Rising economic inequality has received attention by Senator Jim Webb, presidential candidate John Edwards, CNN's maverick Lou Dobbs, and others. The middle class has not shared in rising national prosperity, because the nation's wealth has been siphoned off to the richest Americans. Some elites are nervous. They have attacked what are pejoratively called "neopopulists" – people who say the middle class is under siege.
Surprisingly, the attack has come from the relatively unknown Third Way group that is associated with the Democratic Leadership Council. Why would self-proclaimed progressives and centrists put out a report that says the whole economic inequality story is bogus?
They favor continuation of the free trade globalization policies of recent Democratic and Republican administrations. They want no restraints on international trade, despite mounting U.S. trade deficits and loss of manufacturing and many professional jobs to low wage nations. Of Third Way's 18 board members, 14 are current or former CEOs or investors, including several hedge fund managers and the co-head of global equity trading at Goldman Sachs.
Third Way's report "The New Rules Economy" uses sleazy statistical tricks to create a false image of rising economic prosperity for middle class Americans. You know the group is full of crap when the intellectually bankrupt New York Times columnist David Brooks praises its findings. Anyone who believes this report's data and conclusions is either in the Upper Class or is just plain gullible. The report argues that the middle class is not stagnating, not drowning in debt, not being victimized by free trade. Is this your reality?
Federal Reserve chairman Ben Bernanke said recently that incomes at all levels are rising; it's just that incomes at the upper end are rising much faster. Minor increases for the many are not the same as staggering increases for the few. And that's what economic inequality and injustice are all about.
An expanding Upper Class does NOT mean that those below that class are doing equally well. Between 1979 and 2005, the percentage of the prime wage-earners aged 25 to 59 earning more than $100,000 in inflation-adjusted dollars grew by nearly 13 percentage points. But the overall population grew by more than 30 percent. So the Lower Class is expanding more rapidly than the Upper Class and they are not getting the increases in wages and benefits that they deserve.
Third Way removed lower and higher age Americans and non-married households from their data to emphasize the median income of married-couple households at more than $72,000, up 22 percent from 1979 to 2005 when adjusted for inflation (and not that impressive for 25 years). If both work outside the home it is $81,000. Guess what? Less than half of American households fit the married couple category, and even fewer in the prime wage-earner class. If you include the many unmarried households in this age range the median drops to $61,000. If all households are counted, the median drops sharply to just over $46,000.
Note that median wages for men are lower today than they were in 1973, and even total compensation, including benefits, is lower than it was in the late 1970s. And median incomes of high school graduates in general have declined a lot. For college graduates, median hourly real wages are up just 10 percent over thirty years!
The report dismisses the staggering increases in household debt by invoking higher home values. This of course ignores the housing bubble effect that has created delusional home equity wealth.
There is another reality check. Local geographic or regional economies determine whether a $72,000 or even $81,000 household income is really that good. Compared to 25 years ago, for example, there are incredibly higher housing costs in many places, high costs for two workers commuting long distances between jobs and affordable homes, much higher health insurance and medical costs, remarkably higher college costs, and other rising expenses that never seem to be captured by the government's official inflation figures.
Listen to Turley K. Hayes of Topeka, Kansas – a relatively low cost of living area: "I earn a gross income of $81,000 and support my disabled domestic partner. My NET income from this (after taxes, insurance, Social Security, Medicare, Co-Pays for medical) is down to $46,435. My partner and I live paycheck to paycheck, as prices have risen. The 'money' specialists say we haven't had inflation. Tell that to me after I go to JC Penney and buy a new pair of workshoes, identical to the ones I bought last year and pay $21.34 more (and that was after a 10% discount coupon). There is inequality, those at the low end can get help, those at the high end don't need it. Those of us in the middle are suffering because we make too much to get help and not enough to save for anything." But that schmuck David Brooks tells the world that such household incomes are just fine. How many households below the median can afford to send a child to even a state college and also save for retirement, because virtually no one gets a pension anymore?
As to economic inequality: Adjusted for inflation, wages rose about 11.5 percent from 1979 to 2006 for those at the median. Those near the bottom of the wage scale saw their pay rise just 4% during that time, while the incomes of those at the top rose 34%. That's unfair distributional economics. If you are in the Upper Class, you could care less. But most Americans feel economic anxiety, because direct experience tells them that they are close to – or moving closer to – economic disaster. They are just one serious illness or job loss away from requiring government welfare assistance, losing their home, and going bankrupt.
It pays to be rich. In 2004, just about 25,000 taxpayers took home over $5 million. They paid an average 21.9 percent of their incomes in federal income tax. Back in 1952, at the height of the Korean War, the comparable federal tax bite on America's richest 25,000 averaged 51.9 percent. About a decade earlier, in the middle of World War II, the 25,000 highest-income taxpayers paid 68.4 percent of their incomes in federal income tax. Public policy has helped the rich because the rich have shaped public policy.
True, Americans generally have many more possessions than in the past. But that results from all household adults working – and usually longer hours on the job and at home – than in the past. Is this progress? Economic data say little about quality of life. American insanity is that people are driven by advertising, easy credit and pop culture to consume compulsively even if it means increasing personal risk through excessive borrowing. The visibility of the Upper Class causes 80 percent of the population to fantasize that they too can become rich. But the odds are against that. More realistic is sinking into poverty during their work years or when they retire without a good pension and with uncertain Social Security.
The Third Way's report and status quo power elites love to say that more education is the solution. Is this another lie? Americans have become more educated. In 1970, the National Center for Education Statistics reports that only 75 percent aged 25-29 had completed high school. In 2004, that increased to nearly 90 percent. Similarly, in 1970, only 16 percent of Americans in their late 20s held a four-year college degree. By 2004, that nearly doubled to 29 percent.
Something else doubled since 1970: the share of national income that goes to America's richest 1 percent. The share going to average Americans, by contrast, has dropped. Average Americans in the bottom 90 percent of the nation's income distribution took home 67 percent of U.S. income in 1970. This dropped to only 53 percent in 2004, despite higher education levels! It continues to drop. Education does not necessarily work. Why?
Joel S. Hirschhorn is the author of Delusional Democracy - Fixing the Republic Without Overthrowing the Government (www.delusionaldemocracy.com). His current political writings have been greatly influenced by working as a senior staffer for the U.S. Congress and for the National Governors Association. He advocates a Second American Revolution, beginning with an Article V Convention to propose constitutional amendments. He is Chair of the Independent Party of Maryland.
I don't know. I am glad Edwards has said something about it, but other than that, I simply don't know. I am examining the top 3 on the Democratic side very carefully for things on this issue and on free trade. I want to see policy proposals that address the pounding the middle class has taken and also that address how badly the free trade initiatives have been for our economy.
by
Steven Leser (209 articles, 44 quicklinks, 32 diaries, 1369 comments)
on Wednesday, February 21, 2007 at 10:32:22 AM
"Surprisingly, the attack has come from the relatively unknown Third Way group that is associated with the Democratic Leadership Council. Why would self-proclaimed progressives and centrists put out a report that says the whole economic inequality story is bogus?"
Why surprisingly,Joel? The DLC, with McAllister and From unleashed by Bill Clinton for the purpose of closing the gap between the two parties with respect to corporate donations, has done all it can to subvert and silence the progressive messages from democrats for years now. That they have been very successful at raising large amounts of money is much less important than the sad fact that they have done this by aligning the Dems far too closely to the message of the GOP.
It is fact that the middle class is shrinking, it is that very class which gives the conservatives the most problems, they tend towards being educated, liberal and outspoken, also they vote in large numbers and send their kids to college. All an anathema to the right.
That we do not hear much about this is also fact, but put the blame exactly where it belongs; on Bill and the boys at the DLC. This is exactly why all you loyal dems (not you Joel I know you are not one of those) should be very worried about the '08 elections.
by
ardee D. (6 articles, 4 quicklinks, 1 diaries, 2377 comments)
on Wednesday, February 21, 2007 at 11:21:50 AM
Why would "self-proclaimed progressives" obscure the
real truth about economic inequality? When these very people are essentially members of the Wall St chapter of the DLC? The question practically answers itself.
A strikingly accurate phrase in your essay is "Public policy has helped the rich because the rich have shaped public policy." One can understand a lot about US politics by contemplating the consequences of such mechanisms.
The basic M.O. of the Democratic Party is to try to pass itself off as "the people's party," while quietly pushing the economic agenda one would expect from Goldman Sachs equity traders & hedge-fund managers. The same social types that FDR once called "economic royalists" now dress themselves up as Democrats and call themselves "progressives."
Neither D's nor R's want serious discussion of economic inequality, because that kind of talk can lead to class consciousness, which our official politics prefers to suppress, for obvious reasons. A limited amount of pseudo-populist talk is permitted on the D's side to win support among the rubes, but it's understood this is just showmanship & posturing.
It's too beautiful for words that a schmuck like David Brooks would love these kinds of "Democrats." (And when these types of Dems throw their money behind the inevitable Edwards, Hillary or Obama, one should remember Brooks' praise for the eventual nominee's backers.)
by
Richard Mynick (2 articles, 3 quicklinks, 1 diaries, 1162 comments)
on Wednesday, February 21, 2007 at 12:50:05 PM
Re: "Neither D's nor R's want serious discussion of economic inequality, because that kind of talk can lead to class consciousness, which our official politics prefers to suppress, for obvious reasons. A limited amount of pseudo-populist talk is permitted on the D's side to win support among the rubes, but it's understood this is just showmanship & posturing."
The author himself mentioned that Edwards is in fact talking about this. I am more than certain without even bothering to research that Kucinich and other members of the Democratic progressive caucus are also talking about this.
I realize you are a bona fide member of the Blame Democrats for Everything crowd, but at what point do you start caring about being accurate and not spraying about accusations willy-nilly? Just curious.
by
Steven Leser (209 articles, 44 quicklinks, 32 diaries, 1369 comments)
on Wednesday, February 21, 2007 at 1:47:25 PM
Good points, Steven. Yes, Edwards is indeed a smooth-talking
corporatist Democrat who plays the pseudo-populist game on TV. His act is very polished, & the Third Way guys from Goldman Sachs will be giving him a careful look. That kind of acting talent attracts attention!
Kucinich has the problem that he's too principled. I'm afraid that when he talks about economic inequality & US militarism, he really means it. This is too bad, because nothing turns DLC-supporting hedge-fund managers off more quickly than this kind of talk, which cuts against their financial interests. Probably not much support for DK from Goldman this year.
You've got me pegged wrong, though, when you call me a member of the "Blame Democrats for Everything" crowd. It's more like, the "Blame the 2-party system which is wholly controlled by the corporate oligarchy" crowd. (But that title is a bit awkward -- too many words. Not as melodious as the one you picked.)
Here's a question for you: Of the 280 or so Dems in Congress, how many do you think are in Kucinich's category? Maybe 5 or 6? In other words, he isn't the Dem Party; he's an exception. If they were all like him, we might not be in this mess.
by
Richard Mynick (2 articles, 3 quicklinks, 1 diaries, 1162 comments)
on Wednesday, February 21, 2007 at 3:09:34 PM
I think there are around 70 house Democrats in Kucinich's
category and around 5 Senators. Here is a link to some of them---> click here
But didn't you say in your post that no Democrat would want to even talk about it? Then you backtracked by mentioning that Edwards did, but you couldnt resist a simultaneous dig at him. Which is it? Do Democrats not want to even talk about it or not?
by
Steven Leser (209 articles, 44 quicklinks, 32 diaries, 1369 comments)
on Wednesday, February 21, 2007 at 3:32:01 PM
Again, you raise an important point. If you look closely
at what I said, it was "Neither D's nor R's want serious discussion of economic inequality." The word 'serious' is key. It's OK for a Dem to make certain limited references to the existence of inequality. After all, as Joel's article points out, this fact of American life is getting harder & harder to hide.
However, a Dem can only make this reference in ways that fall far short of a class analysis of US society. He/she cannot imply that deep social inequality means there's any deep & systematic deficiency in US society. There can be no implication that our society's economic organization leads inevitably to intensely destructive results; or that our privileged classes have taken criminally unfair advantage of the political setup, to milk it for their own gains.
But a nice light & cheerful reference, such as "We're a great wonderful country, but I believe we can do even better!! -- that's permitted. A Dem can say that somehow by accident, a little itsy bitsy inequality has developed -- but that of course, our wonderfully fair system will soon fix it. (A Repub can't even say that. He has to go with something like "And if any of you are having trouble making ends meet, it's your own fault, because you're too lazy & stupid to get rich under our wonderful & fair system.")
by
Richard Mynick (2 articles, 3 quicklinks, 1 diaries, 1162 comments)
on Wednesday, February 21, 2007 at 4:31:59 PM
I would like to touch basis on the education in this country.
The primary goal of any education is to develop a systemic thinking. This particular goal ABSOLUTELY DOES NOT EXIST in the US educational system. As such we have people, a majority of them who never ever thought systemically, do not know what that means and as such are gullible beyond belief. Moreover, the systemic thinking ( similar to the one the author demonstrates here) is considered a source of misery and unhappiness. As a result we have a conglomerate of happy idiots who less and less are interested in the real picture and get even irritated if they get one. We here are so happy that we become even happy with death, like when Anna Nicole dies or our soldiers die or people in Iraq die- the TV rejoices, literally: more ratings! That is why people are more interested in hypnosis. All those words like'analysis', 'statistics', ' science', etc. make no sense anymore because they are used as noise. Monkeys in the human form say those words all the time.
National education must be universal, it must have same standards and it must be concentrated on the systemic thinking process. That first and foremost means that the role model of the school dropout or C- student or a bum who made it big and became a Prez has to be discarded. It must also mean that people who get education when they are young should get a steady job market in their own country.
Otherwise it is not a country at all.
by
Mark Sashine (50 articles, 19 quicklinks, 242 diaries, 3435 comments)
on Wednesday, February 21, 2007 at 1:44:26 PM
Do NOT get much help...I think you need to do a "study" on that too. I have a daughter with a five year old son who is living in a Salvation Army Shelter along with many other women and families in the same position..there is very little help for them...and lord knows I can't help. My own story begins with 9/11, I was one of the 28,000 private airport security screeners, that the FAA and the Airlines used to cover their own butts, by blaming 9/11 on us. No, we were not re-hired by TSA, less than 15% were re-hired...we were not all illiterate, uneducated morons. TSA tested persons (friends, family, even cocktail waitresses they had just recently met) hired, trained and gave them our jobs..BEFORE we were even allowed to take the tests..(we were told we would be fired immediately if we tried!!) And any way, we were in Spokane, WA. no where near Boston or New York on 9/11 and worked for a completely different security company..do you fire all the police because one cop shoots an innocent man? I was laid off, I recieved unemployment insurance...173.00 a week, 692.00 a month, (with no taxes taken out)...my rent and utilities alone were costing me about 650.00 a month..so I went to the Social Service office..they could give me 10.00 a month in food stamps, that was the best they could do for me. And you say those on the bottom can get help...? What world do you live in?
by
Susan Nelsen (0 articles, 0 quicklinks, 0 diaries, 265 comments)
on Thursday, February 22, 2007 at 11:49:21 AM
and had four terrible years of unemployment interspersed with short periods of ridiculous underemployment during which I drained my retirement accounts and everything else just in order to pay rent and eat. Everything I had spent nearly 10 years to build was destroyed.
This country needs a FAR, FAR, FAR, FAR better safety net.
by
Steven Leser (209 articles, 44 quicklinks, 32 diaries, 1369 comments)
on Thursday, February 22, 2007 at 3:54:35 PM
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