Reverse Inequality is the Only Solution

We have been moving toward a lords-and-serfs economy for so long, and the right-wing noise machine has drilled acceptance of inequality into the national consciousness so deeply that we are no longer able to recognize, much less address, the real cause of our current crisis.

Robert Reich at Nation of Change:

The econ­omy won’t re­ally bounce back until Amer­ica’s surge to­ward in­equal­ity is re­versed. Even if by some mir­a­cle Pres­i­dent Obama gets sup­port for a sec­ond big stim­u­lus while Ben S. Bernanke’s Fed keeps in­ter­est rates near zero, nei­ther will do the trick with­out a mid­dle class ca­pa­ble of spend­ing. Pump-prim­ing works only when a well con­tains enough water.

Look back over the last hun­dred years and you’ll see the pat­tern. Dur­ing pe­ri­ods when the very rich took home a much smaller pro­por­tion of total in­come — as in the Great Pros­per­ity be­tween 1947 and 1977 — the na­tion as a whole grew faster and me­dian wages surged. We cre­ated a vir­tu­ous cycle in which an ever grow­ing mid­dle class had the abil­ity to con­sume more goods and ser­vices, which cre­ated more and bet­ter jobs, thereby stok­ing de­mand. The ris­ing tide did in fact lift all boats.

Dur­ing pe­ri­ods when the very rich took home a larger pro­por­tion — as be­tween 1918 and 1933, and in the Great Re­gres­sion from 1981 to the pre­sent day — growth slowed, me­dian wages stag­nated and we suf­fered giant down­turns. It’s no mere co­in­ci­dence that over the last cen­tury the top earn­ers’ share of the na­tion’s total in­come peaked in 1928 and 2007 — the two years just pre­ced­ing the biggest down­turns.

SNIP

Even­tu­ally, of course, the bub­ble burst. That ended the mid­dle class’s re­mark­able abil­ity to keep spend­ing in the face of near stag­nant wages. The puz­zle is why so lit­tle has been done in the last 40 years to help deal with the sub­ver­sion of the eco­nomic power of the mid­dle class. With the con­tin­ued gains from eco­nomic growth, the na­tion could have en­abled more peo­ple to be­come prob­lem solvers and in­no­va­tors — through early child­hood ed­u­ca­tion, bet­ter pub­lic schools, ex­panded ac­cess to higher ed­u­ca­tion and more ef­fi­cient pub­lic trans­porta­tion.

We might have en­larged safety nets — by hav­ing un­em­ploy­ment in­sur­ance cover part-time work, by giv­ing tran­si­tion as­sis­tance to move to new jobs in new lo­ca­tions, by cre­at­ing in­sur­ance for com­mu­ni­ties that lost a major em­ployer. And we could have made Medicare avail­able to any­one.

Big com­pa­nies could have been re­quired to pay sev­er­ance to Amer­i­can work­ers they let go and train them for new jobs. The min­i­mum wage could have been pegged at half the me­dian wage, and we could have in­sisted that the for­eign na­tions we trade with do the same, so that all cit­i­zens could share in gains from trade.

We could have raised taxes on the rich and cut them for poorer Amer­i­cans.

But start­ing in the late 1970s, and with in­creas­ing fer­vor over the next three decades, gov­ern­ment did just the op­po­site. It dereg­u­lated and pri­va­tized. It cut spend­ing on in­fra­struc­ture as a per­cent­age of the na­tional econ­omy and shifted more of the costs of pub­lic higher ed­u­ca­tion to fam­i­lies. It shred­ded safety nets. (Only 27 per­cent of the un­em­ployed are cov­ered by un­em­ploy­ment in­sur­ance.) And it al­lowed com­pa­nies to bust unions and threaten em­ploy­ees who tried to or­ga­nize. Fewer than 8 per­cent of pri­vate-sec­tor work­ers are union­ized.

More gen­er­ally, it stood by as big Amer­i­can com­pa­nies be­came global com­pa­nies with no more loy­alty to the United States than a GPS satel­lite. Mean­while, the top in­come tax rate was halved to 35 per­cent and many of the na­tion’s rich­est were al­lowed to treat their in­come as cap­i­tal gains sub­ject to no more than 15 per­cent tax. In­her­i­tance taxes that af­fected only the top­most 1.5 per­cent of earn­ers were sliced. Yet at the same time sales and pay­roll taxes — both tak­ing a big­ger chunk out of mod­est pay­checks — were in­creased.

Most telling of all, Wash­ing­ton dereg­u­lated Wall Street while in­sur­ing it against major losses. In so doing, it al­lowed fi­nance — which until then had been the ser­vant of Amer­i­can in­dus­try — to be­come its mas­ter, de­mand­ing short-term prof­its over long-term growth and rak­ing in an ever larger por­tion of the na­tion’s prof­its. By 2007, fi­nan­cial com­pa­nies ac­counted for over 40 per­cent of Amer­i­can cor­po­rate prof­its and al­most as great a per­cent­age of pay, up from 10 per­cent dur­ing the Great Pros­per­ity.

SNIP

The real rea­son for Amer­ica’s Great Re­gres­sion was po­lit­i­cal. As in­come and wealth be­came more con­cen­trated in fewer hands, Amer­i­can pol­i­tics re­verted to what Mar­riner S. Ec­cles, a for­mer chair­man of the Fed­eral Re­serve, de­scribed in the 1920s, when peo­ple “with great eco­nomic power had an undue in­flu­ence in mak­ing the rules of the eco­nomic game.” With hefty cam­paign con­tri­bu­tions and pla­toons of lob­by­ists and pub­lic re­la­tions spin­ners, Amer­ica’s ex­ec­u­tive class has gained lower tax rates while re­sist­ing re­forms that would spread the gains from growth.

Yet the rich are now being bit­ten by their own suc­cess. Those at the top would be bet­ter off with a smaller share of a rapidly grow­ing econ­omy than a large share of one that’s al­most dead in the water.

SNIP

Re­viv­ing the mid­dle class re­quires that we re­verse the na­tion’s decades-long trend to­ward widen­ing in­equal­ity. This is pos­si­ble notwith­stand­ing the po­lit­i­cal power of the ex­ec­u­tive class. So many peo­ple are now being hit by job losses, sag­ging in­comes and de­clin­ing home val­ues that Amer­i­cans could be mo­bi­lized.

SNIP

As the his­to­rian James Truslow Adams de­fined the Amer­i­can Dream when he coined the term at the depths of the Great De­pres­sion, what we seek is “a land in which life should be bet­ter and richer and fuller for every­one.”

That dream is still within our grasp.

Read the whole thing.

If you are old enough to remember the Liberal Prosperity of 1940 to 1980, tell the story to everyone you meet. If you are not old enough to remember it, ask to hear the story from everyone old enough to tell it.

Liberals know we all do better when we all do better.