|
Daniel De Groot had a post yesterday suggesting more focus on economics issues. Coincidently, or maybe not, this is "economics week" for both the Obama and McCain camps.
Understanding where we are and how we got there is essential to the formulation of smart and effective solutions. The New York Times' Steven Greenhouse has recently written "The Big Squeeze: Tough Times for the American Worker," a book that distills much of what is wrong with our economic situation today. He discusses it at TPM Cafe, setting out what to me is the crux of what is wrong with today's economy: In recent years, the statistics regarding income disparity in America have been startling. After-tax annual income for the bottom fifth of American households inched up just 6 percent from 1979 to 2005, according to the Congressional Budget Office. During that time, income for the middle fifth of households grew by a modest 21 percent, with much of that gain caused by women in many households working more hours. Over that same period, income for the top fifth of households jumped by an impressive 80 percent, while income for the top 1 percent more than tripled, soaring by 228 percent.
The highest-earning fifth of households received 51.6 percent of the nation's after-tax income in 2005, meaning that the income of the top fifth exceeded that of the bottom four-fifths. As for the top 1 percent of households, they received more after-tax income than the bottom 40 percent, according to the Congressional Budget Office. A study that Thomas Piketty and Emmanuel Saez did based on federal tax returns found that the top 1 percent of households, averaging $1.1 million in annual income, received nearly 22 percent of all reported income in 2005, up from 9 percent in 1980. That income shift helped create the greatest level of inequality since the Roaring Twenties.
As someone who grew up in the 1940s and 1950s, when the average CEO earned only 40 times the salary of his average worker, instead of over 300 times as it is today, this stalling of the economic escalator is one of the most dismaying aspects of modern America. Quoting Greenhouse again, Lawrence Summers, the former Harvard president and Treasury Secretary, found that were it not for this increased inequality the bottom 80 percent of Americans would be doing considerably better. If the distribution of income today were the same as in 1979, Summers said, assuming the same level of economic growth since then, income of the bottom 80 percent of Americans would be about $670 billion more a year--or about $8,000 per family. For many households in the bottom half, this would mean a welcome 20 to 30 percent increase in income, perhaps the boost needed to avoid foreclosure.
The return to the class stratification of the Gilded Age is as much a betrayal of the American ideal of opportunity as George W. Bush's security state and executive overreach are a betrayal of the Founders' vision of a government of laws, checks and balances. It has not always been this way and it need not be in the future. How we got here is largely a combination of deregulation moves that allowed those with money to make ever more money through manipulated markets and subsidies while preaching the glories of the free market, and tax policies which allowed them to keep ever more of what they made. The history and politics are very ably set forth at length in this post by DHinMI yesterday at Daily Kos contrasting the New Deal/Great Society years with the Reagan/Bush years.
Rising income inequality is every bit as unsustainable as our excessive energy usage. It risks economic havoc as consumers are unable to continue buying goods and services, it risks political instability and it is morally wrong as an abuse of power and position by the strong and a betrayal of our ideals as a nation. We need to reverse the policies that got us here and try new solutions. Part of what makes us Democrats is a profound belief in the virtues of expanded opportunity and broad prosperity. Let us measure the proposals of the candidates against these principles.
|
STATE BLOGS
