“A Systemic Problem Of Enabling The Rich”: Growing Income Gap Is Ripping The Social Fabric
Perhaps it’s a sign of the times that one man’s act of altruism has attracted national attention. Raymond Burse, interim president of Kentucky State University, has given up more than $90,000 of his annual salary in order to boost pay for the lowest-paid workers at the college, some of whom earn as little as the minimum wage of $7.25 an hour. His donation will bump their wages to $10.25.
Burse has noted that his sacrifice will hardly leave him impoverished. He is a retired General Electric executive (as well as a former president of the college) with good benefits, as he told the Lexington Herald-Leader. While his job as interim president is “not a hobby, in terms of the people who do the hard work and heavy lifting, they are at the lower pay scale,” he said.
Yet, Burse is not Mitt Romney rich, and he could easily have kept his entire $349,869 annual paycheck without raising an eyebrow among his peers. As acting head of a historically black institution, he’s not in the growing circle of college presidents whose annual compensation tops a million bucks. Still, his act of generosity shines a spotlight on the growing divide between the haves and the have-nots, the well-off and the working stiffs, the 1 percent and the rest of us.
The nation’s growing income inequality is one of its biggest challenges, a widening rip in the social fabric. The United States is not held together by a common religion or language or ethnicity, but by its promise of equal opportunity for all. While that’s always been a bit exaggerated, the nation has generally made good on the ideal that those who work hard can at least provide for their families.
But that notion has been less and less true since the 1980s, as globalization and technology starting stealing the factory jobs that paid good wages and gave average workers a toehold in the middle class. Then came the financial meltdown of 2008, which sped the decline. It’s no wonder that 49 percent of Americans, according to a new NBC-Wall Street Journal poll, think the country is still in a recession.
The Great Recession, though, just put rocket-boosters on a trend evident for decades. The problem is systemic. We’ve managed to create an economy that makes the rich richer while most others struggle to get by. Those with college degrees generally fare better than those with high school diplomas, but there are lots of twenty-something college grads working part-time jobs and living with their parents. They can’t afford to rent an apartment.
The economic climate isn’t the fault of Congress or the president. This globe-shaking dislocation is a mega-trend — the sort of frightening reordering of the universe that shook millions at the start of the Industrial Revolution. It’s not necessarily a bad thing that thousands of bank tellers, for example, are slowly being replaced by smart ATMs, but it does signal the disappearance of jobs that paid a decent wage.
Most Americans, however, aren’t buying the mega-trend explanation. They place the blame for their economic decline squarely on the shoulders of their elected leaders. The NBC-Wall Street Journal poll, conducted late last month, found that “seven in 10 adults blamed the malaise more on Washington leaders than on any deeper economic trends,” the Journal said.
That is easy enough to understand. Even if political leaders didn’t instigate a tectonic shift in the economy, they have done next to nothing to ease the dislocations. Indeed, a dysfunctional Republican Party, now comfortable in its role as enabler to the rich, will barely acknowledge the growing income gap.
Democrats, for their part, have recognized the problem but present few long-term solutions. Yes, raising the minimum wage would help, but it’s just a start. The nation needs an overhaul of its educational system, cheaper college costs and a public works program that pays a decent wage.
Burse’s noble sacrifice could help a few workers, but it’s not clear that it will stay in effect after he leaves. Still, his gesture is a step in the right direction. Too few men and women in his position have even noticed the plight of their poorly paid workers.
By: Cynthia Tucker, Visiting Professor, The University of Georgia; The National Memo, August 9, 2014
“GOP’s New Plutocratic Populism”: A Bizarre Vision Of The Working Class
Fresh off his victory over Tea Party challenger Matt Bevin, Senate Minority Leader Mitch McConnell headed to the American Enterprise Institute Thursday to make himself over as a GOP populist. The party, as you’ve heard, has decided it needs “middle-class outreach” – since it’s given up on outreach to women, Latinos, African-Americans and the LGBT community – and thus some intellectuals and politicians have tried to craft “a middle class agenda.”
While the party should continue to stand for the free market and business interests, McConnell said, it had to face facts: “For most Americans whose daily concerns revolve around aging parents, long commutes, shrinking budgets and obscenely high tuition bills, these hymns to entrepreneurialism are as a practical matter largely irrelevant. And the audience for them is probably a lot smaller than we think.”
That, you’ll recall, was the takeaway from Mitt Romney’s 2012 campaign, where the plutocrat’s self-satisfied slogan “You built that!” was meant to mock Obama’s declaring that nobody builds a business entirely alone, but seemed to mock anyone who drew a paycheck, which is most of us.
But what is the tangible help McConnell and his friends are now offering to middle-class families? Very little, it turns out. McConnell had the audacity to present his union-busting National Right to Work Act as a pro-middle class reform, ignoring the way the labor movement actually built the middle class from the 1940s through the 1970s. Oh well.
The AEI event also included Sens. Mike Lee and Tim Scott, along with House Majority Leader Eric Cantor and writers like Ross Douthat, Ramesh Ponnuru and Reihan Salam, who contributed to a collection of essays on the new middle-class agenda called “Room to Grow.” They talked about helping single mothers, tackling student debt and ending corporate cronyism. But they offered very few ideas that would make a difference, and their good ideas are strangled by GOP orthodoxy. Lee wants to develop a package of tax cuts and credits for the middle class, for instance, but it adds $2.4 billion to the deficit so he hasn’t worked out his numbers.
The Utah Tea Party favorite also proposes to help the middle class while cracking down on the poor: Since he believes poverty programs create a “disincentive to work,” he wants to cut them and step up work requirements for those who do get help. “We don’t want people to have to make that kind of awful choice” between welfare and work, Lee told a reporter, so we’ll cut back welfare and make it harder to access. Bless his heart.
Ending corporate cronyism seems like a place the two parties might find common ground, but every time Democrats and a few Republicans put together a proposal for cutting the tax loopholes that make the tax code so unfair, conservatives squash it.
Still, let’s give the folks behind “Room to Grow” credit for trying, again, to buck the prevailing pro-plutocrat direction of their party. In the conservative Washington Free Beacon, Matthew Continetti praised the agenda, but offered a caveat. “I do not doubt for a moment that if the Republican Party adopted Room to Grow as its platform tomorrow, then both the GOP and the country would enjoy a better future,” he wrote. But he remembered a similar reception for Douthat and Salam’s widely praised “Grand New Party: How Republicans Can Win the Working Class and Save The American Dream,” and concluded the GOP “is no closer to embracing the ideas of Salam [and] Douthat…than it was when we celebrated the publication of ‘Grand New Party’ at the Watergate in 2008.”
Continetti deserves credit for explaining exactly why that is:
The outreach Republicans make to single women and to minorities inevitably repels the groups that give the party 48 percent of the popular vote—Christians and seniors and men. As has been made abundantly clear, 48 percent of the popular vote does not a presidential victory make. But 48 percent is not quite something to sniff at either. That number can always go down.
So if the GOP can craft an agenda that it can sell to Christian senior men, this middle-class thing is a go. Otherwise, it’s going to have to wait for people with the courage to sacrifice part of that 48 percent to get to 51 percent.
By: Joan Walsh, Editor at Large, Salon, May 23, 2014
“Reaganomics Killed America’s Middle Class”: The Time Is Long Past Due For Us To Roll Back The Reagan Tax Cuts
There’s nothing “normal” about having a middle class. Having a middle class is a choice that a society has to make, and it’s a choice we need to make again in this generation, if we want to stop the destruction of the remnants of the last generation’s middle class.
Despite what you might read in the Wall Street Journal or see on Fox News, capitalism is not an economic system that produces a middle class. In fact, if left to its own devices, capitalism tends towards vast levels of inequality and monopoly. The natural and most stable state of capitalism actually looks a lot like the Victorian England depicted in Charles Dickens’ novels.
At the top there is a very small class of superrich. Below them, there is a slightly larger, but still very small, “middle” class of professionals and mercantilists – doctor, lawyers, shop-owners – who help keep things running for the superrich and supply the working poor with their needs. And at the very bottom there is the great mass of people – typically over 90 percent of the population – who make up the working poor. They have no wealth – in fact they’re typically in debt most of their lives – and can barely survive on what little money they make.
So, for average working people, there is no such thing as a middle class in “normal” capitalism. Wealth accumulates at the very top among the elites, not among everyday working people. Inequality is the default option.
You can see this trend today in America. When we had heavily regulated and taxed capitalism in the post-war era, the largest employer in America was General Motors, and they paid working people what would be, in today’s dollars, about $50 an hour with benefits. Reagan began deregulating and cutting taxes on capitalism in 1981, and today, with more classical “raw capitalism,” what we call “Reaganomics,” or “supply side economics,” our nation’s largest employer is WalMart and they pay around $10 an hour.
This is how quickly capitalism reorients itself when the brakes of regulation and taxes are removed – this huge change was done in less than 35 years.
The only ways a working-class “middle class” can come about in a capitalist society are by massive social upheaval – a middle class emerged after the Black Plague in Europe in the 14th century – or by heavily taxing the rich.
French economist Thomas Piketty has talked about this at great length in his groundbreaking new book, Capital in the Twenty-First Century. He argues that the middle class that came about in Western Europe and the United States during the mid-twentieth was the direct result of a peculiar set of historical events.
According to Piketty, the post-World War II middle class was created by two major things: the destruction of European inherited wealth during the war and higher taxes on the rich, most of which were rationalized by the war. This brought wealth and income at the top down, and raised working people up into a middle class.
Piketty is right, especially about the importance of high marginal tax rates and inheritance taxes being necessary for the creation of a middle class that includes working-class people. Progressive taxation, when done correctly, pushes wages down to working people and reduces the incentives for the very rich to pillage their companies or rip off their workers. After all, why take another billion when 91 percent of it just going to be paid in taxes?
This is the main reason why, when GM was our largest employer and our working class were also in the middle class, CEOs only took home 30 times what working people did. The top tax rate for all the time America’s middle class was created was between 74 and 91 percent. Until, of course, Reagan dropped it to 28 percent and working people moved from the middle class to becoming the working poor.
Other policies, like protective tariffs and strong labor laws also help build a middle class, but progressive taxation is the most important because it is the most direct way to transfer money from the rich to the working poor, and to create a disincentive to theft or monopoly by those at the top.
History shows how important high taxes on the rich are for creating a strong middle class.
If you compare a chart showing the historical top income tax rate over the course of the twentieth century with a chart of income inequality in the United States over roughly the same time period, you’ll see that the period with the highest taxes on the rich – the period between the Roosevelt and Reagan administrations – was also the period with the lowest levels of economic inequality.
You’ll also notice that since marginal tax rates started to plummet during the Reagan years, income inequality has skyrocketed.
Even more striking, during those same 33 years since Reagan took office and started cutting taxes on the rich, income levels for the top 1 percent have ballooned while income levels for everyone else have stayed pretty much flat.
Coincidence? I think not.
Creating a middle class is always a choice, and by embracing Reaganomics and cutting taxes on the rich, we decided back in 1980 not to have a middle class within a generation or two. George H.W. Bush saw this, and correctly called it “Voodoo Economics.” And we’re still in the era of Reaganomics – as President Obama recently pointed out, Reagan was a successful revolutionary.
This, of course, is exactly what conservatives always push for. When wealth is spread more equally among all parts of society, people start to expect more from society and start demanding more rights. That leads to social instability, which is feared and hated by conservatives, even though revolutionaries and liberals like Thomas Jefferson welcome it.
And, as Kirk and Buckley predicted back in the 1950s, this is exactly what happened in the 1960s and ’70s when taxes on the rich were at their highest. The Civil Rights movement, the women’s movement, the consumer movement, the anti-war movement, and the environmental movement – social movements that grew out of the wealth and rising expectations of the post-World War II era’s middle class – these all terrified conservatives. Which is why ever since they took power in 1980, they’ve made gutting working people out of the middle class their number one goal.
We now have a choice in this country. We can either continue going down the road to oligarchy, the road we’ve been on since the Reagan years, or we can choose to go on the road to a more pluralistic society with working class people able to make it into the middle class. We can’t have both.
And if we want to go down the road to letting working people back into the middle class, it all starts with taxing the rich.
The time is long past due for us to roll back the Reagan tax cuts.
By: Thom Hartmann, AlterNet, April 19, 2014
“Pushing Bad Politics And Bad Economics”: Washington ‘Centrists’ Don’t Want President Obama To Target Inequality
Last week, President Obama delivered an impassioned address about growing income inequality and declining mobility, correctly identifying the trend as both a problem long in the making and the seminal economic challenge of our time. Inequality in the U.S. has not just meant a growing divide between the rich and the poor, but a weakening middle class, with median wages declining to $51,404 a year, down from $56,000 a year in 2000, all while productivity increased. As President Obama put it, “We know from our history that our economy grows best from the middle out, when growth is more widely shared.” But this belief that a strong and growing middle class is key to economic growth and that inequality actually harms the economy is not an argument Obama pulled out of thin air. Rather it is a theory at the core of the Democratic Party, adhered to by both recent and long past Presidents. Indeed, Bill Clinton who titled his campaign book “Putting People First,” made the same argument when he accepted his party’s nomination for the middle class, stating he was doing so “in the name of all those who do the work, pay the taxes, raise the kids and play by the rules.” And of course, FDR was the father of middle-out economics, adopting demand-side Keynesian economics in the face of the Great Depression.
That’s why it was so surprising that the day before Obama’s speech hosted by the Center for American Progress, Third Way’s Jon Cowan and Jim Kessler declared economic populism “a dead end for Democrats.” They argue that messages about income inequality are overly idealistic and claim that the progressive economic agenda doesn’t excite voters outside of midnight blue districts. Of course, they ignore that it was a populist message about reducing inequality that won Obama reelection just over a year ago.
However, the push from leading progressives for Democrats to embrace a policy agenda that says the promise of America should be for all wasn’t born from a political playbook, but from the economic reality of the last decade. Wages have been unacceptably stagnant: in 2000 the median American worker earned $768 per week, in 2012 that worker still makes $768 per week even as productivity increased over the same time period by 23 percent. Inequality is on the rise. Between 2009 and 2012, 95% of the country’s income gains went to the top 1% of earners. An overwhelming majority of Americans—85 percent—feel that it’s more difficult for middle-class families to maintain their standard of living now than a decade ago. It is in response to this economic hardship and widening income inequality that Americans have embraced a policy vision that rejects failed austerity measures in favor of smart investments in the middle class.
This vision is far from “fantasy-based blue-state populism.” In fact, it’s budget-hawks whose arguments for austerity find support in fictional evidence. The deficit is falling fast—in 2013 it decreased by 37 percent. Where in 2010, the Congressional Budget Office projected deficits would exceed 8 percent of gross domestic product by 2023, today deficits are projected to average around 3 percent of GDP; the unemployment rate, on the other hand is higher today, averaging 7.5% this year, than the CBO predicted it would be by this year , 6.7%. But unemployment isn’t following the same trend. While debt projections are no longer threatening to spiral out of control, budget hawks continue their relentless focus on deficit reduction. And Washington’s obsession with fiscal “solutions” that are in search of a problem has made it harder, not easier, to create good jobs, to increase wages, and to boost overall economic growth.
This is the reality not only in true-blue districts and states, but across the country. That’s why a focus on inequality and requiring the wealthy to pay their fair share has not just been a successful political strategy for Bill de Blasio and Elizabeth Warren, but for leaders in Ohio, California, Maryland, and across the country.
In Ronald Reagan’s home state of California, Gov. Jerry Brown fought for a proposition to raise taxes on those making $250,000 or more a year and to increase the state’s sales tax by a quarter-cent directly to Californians in 2012. The establishment of a “millionaire tax” didn’t drive away innovators, but allowed the state’s leaders to say no to painful budget cuts and turned California into a global model for how to make an economy that works for everybody. Brown turned a $27 billion deficit into a surplus, brought down California’s unemployment rate, and improved the state’s credit rating. As Brown’s progressive, middle-out economic agenda paid dividends, his approval ratings soared.
Kessler and Cowan disingenuously term the serious policy ideas put forward by progressives as a “‘we can have it all’ fantasy.” But what’s lofty about a proposal to enable every child the opportunity to attend preschool when the plan would dramatically expand opportunity by boosting children’s lifetime earnings, reducing teen pregnancy rates, and lowering the chances of future arrest and incarceration? Making smart investments in early childhood education could not only generate more than $7 of economic benefits over a child’s lifetime for every dollar spent up front, but would also benefit our economy in the immediate term by providing parents with increased workplace flexibility. In pursuit of pragmatic, big ideas like universal pre-k, progressives are more than willing to talk about entitlement reforms that don’t hurt beneficiaries. In fact, the idea that every child should have access to high quality pre-k in return for enormous economic dividends is simply smart economics, not fantasy.
The most confounding piece of Kessler and Cowan’s argument is that they don’t distinguish between tax increases that affect everyone and tax increases that impact the wealthy. They argue that Democrats should learn a lesson from Colorado’s recent decision to turn down an across the board tax. While raising taxes on the wealthy has proven to be both good policy and good politics, there’s no doubt that raising taxes on everyone, as Colorado attempted, may be difficult to do—especially when wages are down. But, Bill de Blasio and Elizabeth Warren aren’t arguing that everyone should pay more in taxes, but only that the wealthy should pay their fair share. President Obama is advocating for the idea that when the top 10 percent of earners take home 50 percent of the country’s wealth, it’s reasonable to ask that the wealthiest Americans pay their fair share to ensure that all Americans have a shot at economic success. There’s another politician who raised taxes on the wealthy by raising the top marginal rate who was handily reelected President: Bill Clinton.
By: Neera Tanden, President of the Center for American Progress; The New Republic, December 15, 2013
“Worsening Jobs Crisis”: America’s Middle Class Is Burning To The Ground, While Washington Fiddles With Scandal Nonsense
At last, some excellent economic news for folks long-mired in the stagnant labor market!
At least, those were the headlines recently trumpeted across the country. “Jobs Spring Back,” exclaimed a typical headline or report that companies added a better than expected 165,000 private-sector jobs in April. Wow — the thunderous, three-year boom of prosperity that has rained riches on Wall Street is finally beginning to shower on our streets, right?
Well, as dry-land farmers can tell you, thunder ain’t rain. Read beneath the joyful headlines hailing April’s uptick in job numbers, and you’ll see the parched truth.
For example, more than a third of working-age Americans are either out of work or have given up on finding a job. Also, last month’s hiring increase was almost entirely for receptionists, waiters, clerks, temp workers, car-rental agents and other low-wage positions with no benefits or upwardly mobile possibilities. On the other hand, manufacturing — generally the source of good, middle-class jobs — did not add workers in April and has cut some 10,000 jobs in the last year.
Especially problematic was the continued rise in underemployment — people wanting full-time work, but having to take part-time and temporary jobs. Underemployment is also pounding college graduates. While they’ve been more successful than non-grads at landing jobs, they’re not getting jobs that fit their career goals or even require the degrees they spent money and time to obtain. Indeed, many of those rental agents and restaurant employees you encounter hold four-year degrees, forcing everyone else to scramble for the few, even lower-paid jobs further down the skill ladder.
Meanwhile, the next graduating class is already beginning to flood into the labor market from colleges and high schools with nowhere to go.
In May, another headline shouted: “Stock Market Soars.” It expressed delight that the Dow Jones Average topped 15,000 for the first time in its history.
Yet this index of Wall Street wealth gives a totally false picture of our nation’s true economic health. Yes, the privileged few are doing extremely well. But the workaday many are struggling — and falling further and further behind as the jobs market sinks steadily from mere recession down into depression.
The monthly unemployment reports don’t tell the depths of misery that’s out here in the real world, beyond the view of Wall Street and Washington elites. For example, President Obama hailed the news that unemployment dipped to 7.5 percent in April. Unstated, though, was the stark reality that this good-news dip was not due to a jump in job offerings, but to a bad-news labor market so weak and discouraging that more and more Americans are dropping out of it or never entering it.
More than a third of our working-age population is no longer even in the job market, and only 58.6 percent of us are employed. Put the opposite way, 41 percent of the potential workforce is not working — about 102 million people. One more statistic, and it’s a chiller: More than one out of five American families report that, last year, not a single family member had a job.
Our people are trapped in a jobs crisis that is sucking the economic vitality out of our nation, but our leaders refuse even to acknowledge it, much less cope with it. In fact, corporate chieftains are deliberately exacerbating the crisis by hoarding trillions of dollars that ought to be rushed into job-creating expansions, and politicians keep adding to the casualties by gleefully eliminating the middle-class jobs of hundreds of thousands of teachers, firefighters, police and other valuable public employees.
America’s middle class is burning to the ground, while Washington fiddles with nonsense and Wall Street feathers its own nest. It’s disgraceful.
By: Jim Hightower, The National Memo, May 15, 2013
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