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Our torn social contract

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Our nation is drowning in debt, and we have the highest income inequality of any advanced industrial country. Yet Republicans demand that taxpayers with an average income of $8.4 million get a tax cut of $370,000.

Take it from Warren Buffet: "There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning."

In the face of very high unemployment, increasing poverty, homelessness and hunger, and growing numbers of people without health insurance, Republicans advocate cutbacks in social spending and repeal of Obama's universal health insurance plan.

This destructive agenda is the culmination of a 30-year class war waged by the GOP and a wealthy elite against American working people. Let's reflect on how we got to this point.

Markets create very unequal incomes. We accept such inequality because we believe that the prospect of greater income and higher status motivates people to work hard at producing goods and services that make us all better off. In the words of John F. Kennedy, we want "a rising tide [that] lifts all the boats."
But what if a minority becomes vastly wealthier with little or no benefit to the rest of society? The measure of our income as a nation is the Gross Domestic Product -- the dollar value of all the goods and services produced by American workers. What if the GDP grows steadily for decades while incomes rise only for an already affluent minority?

That's what has happened here since 1980. The GDP per capita rose from $25,640 in 1980 to $43,714 in 2008 (in 2005 dollars). This growth was fueled by a steady rise in productivity (output per work hour) over the same period.

Yet, according to the Economic Policy Institute, 38.7 percent of all of the nation's income growth went to the richest 1 percent from 1979 to 2007. The entire bottom 90 percent received 36.3 percent, a smaller share of income growth than the top 1 percent. The richest 10 percent received nearly 2/3 of the income growth, while the bottom 20 percent received almost nothing.

In an advanced capitalist economy, nearly all workers depend on getting jobs from a minority that controls the capital that funds workplaces. So there is a great imbalance in power between labor and management.

Such imbalance, left unchecked, leads to inadequate compensation and poor working conditions for employees. This weakens the sense of solidarity necessary for a healthy society. It's hard for workers to feel that "we're all in this together" if their health and welfare is at the mercy of managers whose only concern is the bottom line.

To check this imbalance, capitalist democracies have relied on several institutions. They created publicly funded social insurance programs (e.g. social security and Medicaid) to protect citizens from the worst effects of fluctuations in the labor market. They legislated minimum wages and workplace safety.

They supported labor unions to give workers strength in unity against the powerful minority of investors and managers. One of FDR's greatest achievements was passage of the National Labor Relations Act in 1935, which enshrined the rights of laborers to form unions and engage in collective bargaining.

The NLRA, together with other measures such as the Social Security Act, created a strong alliance between the Democratic Party and labor. This alliance was at the core of Roosevelt's New Deal, Truman's Fair Deal and Johnson's Great Society.

This was a period during which workers' share of America's total income kept pace with economic growth, and union-negotiated wages and benefits enabled many factory workers to join the middle class. There was a social contract in effect: Labor and management were cooperating for the common good. Real GDP per capita grew at 2.92 percent per year from 1936-1979 (MeasuringWorth.com).

This social contract had some degree of bipartisan support until the election of Reagan in 1980. By that date, the Taft-Hartley Act -- passed by Republicans in 1947 over Truman's veto -- and the decline of American manufacturing had eroded union membership and influence.

Reagan's election marked a radical shift in conventional wisdom about the role of government in a capitalist society. To paraphrase Reagan: Government is not the solution to our social problems; government is the problem. Bill Clinton echoed him: "The era of big government is over."

The only legitimate function of government was to enable markets to flourish. Private enterprise could handle everything else. Under Reagan and Bush, large tax cuts and unfunded wars  left government without the resources for an adequate social safety net. GDP growth slowed to only 1.92 percent per year.
President Obama is hinting at compromise with Republicans on tax cuts for the rich. He seems intent on making nice with the managerial elite who worked against him in the recent election.

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I'm a retired philosophy professor at Centre College. I also am a regular columnist for our local paper, The Danville Advocate-Messenger, as well as the Lexington Herald-Leader. My last book was Posthumanity-Thinking Philosophically about the Future (more...)
 

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The contrast between Obama and FDR encapsulates ev... by Brian Cooney on Tuesday, Nov 23, 2010 at 3:25:54 PM
Oh, you mean "universal" in the sense of us all h... by Jill Herendeen on Wednesday, Nov 24, 2010 at 9:03:52 AM
Thanks for reminding us why we became a great nati... by liberalsrock on Wednesday, Nov 24, 2010 at 10:00:40 AM