system in place and that people need time to plan. But if “premium support” (a euphemism right up there with “enhanced interrogation”) were ever going to work, it could be implemented as quickly as the Affordable Care Act (four years) or Medicare’s prescription drug coverage (two years). Presumably, the delay is mostly a political kludge, intended to avoid a backlash from those now or soon to be dependent on Medicare by affecting only those young enough to be giving little thought to retirement health coverage.
But the line they chose is more than a gimmick: The 55-and-over cutoff marks a sharp and significant generational divide. Those over 55 will continue to benefit from one of the triumphs of social insurance in the Great Society, while the rest of us will be on our own, with a coupon for private health insurance. If you consider what it means to be 55 years old in 2011, you’ll see the significance of the line.
Today’s 55-year-old was born in 1956. That’s not generally considered a major break in the generations. It’s smack in the middle of the Baby Boom (the peak of the boom, in fact), with almost a decade to go before the first Gen-Xers were born, dreaming of Winona Ryder. But the difference between early and later Boomers, especially in their experience of the economy, is dramatic.
A baby born in 1956 would have graduated from high school in about 1974, from college in 1978 or so. Look at almost any historical chart of the American economy, and you see two sharp breaks in the 1970s. First, in 1974, household incomes, which had been rising since World War II, flattened. Real wages started to stagnate. The poverty rate stopped falling. Health insurance coverage stopped rising. Those trends have continued ever since.
Second, a little later in the decade, around the time today’s 55-year-olds graduated from college (if they did—fewer than 30 percent have a four-year degree), inequality began its sharp rise, and the share of national income going to the bottom 40 percent began to fall. Productivity and wages, which had tended to keep pace, began to diverge, meaning that workers began seeing little of the benefits of their own productivity gains. The number of jobs in manufacturing peaked and began to drop sharply. Defined benefit pensions, which provide a secure base of income in retirement, began to give way to 401(k)s and similar schemes that depend on the worker to save and the stock market to perform. While the benefits of higher education rose, college tuitions started to rise even faster. Those trends, too, have continued.
If there was ever going to be a generational war in this country, that high school class of ’74 would be its Mason-Dixon line. It’s the moment when Bill Clinton’s promise—“if you work hard and play by the rules you’ll get ahead”—began to lose its value. Today’s seniors and near-seniors spent much of their working lives in that postwar world, with their incomes rising, investments gaining, their health increasingly secure, and their retirements predictable. Everyone 55 and younger spent his or her entire working life in an economy where all those trends had stalled or reversed. To borrow former White House economist Jared Bernstein’s phrase, it was the “You’re On Your Own” economy. Finally, those 55-year-olds are spending several of what should be their peak earning years, years when they should be salting away money in their 401(k)s and IRAs, in a period of deep recession and very slow recovery.
The Ryan plan, in other words, delivers to the older generation exactly what they’ve had all their lives—secure and predictable benefits—and to the next generation, more of what they’ve known—insecurity and risk. It’s hardly the first generational fight the GOP has started. The previous one was just last fall, when they campaigned for Medicare, and against the $500 billion in cuts (mostly by getting rid of the overgenerous subsidies to private insurers in an experimental program) passed as part of the Affordable Care Act. With an off-year electorate that was overwhelmingly older, they could put all their bets on the older side, knowing that seniors would see little benefit from the Affordable Care Act and were naturally worried about any change to the health system they enjoyed.
Heading into the 2012 election, however, the electorate is likely to shift back to one in which younger and middle-aged voters vote in proportion to their share of the population, so a “Mediscare” campaign won’t work. This time, the GOP hopes to play both sides of the generational war, gambling that while seniors want security, younger voters never expected the certainty of Medicare, just as they don’t expect reliable pensions or Social Security benefits, and thus will embrace a plan that sounds innovative, flexible, and market-based. Contending that the only alternative to premium support is the end of Medicare entirely, they are offering a generation that is accustomed to getting less than their parents a little bit, rather than nothing.
This strategy is a variation on the generational conflict the Bush Administration tried to launch in 2005 over Social Security privatization. Although it never reached the level of specificity that Ryan achieved, the calculus was the same: Younger voters would welcome the opportunity to take advantage of the stock market for their retirement, rather than the stodgy and predictable system their parents and grandparents liked.
That wager didn’t work, however: It turned out that older voters were terrified of Social Security privatization and younger voters unenthusiastic. Within five months, the radical move that every pundit thought was a near-certainty when George W. Bush declared “I’ve got political capital and I intend to use it,” had disappeared, never even introduced as legislation. And despite this week’s relaunch of the Ryan plan, it’s likely to end in the same result. If Social Security is any precedent, younger voters will be indifferent, while older voters won’t believe they’re exempt. The Republicans will again walk away from the conflict, hoping to get credit for being “serious” without bearing a political price for the error.
For Democrats, the defeat of the Ryan plan, like the failed Social Security privatization before it, will be regarded as a great victory, and an opportunity to get a fresh start with worried older voters. But they should not ignore the generational divide revealed by Ryan’s cutoff. If progressive politics has nothing to offer the late Boomers and the generations that follow except the same old programs, and nothing that responds to their distinctive experience of the economy, then eventually they’ll fall for one of these gimmicks from the right.
By: Mark Schmitt, The New Republic; Senior Fellow, Roosevelt Institute, May 20, 2011
GOP Jobs Plan: Old Ideas, Fancy New Clip Art
Academic books pack about 600 words to a page. Normal books clock in around
400. Large-print books, you know, the ones for kids or the visually impaired — fit about 250. The House GOP’s jobs plan, however, gets about 200 words to a page. The typeface is fit for giants, and the document’s 10 pages are mostly taken up by pictures. It looks like the staffer in charge forgot the assignment was due on Thursday rather than Friday and cranked up the font to 24 points and began dumping clip art to pad out the plan.
Which is odd, because there’s nothing in this plan that hasn’t been in a thousand other plans. When I asked David Autor, an economist at the Massachusetts Institute of Technology and a specialist on labor markets, to take a look at the substance, he pronounced it a classic case of “what Larry Summers would call ‘now-more-than-everisms.”
“Here’s how it works,” Autor wrote in an e-mail. “1. You have a set of policies that you favor at all times and under all circumstances, e.g., cut taxes, remove regulations, drill-baby-drill, etc. 2. You see a problem that needs fixing (e.g., the economy stinks). 3. You say, ‘We need to enact my favored policies now more than ever.’ I believe that every item in the GOP list that you sent derives from this three-step procedure.
“That’s not to say that there are no reasonable ideas on this list. But there is certainly no original thinking here directed at addressing the employment problem. Or, to put it differently, is there any set of economic circumstances under which the GOP would not actually want to enact every item on this agenda? If the answer is no, then this is clearly now-more-than-everism.”
If you read Autor’s answer and then guessed at what’s included in the plan, you’d probably get it about right. The GOP wants a separate congressional vote on every significant regulation. It wants to cut taxes for corporations and small businesses led by individuals. It wants a tax break on profit that corporations earn overseas. It wants to pass pending trade agreements, increase domestic production of oil and enact spending cuts. The only two proposals you couldn’t have guessed sight unseen are patent reform and visas for the highly skilled.
But even if you think every item on that agenda is a grand idea, this isn’t exactly fast-acting medicine. “At best, an agenda like this is meant to improve long-term growth by a couple of tenths of a percentage point,” says Larry Mishel, president of the Economic Policy Institute. “It takes a really long time to move the dial. It’s not a response to a cyclical downturn.”
That’s okay, because the document doesn’t believe in cyclical downturns. It only believes in deviations from the Republican agenda. The first page sets out the GOP’s narrative of the unemployment crisis. See if you recognize what’s missing here: “For the past four years, Democrats in Washington have enacted policies that undermine these basic concepts which have historically placed America at the forefront of the global marketplace. As a result, most Americans know someone who has recently lost a job, and small businesses and entrepreneurs lack the confidence needed to invest in our economy. Not since the Great Depression has our nation’s unemployment rate been this high this long.”
Four years ago, of course, George W. Bush was president. And he was, as you might remember, a Republican, not a Democrat. As for Wall Street, well, Wall Street who?
But it’s not just that you could read this jobs plan without knowing the financial crisis ever happened. You could read it without knowing the past decade ever happened. As Mishel says, “If lower taxes and less regulation was such good policy, then George W. Bush’s economy would have been a lot better. But under Bush, Republicans cut taxes on business and on investors and high-income people, and they didn’t add many regulations, and that business cycle was the first one in the postwar period where the income for a typical working-class family was lower at the end than at the beginning.”
That, however, is the agenda the House GOP thinks we need. And now more than
ever.
By: Ezra Klein, Columnist, The Washington Post, May 26, 2011
To Fix The Budget Deficit, Raise Corporate Taxes
Washington is a town currently gripped by deficit hysteria. Various commissions and congressional “gangs” have formed (and broken up) with the goal of crafting a plan to bring the nation’s budget into balance. Even the media has been sucked into this vortex, dedicating far more of its time to covering the deficit than other economic issues, such as unemployment.
At the same time, both parties seem to agree that the nation’s corporate tax code needs to be reformed. President Obama and House Budget Committee Chairman Paul Ryan each dedicated a portion of their respective budget plans to overhauling the federal corporate income tax, which is high on paper, but so riddled with loopholes, deductions, and outright giveaways that few corporations pay the full statutory rate (and several corporations pay no corporate income tax at all).
This, then, should be an excellent opportunity to kill the proverbial two birds with one stone: cleaning up the corporate tax code, lowering the corporate tax rate, and still raising more revenue that can be put towards deficit reduction.
But no.
Despite all the hyperventilating over the deficit, both Republicans and Democrats have said that they want corporate tax reform to be revenue neutral, meaning no more or less revenue will be raised by the new system than was raised by the old. President Obama and Treasury Secretary Tim Geithner have each extolled the virtues of deficit-neutral corporate tax reform. But if this is actually the road that’s taken, it will constitute a colossal missed opportunity.
At the moment, corporate tax revenue has plunged to historic lows. In 1960, the corporate income tax provided more than 23 percent of federal revenue; the Office of Management and Budget estimates that it will provide less than 10 percent this year.
During the 1960s, the United States consistently raised nearly 4 percent of GDP in corporate revenue. During the 1970s, the total was still above 2.5 percent of GDP. Now, the U.S. raises less than 1.5 percent of GDP from the corporate income tax. As the Congressional Research Service put it, “Despite concerns expressed about the size of the corporate tax rate, current corporate taxes are extremely low by historical standards.”
The United States effective corporate tax rate is also low by international standards (though the 35 percent statutory rate is the second highest in the world). There are plenty of reasons for this drop, but chief among them is the proliferation of loopholes and credits clogging up the corporate tax code (alongside the growing use of offshore tax havens and the ability of corporations to defer taxes on offshore profits indefinitely).
Huge corporations, such as ExxonMobil, have recently had years where they paid literally nothing to the U.S. Treasury, despite making huge profits. The New York Times made waves by finding that General Electric paid no federal income tax last year, instead pocketing hundreds of millions of dollars in tax benefits. Mega-manufacturer Boeing has done the same, paying no federal taxes in 2009 while collecting $132 million in tax benefits. Google last year had a 2.4 percent effective tax rate, while California-based Broadcom’s rate was just 1.4 percent, far below the rate that the average American pays.
The Treasury Department estimated in 2007 that corporate tax preferences cost $1.2 trillion in lost revenue over a decade. So there is ample room to remove credits and deductions (like those that benefit, amongst others, hugely profitable oil companies and agribusinesses), lower the statutory rate, while still bringing in more revenue. Some companies would see their taxes go up, but others would see their tax bills drop, and the corporate tax code would be more fair, efficient, and competitive, while ensuring that all corporations pay their fair share.
As the Center on Budget and Policy Priorities put it, “corporate tax reform is a solid candidate to make a contribution to fiscal improvement … Taking a major revenue source off the table for deficit reduction at the outset would be ill-advised.” Indeed, with corporate profits skyrocketing—up 81 percent over a year ago—and corporations sitting on trillions in cash reserves, there is no reason that corporate tax reform should be done in a way that is deficit neutral, besides the fact that raising more revenue will be politically difficult, as corporations will likely throw their considerable lobbying weight against such a move. But in the end, failing to raise additional corporate tax revenue will simply shift more of the deficit reduction burden onto a middle-class already battered by the Great Recession.
By: Pat Garofalo, U. S. News and World Report, May 25, 2011
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