“Growing Inequality”: A Rich Man, Poor Man Election
Three new reports on taxes, inequality and economic mobility add up to one conclusion: The 2012 presidential election should be about one thing, and one thing only: class warfare.
Let’s start with a report from the Pew Charitable Trusts, “Pursuing the American Dream: Economic Mobility Across Generations.”
The Pew Economic Mobility Project has been tracking the economic status of thousands of families since 1968 — the data covered in the current report is through 2009. And there is some good news: Absolute income has increased for Americans of all economic classes, from the poorest to the richest. The richest Americans have seen much larger relative gains, and, naturally, are far more immune to skyrocketing healthcare and education costs than are the poor, but at least part of the American dream is still intact: Children are still earning higher incomes than their parents.
But then comes the bad news: When one measures wealth — the total assets held by families — instead of income, the picture is substantially different. As Catherine Rampell summarized in the New York Times:
The median person in the poorest quintile has a family net worth that is 63 percent less than that of his counterpart a generation ago: $2,748, versus $7,439 …
The median family in the top socioeconomic class today (i.e., the family at the 90th percentile) is worth $629,853, compared to $495,510 in the last generation. That’s a 27 percent increase in the size of the median fortune in the top income stratum.
If you’re scoring at home: Rich: richer; Poor: poorer.
Now let’s move to “Inequality and Redistribution During the Great Recession,” a research paper produced by the Minneapolis Fed.
In 2010, the bottom 20 percent of the U.S. earnings distribution was doing much worse, relative to the median, than in the entire postwar period. This is because their earnings (including wages, salaries, and business and farm income) fell by about 30 percent relative to the median over the course of the recession. This lowest quintile also did poorly in terms of wealth, which declined about 40 percent …
However, even as earnings plunged, disposable income and consumption managed to hold even, relatively speaking, for the poorest Americans as compared to other classes. This is a bit of a mystery, noted the authors, who believe it can be explained by aggressive government redistribution and tax cuts.
Our main substantive conclusion is that government redistribution in the Great Recession was at historical highs and partially shielded households from experiencing large declines in disposable income and consumption expenditures. The same households, though, have experienced losses in net wealth, and this might make them more vulnerable to further or more persistent earnings declines in the future.
If you’re still keeping score: While the rich were getting richer and the poor poorer, the Great Recession absolutely hammered the worst-off Americans, but substantial government support — unemployment benefits, food stamps, Medicaid, tax cuts — saved the most vulnerable Americans from utter disaster.
And that brings us to our third report, the Congressional Budget Office’s latest numbers on federal taxes: “The Distribution of Household Income and Federal Taxes: 2008-2009.”
The bottom line: In 2009, as a result of tax cuts included in the stimulus, Americans ended up paying the lowest percentage of their income in federal taxes since 1979.
The observations included in these reports mutually reinforce each other. For example, one reason why the wealthiest Americans have done so much better than everyone else is directly related to substantial cuts in the capital gains tax rate over the past several decades. High unemployment and the collapse in home prices as a result of the Great Recession, on the other hand, have a disproportionately greater effect on poorer Americans, whose net wealth has been declining over past decades.
The numbers also beg to be put in political context. Over the long term, the rich have been getting richer and the poor poorer. In the short term, the poor took the brunt of the impact of the Great Recession, and were only kept afloat through government assistance. However, as tax rates have fallen to historic lows, it has become more and more difficult for the federal government to find the resources necessary to ameliorate widening inequality.
Now consider the fact that the Republican candidate for president wants to cut taxes even further, while eviscerating the social welfare safety net that is the only thing staving off complete economic disaster for poorer Americans. It’s class warfare all right, but one side seems to have already won.
By: Andrew Leonard, Salon, July 11, 2012
“End Of The Middle Class?”: What Happens If America Loses Its Unions
Are American unions history?
In the wake of labor’s defeated effort to recall Wisconsin Gov. Scott Walker (R) last week, both pro– and anti-union pundits have opined that unions are in an all-but-irreversible decline. Privately, a number of my friends and acquaintances in the labor movement have voiced similar sentiments. Most don’t think that decline is irreversible but few have any idea how labor would come back.
What would America look like without a union movement? That’s not a hard question to answer, because we’re almost at that point. The rate of private-sector unionization has fallen below 7 percent, from a post-World War II high of roughly 40 percent. Already, the economic effects of a union-free America are glaringly apparent: an economically stagnant or downwardly mobile middle class, a steady clawing-back of job-related health and retirement benefits and ever-rising economic inequality.
In the three decades after World War II the United States dominated the global economy, but that’s only one of the two reasons our country became the first to have a middle-class majority. The other is that this was the only time in our history when we had a high degree of unionization. From 1947 through 1972 — the peak years of unionization — productivity increased by 102 percent, and median household income also increased by 102 percent. Thereafter, as the rate of unionization relentlessly fell, a gap opened between the economic benefits flowing from a more productive economy and the incomes of ordinary Americans, so much so that in recent decades, all the gains in productivity — as economists Ian Dew-Becker and Robert Gordon have shown — have gone to the wealthiest 10 percent of Americans. When labor was at its numerical apogee in 1955, the wealthiest 10 percent claimed just 33 percent of the nation’s income. By 2007, with the labor movement greatly diminished, the wealthiest 10 percent claimed 50 percent of the nation’s income.
Today, wages account for the lowest share of both gross domestic product and corporate revenue since World War II ended — and that share continues to shrink. An International Monetary Fund study released in April shows that the portion of GDP going to wages and benefits has declined from 64 percent in 2001 to 58 percent this year. The survey compared the United States with Europe, where the only other nations in which labor’s share declined were Greece, Spain and Ireland — countries whose economies are at death’s door. Our economy is nowhere near so weak, but as Americans’ ability to collectively bargain has waned, so has their power to keep all corporate revenue from going to top executives and shareholders.
When unions are powerful, they boost the incomes of not only their members but also of nonunion workers in their sector or region. Princeton economist Henry Farber has shown that the wages of a nonunion worker in an industry that is 25 percent unionized are 7.5 percent higher because of that unionization. Today, however, few industries have so high a rate of unionization, and a consequence is that unions can no longer win the kinds of wages and benefits they used to.
Deunionization is just one reason Americans’ incomes have declined, of course; globalization has taken its toll as well. But the declining share of pretax income going to wages is chiefly the result of the weakening of unions, which is the main reason American managers now routinely seek to thwart their workers’ attempts to unionize through legally questionable but economically rewarding tactics (rewarding, that is, for the managers).
The weakening of unions has had a huge political effect as well: the realignment of the white working class. Since the ’60s, exit polls have shown that unionized blue-collar whites vote Democratic at a rate 20 to 30 percent higher than their nonunion counterparts. The decline in union membership has weakened Democrats in such heavily white, increasingly deunionized states as West Virginia and Wisconsin — the main reason Republicans such as Walker have sought to reduce labor’s numbers. Liberals who have been indifferent to unions’ decline will find it difficult to enact progressive legislation in their absence.
Understandably, some liberals are searching for ways to arrest the economic decline of the majority of their fellow Americans in a post-union environment. I fear they’re bound to be frustrated. If workers can’t bargain with their employers, it can’t be done. If and when Big Labor dies — it’s on life support now — America’s big middle class dies with it.
By: Harold Meyerson, Opinion Writer, The Washington Post, June 12, 2012
“Rand Paul’s Twisted Mind”: Protecting Individual Rights Is Not Stalinist
This week Republicans in the Senate once again blocked the Paycheck Fairness Act, which would take further steps to guarantee access to the legal system for women who charge they’ve been paid less than men for doing the same job. (That’s illegal, in case anyone was thinking of trying it.) Justifying his vote against the act, Rand Paul compared it to Soviet communism. This is sort of a dog bites man story; on a given day, Rand Paul probably compares several dozen things to Soviet communism. But here, for what it’s worth, is why he thinks legislation to make it easier for women to sue when they’ve been paid less than men for doing the same job is just like Soviet communism:
“Three hundred million people get to vote everyday on what you should be paid or what the price of goods are,” Paul told reporters on Capitol Hill. “In the Soviet Union, the Politburo decided the price of bread, and they either had no bread or too much bread. So setting prices or wages by the government is always a bad idea.”
Mr. Paul does not appear to understand either the law which he has just voted against, or the class of economic transaction about which he is speaking. If a woman sues because she has been paid less than a man for doing the same work, and a judge rules in her favour, that is not an instance of “setting prices or wages by the government”. The wage in question was set by the employer. What the judge has ruled is that the employer cannot offer different wages to different employees based on their sex. Why might such a hypothetical judge make such a ruling? Because, as noted above, offering different wages to different employees based on their sex is against the law, and has been so since 1963.
I. What Are the Federal Laws Prohibiting Job Discrimination?
1. Title VII of the Civil Rights Act of 1964 (Title VII), which prohibits employment discrimination based on race, color, religion, sex, or national origin;
2. the Equal Pay Act of 1963 (EPA), which protects men and women who perform substantially equal work in the same establishment from sex-based wage discrimination;
But should it be illegal to offer different pay for the same work based on an employee’s sex? Maybe not. Mr Paul’s argument here implies he thinks it should be okay. So, let’s try a thought experiment. How would you react to seeing a job advertisement that read: “Associate lawyer in patent firm, 3 years’ experience required, salary $100k for man, $77k for woman”? Is that okay? If not, why not? How about this: “Associate lawyer in patent firm, 3 years’ experience required, salary $100k for Christian, $70k for Jew”? How about “Salary $100k for white, $65k for negro”?
The Paycheck Fairness Act, like the Lily Ledbetter Act and Title VII of the Civil Rights Act, is not an instance of government price setting. It is an instance of government prohibition of certain forms of exploitative price discrimination. It is illegal for an employer to pay a woman less than a man for the same work just as it is illegal for a shop owner to charge a Jew more than a Christian for the same loaf of bread. There have been places in the world where at various times shop owners were allowed to charge Jews more based on their religion, to pay untouchables less based on their caste, and so forth.
Those places were not freer than America. Indeed, one place where employers were free to discriminate against women and Jews, and did so avidly, was the Soviet Union. One of the key differences between the Soviet Union and America is that in America, we have an independent judiciary to which individuals can turn for enforcement of their legal rights when someone is screwing them over because they are of the wrong race, colour, religion, sex or national origin.
In America, you have rights, and what makes those rights non-meaningless is that you can use the legal system to defend them. Mr Paul’s ideological system has performed the ingenious trick of twisting his head around 180 degrees, such that he views the fact that Americans have legally enforceable rights not to be discriminated against as a form of communism.
By: M. S., The Economist, June 6, 2012
Romney-Trump In 2012: The “I’ve Got Mine And The Hell With You” Financiers
What could Romney’s handlers be thinking when they hyped his connection with Donald Trump — fundraising with Trump, offering supporters the possibility of a meal with Trump, relishing Trump’s attention and endorsement?
Trump signifies everything Romney presumably doesn’t want people to associate with himself — conspicuous wealth, arrogance, hubris, and a distinct preference for money over all other human values.
Trump, like Romney, represents almost everything that’s wrong with the American economy today — an unprecedented amount of wealth and power at the very top, widespread insecurity and declining real wages for everyone else, and a form of casino capitalism that places huge bets with other peoples’ money and depends on everyone else to bail it out when the bets turn sour.
But wait a minute. Perhaps Romney’s handlers are smarter than they seem. Maybe Mitt has decided to let it all hang out. Rather than try to hide what’s obvious to everyone, the new strategy is to make Romney’s liabilities into assets by flaunting them. Be even bigger and bolder. Money rules!
In fact, they’re mulling an even bigger and bolder move. They recall how Bill Clinton’s choice of Al Gore as running mate in 1992 — someone very much like Clinton — accentuated Clinton’s youthful energy, the new generation he represented, and the new start Clinton wanted to give America.
So they figure Mitt’s choice of Trump as running mate will allow Mitt to celebrate his boundless capacity to make money, the “I’ve got mine and the hell with you” financiers and CEOs he represents, and the social Darwinism that he and the regressive right are convinced will be good for America.
The new bumper-sticker: ROMNEY-TRUMP IN 2012. YOU’RE FIRED!
By: Robert Reich, Robert Reich Blog, May 29, 2012
“Life Is Too Short”: Typical American Worker Would Need 244 Years To Match CEO’s Annual Salary
The average CEO made $9.6 million in 2011, even as workers’ wages remained stagnant and unemployment hovered nationally around 8 percent. Chief Executive Officers are being paid at the highest-ever rate since the AP started tracking the figure in 2006, according to a new report from the news organization.
But while CEOs may be reaping the rewards of higher profits and a growing stock market, very little of that achievement spreads as far as the average worker — or even the company’s stockholders:
Profit at companies in the Standard & Poor’s 500 stock index rose 16 percent last year, remarkable in an economy that grew more slowly than expected.
CEOs managed to sell more, and squeeze more profit from each sale, despite problems ranging from a downgrade of the U.S. credit rating to an economic slowdown in China and Europe’s neverending debt crisis.
Still, there wasn’t much immediate benefit for the shareholders. The S&P 500 ended the year unchanged from where it started. Including dividends, the index returned a slender 2 percent.
As the AP noted, “the typical American worker would have to labor for 244 years to make what the typical boss of a big public company makes in one.”
Growing CEO pay is contributing to the larger trend of increasing income inequality — CEO pay increased 127 times faster than the average worker pay over the last 30 years, and the average Fortune 500 CEO made 380 times what the average worker did last year. Fortune 500 companies made a record $824 billion in 2011.
By: Annie-Rose Strasser, Think Progress, May 25, 2012
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