Facing America’s Economic Inequality: What Would We Do Without Wishful Thinking?

by on January 15, 2013 · 0 comments

in American Empire, Civil Rights, Economy, Politics, Under the Perfect Sun

class-warIn last week’s column I noted how the tax increases on the 1% included in the “fiscal cliff” deal amounted to little more than the political equivalent of a love tap for the rich because upper income tax rates remain much closer to their historic lows than to their mid-twentieth century highs.

This is disheartening because, as the political narrative shifts toward some form of austerity in the name of deficit reduction, our country’s historically high level of economic inequality remains deeply entrenched and there simply will not be enough revenue to engage in a robust progressive program centered around “nation building at home” as President Obama likes to say.

In sum, the unemployment crisis and other key social and economic needs will take a back seat to deficit reduction and the battles will not be about whether an austerity agenda is the right course for America but rather what form of austerity program we should pursue. While there is an impressive list of eloquent critics (from Paul Krugman and Robert Reich to Joseph Stiglitz and Bernie Sanders) bemoaning this wrong-headed approach, we seem destined to ignore them and head down a road that spares the comfortable while further burdening the afflicted. In elite opinion circles, it’s a bipartisan consensus. Sure the wing nuts on the right are crazy but the even the Democrats are largely wedded to the gospel of Simpson-Bowles.

But isn’t this bitter medicine that will make us all better in the long run?

No, it’s bad policy that amounts to a not too-thinly-veiled class war. To understand this, we need to once again look at our recent history.

Accompanying the dramatic redistribution of wealth upward over the last several decades has been a downward push on workers’ wages. As Steven Greenhouse noted Sunday, Jan. 13, in the New York Times:

Wages have fallen to a record low as a share of America’s gross domestic product. Until 1975, wages nearly always accounted for more than 50 percent of the nation’s G.D.P., but last year wages fell to a record low of 43.5 percent. Since 2001, when the wage share was 49 percent, there has been a steep slide.

“We went almost a century where the labor share was pretty stable and we shared prosperity,” says Lawrence Katz, a labor economist at Harvard. “What we’re seeing now is very disquieting.” For the great bulk of workers, labor’s shrinking share is even worse than the statistics show, when one considers that a sizable — and growing — chunk of overall wages goes to the top 1 percent: senior corporate executives, Wall Street professionals, Hollywood stars, pop singers and professional athletes. The share of wages going to the top 1 percent climbed to 12.9 percent in 2010, from 7.3 percent in 1979.

Some economists say it is wrong to look at just wages because other aspects of employee compensation, notably health costs, have risen. But overall employee compensation — including health and retirement benefits — has also slipped badly, falling to its lowest share of national income in more than 50 years while corporate profits have climbed to their highest share over that time.

Thus the hackneyed argument that we can’t tax “job creators” falls apart upon contemplation of the fact that decades of lower taxes on the wealthy and corporations have done little to improve the condition of the average worker. In fact, American workers have labored longer, harder, and more productively for less in return. All the while, profits have soared for corporations and the wallets of the rich have gotten much fatter.

Key factors in this phenomenon are the outsourcing of jobs, technological innovation, the decline of union power, and the domination of our political system by the rich and corporate interests. Hence American workers have become better educated and productivity has grown by 80 percent since 1973 but workers’ wages have remained stagnant.

Since 2000, Greenhouse notes, worker productivity has increased by 23% and workers have seen no gain while the top 1% has seen 65% of income growth. For those on the corporate education reform train, it should be noted that even amongst college educated workers, the average wage has declined for 70% of them to the tune of about 3 percent. Consequently the problem isn’t that we have inefficient, uneducated workers, it’s that the employing class has been hogging the expanded pie at the expense of most Americans.

And now that we have a politically constructed debt crisis to solve, who should pay the bill? Drum roll: the American worker.

Interestingly, in the same issue of the Times, we learn that business experts have some advice for squeezed American workers who have suffered from the new normal:

For millions of Americans over 50, this isn’t a bad dream — it’s grim reality. The recession and its aftermath have hit older workers especially hard. People 55 to 64 — an age range when many start to dream of kicking back — are having a particularly hard time finding new jobs. For a vast majority of this cohort, being thrown out of work means months of fruitless searching and soul-crushing rejection.

To which many experts say, “What did you expect?”

Everyone, whatever age, needs a Plan B. And maybe a Plan C and a Plan D. Who doesn’t know that loyalty and hard work go only so far these days?

“Shame on you if you’re not thinking every single year, ‘What’s my next step?’” says Pamela Mitchell, a career coach and author. “It’s magical thinking not to do this.”

Great stuff. I would add to this eternal wisdom “stay in school,” “say no to drugs,” and “no pain no gain.” “Give a hoot, don’t pollute,” however, was struck from the list because it might have involved unnecessary government regulation.

Kidding aside, this kind of individualized Franklinesque cliché solution to our seemingly intractable, collective economic mess has long been part of the American ideological stock in trade. The truth is that the economic problems of most unemployed and/or underpaid Americans have less to do with an individual lack of initiative than they do with folks playing by the rules, working hard, and having the game changed on them mid-contest.

WalMartGestapoBut the legacy of this Puritan ideology that associates moral failure with national debt or individual economic deprivation is a powerful part of why we can’t seem to come to terms with the reality of the new normal. We just can’t seem to admit that our present conundrum is not the result of a lack of effort, discipline, or virtue on the part of American workers but rather the greed and hubris of their bosses and the politicians who serve their interests. The government spending that helps maintain our social safety net and national infrastructure did not bring down our economy; avarice and casino economics did.

One might audaciously hope that as the upcoming budget showdowns approach, the push toward austerity will be met with a principled collective pushback that points out that cutting social security and/or generally gutting the safety net will hurt most Americans while doing nothing to help the economy. And just as austerity will not help boost our collective fortunes, neither will the continued assault on government, unions, and the notion of a public sphere not totally dominated by the market.

Instead we need to change the frame of the debate and demand our politics be driven by better ideas and what MLK called “divine dissatisfaction” with a world that accepts a diminished future as the new normal. That might be magical thinking, but, as that great Wilco song says, “What would we do without wishful thinking?”

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