Inequality, Unemployment, and our Need for a More Liberal, Egalitarian Approach to our Politics

Time for change

(1000+ posts) Send PM | Profile | Ignore

Sun Dec-05-10 10:11 PM
Original message

Inequality, Unemployment, and our Need for a More Liberal, Egalitarian Approach to our Politics

Inequality has emerged in the United States – and to a lesser extent in other parts of the world – as perhaps the pre-eminent social and political issue of our times. As noted in an article by William Domhoff titled “Wealth, Income and Power”, as of 2007 the top 1% of households in the United States owned 35% of wealth, compared to only 15% of wealth for the bottom 80%. This means that the average wealth held by the top 1% of households was more than 160 times that held by the average household in the bottom 80%. This situation has worsened considerably since 2007, as there has been an astounding 36% decline in wealth for the median household, a decline which the wealthiest Americans have largely escaped.

As a direct result of this huge degree of wealth inequality, as of September 2010 it was estimated by experts that 2009 statistics would show a poverty rate of 14.7% to 15%, representing about 45 million Americans in poverty – which would be the highest single year increase in the U.S. poverty rate since our government began calculating poverty statistics in 1959. More than 20% of those Americans are children, most of whom are considered to be living in food insecure households.

The effects of severe income inequality are not limited to economic consequences. Epidemiologists Richard Wilkinson and Kate Pickett demonstrate in their book, “The Spirit Level – Why Greater Equality Makes Societies Stronger”, numerous non-economic consequences of obscene income inequality that are independent of absolute income or wealth. These consequences include more mental illness, greater use of illegal drugs, higher imprisonment rate, higher infant mortality rate, more homicides, lower educational performance of our children, lower index of child well-being, lower trust in our fellow citizens, and lower status of women, among other adverse societal effects. Wilkinson and Pickett attribute much of this to the effects of the humiliation that many people feel when they see others around them who have much more status, wealth, and power than they do. This is especially applicable in a society in which wealth and status is considered by many to be a mark of one’s character.

HOW THEY JUSTIFY EXTREME INEQUALITY OF INCOME AND WEALTH

This obscene degree of wealth inequality should be seen as a mark of shame on our society. Yet repeated fraudulent justifications for it by our corporate-owned politicians and corporate media serve to make it seem acceptable to just enough Americans to maintain the status quo and continue the process of ever increasing inequality.

Trickle down economics

Their first argument is that all of society benefits from a great amount of income inequality because the lavish incomes bestowed upon the wealthy provide the incentives that they require in order to produce what society needs. In this view, though the economic pie is divided unevenly, the uneven division of the pie causes the pie to expand so that ultimately everyone gets more. Everyone benefits. Another way to explain the situation from this point of view is that the huge amounts of money received by the wealthy get to “trickle down” to everyone else. This theory is called “trickle down economics”, and it was introduced to our country on a mass basis by the Ronald Reagan Presidency.

To put it simply, trickle down economics is a myth with no basis in reality. It is simply an ideology that never was supported by evidence. Right wing conservatives have warned of dire consequences from any attempt to increase taxes on the wealthy ever since the idea was first voiced. From those warnings you would think that the very high rates of taxation on the wealthy starting with FDR’s presidency, and lasting for half a century, would have resulted in catastrophic economic consequences, notwithstanding the reductions in income inequality achieved in part by that taxation. However, just the opposite turned out to be the case.

A comparison Figures 1 and 6 in this article enables a comparison of top marginal tax rates with median family income levels beginning in 1947, when accurate statistics on this issue first became available. With the top marginal tax rate approaching 90% at this time, median family income rose steadily (in 2005 dollars) from $22,499 in 1947 to more than double that, $47,173 in 1980. Then, for the next 25 years, except for some moderate growth during the Clinton years, there was almost no growth in median income at all, which rose only to $56,194 by 2005 (85% of that growth accounted for during the Clinton years). However one wants to interpret those numbers, nobody could possibly conclude that they indicate overall bad financial consequences accruing from high tax rates on the wealthy. To the contrary, as economist Paul Krugman notes, this period coincides with “the greatest sustained economic boom in U.S. history”.

So much for trickle down economics.

More recently, what did the Bush tax cuts for the wealthy do? We now find ourselves in our worst economic crisis since the Great Depression of the 1930s, after more than eight years of those tax cuts. Yet Mitch McConnell has the gall to tell us that “This is not the time to be raising taxes on anybody”.

Fairness and freedom

Another argument asserts that it is only fair to reward the most productive members of society, even if it isn’t absolutely necessary to do so in order to make the economic pie bigger.

But that argument totally ignores the fact that the wealthy owe most of their wealth to government statutes and policies that provide a framework for their accumulation of wealth, as well as government subsidies (or bailouts) for their businesses in many cases. This includes government protected monopolies (as in the case of private corporate control of our “public” airwaves) and trade agreements such as NAFTA. It also includes the system by which corporate CEOs largely determine their own salaries through their choosing of their own board of directors. Yet CEOs who run their company into the ground and cause it to go bankrupt are often rewarded with millions of dollars in bonuses.

Furthermore, the wealthy benefit disproportionately from numerous taxpayer-supported programs. For example, our police forces and criminal justice system disproportionately benefit the wealthy by virtue of the fact that they have more wealth to be protected (not to mention the fact that they often receive favorable treatment in our courts). And when the wealthy steal, the stakes are almost always much greater than when the poor steal – and yet the punishment when they get caught is far from proportionate to the amount stolen.

Wealthy (and other) conservatives often claim that any redistribution of wealth (such as through the Social Security program, Medicare, federal aid to public education, or a progressive income tax) constitutes “Socialism” and an infringement on their freedom. But given that government in a democracy is supposed to represent the will of the people, if government can enact and enforce laws that benefit the wealthy, then why can’t government provide for the common good and ask the wealthy to pay what most Americans consider to be their fair share without endless whining about their loss of freedom?

George Lakoff, in his book “Whose Freedom – The Battle over America’s Most Important Ideal”, put the idea of freedom in perspective:

The focus of (George Bush’s) presidency is defending and spreading freedom. Yet, progressives see in Bush’s policies not freedom but outrages against freedom. They are indeed outrages against the traditional American ideal of freedom… Take the 2005 bankruptcy bill, which had the effect of keeping poor people (though not wealthy corporations) from declaring bankruptcy in the face of overwhelming debt – in most cases debt from emergency medical care. This will keep tens of thousands of families enslaved to debt, often at the cost of their homes! It was sponsored and passed by conservatives. It was an anti-freedom bill…

Freedom and liberty are progressive ideas that are precious to Americans. When the right wing uses them, it sounds as if aliens had inhabited, and were trying to take possession of, the soul of America. It is time for an exorcism.

EMPLOYMENT

It is self-evident that high unemployment rates greatly expand income and wealth inequality and drive families into poverty. Conservatives believe that unemployment is the result of individual laziness. Liberals/progressives believe that it is due to flaws in our economic system. If the conservative view is the correct one, then how can it be explained why unemployment rates are cyclical? Does a wave of national laziness affecting most of our society bring on a recession?

FDR’s thoughts on the security of working people during the Great Depression

During the Great Depression of the 1930s, President Roosevelt spoke of the effect of a flawed system on the security of working people in his Democratic National Convention speech of 1936:

The hours men and women worked, the wages they received, the conditions of their labor – these had passed beyond the control of the people, and were imposed by this new industrial dictatorship. The savings of the average family, the capital of the small business man, the investments set aside for old age – other people's money – these were tools which the new economic royalty used to dig itself in.

Those who tilled the soil no longer reaped the rewards which were their right. The small measure of their gains was decreed by men in distant cities.

Throughout the Nation, opportunity was limited by monopoly. Individual initiative was crushed in the cogs of a great machine. The field open for free business was more and more restricted. Private enterprise, indeed, became too private. It became privileged enterprise, not free enterprise.

An old English judge once said: "Necessitous men are not free men." Liberty requires opportunity to make a living – a living decent according to the standard of the time, a living which gives man not only enough to live by, but something to live for.

For too many of us the political equality we once had won was meaningless in the face of economic inequality. A small group had concentrated into their own hands an almost complete control over other people's property, other people's money, other people's labor – other people's lives. For too many of us life was no longer free; liberty no longer real; men could no longer follow the pursuit of happiness.

FDR didn’t just talk about it. He acted, through a massive economic stimulus program of public works and through promoting the enactment of statutes to empower unions of workers to affect the conditions of their work. This resulted in the greatest rate of job creation of any presidential administration in U.S. history.

Conservative elite attitudes towards job creation

While high unemployment rates spell disaster for the population at large, they pose many advantages for corporations. In an environment of high unemployment, workers are often so afraid of losing their jobs that they are willing to work for lower pay, less benefits, and under brutal working conditions. These facts largely explain why conservatives and corporations are often so rabidly anti-union.

But they can’t just admit that they favor high unemployment rates. So instead they attack any government effort to protect workers as interference with the “free market”, government infringement on their freedom, or just plain “SOCIALISM!!!”

The record of job creation in American history by presidential Party

Given the importance of a nation’s unemployment rate to the welfare of its citizens, a comparison of job creation by presidential Party is important to consider. The attitudes of our nation’s two major political parties on this issue are diametrically opposite: Democrats believe that a major purpose of government is to create the conditions that provide all Americans with the opportunity for work, whereas Republicans believe that government should not interfere, and indeed that government help in this matter is an infringement on their freedom. So let’s consider the record of job creation by presidential term since 1925, in order of the average annual percent increase in jobs:

Roosevelt: + 4.4%
Johnson: + 3.9%
Carter: + 3.1%
Kennedy: + 2.6%
Truman: + 2.4%
Coolidge: + 2.2%
Nixon: + 2.2%
Reagan: + 2.1%
Clinton: + 2.0%
Ford/Nixon: + 1.7%
Eisenhower: + 0.9%
Bush I: + 0.6%
Bush II: + 0.7%
Obama: -1.1%
Hoover: -9.0%

Obviously the rate of job creation is affected by more than just presidential policies and efforts. Nevertheless, the vastly greater rate of job creation during an average Democratic administration compared with an average Republican administration is huge and immediately apparent at a glance. Just as obviously, the difference is the result of the difference in liberal vs. conservative philosophy: Liberals/progressives believe that government should take an active role in creating jobs, whereas conservatives do not.

The Obama administration record on job creation

Then how to explain the woeful record of job creation (loss) thus far during the Obama administration? One thing that could be said about it is that Obama has been president for only two years, and that he inherited a nation in economic crisis. That is true, but so did FDR. Yet the philosophy and actions of the two administrations have been very different. In fact, Obama’s philosophy leans towards the Republican side of the spectrum, as he made clear in a statement:

See, I’ve never believed that government has all the answers to our problems. I’ve never believed that government’s role is to create jobs or prosperity. I believe it’s the drive and the ingenuity of our entrepreneurs, our small businesses; the skill and dedication of our workers… that’s made us the wealthiest nation on Earth. I believe it’s the private sector that must be the main engine for our recovery. I believe government should be lean; government should be efficient.

He’s bragging about us being “the wealthiest nation on Earth” during the midst of an economic crisis that is driving record numbers of Americans into poverty? Worse than that, his actions have not been commensurate with the magnitude of the crisis: Though our best economists recommended a much stronger stimulus package, he decided to go with the advice of his much more conservative economic advisors; his solution to the home foreclosure crisis was “Making Home Affordable”, a program that William Kuttner explains in his book, “A Presidency in Peril”, was orders of magnitude more favorable to banks than to homeowners; his continuation of the Bush bailout of Wall Street without demanding much fiscal reform from Wall Street failed to improve our financial situation; and in his 2010 State of the Union message he indicated that deficit reduction would be a priority over stimulation of a stagnant economy. Nobel Prize-winning economist Paul Krugman’s response was scathing in his criticism of that:

A spending freeze? That’s the brilliant response of the Obama team… It’s appalling on every level. It’s bad economics, depressing demand when the economy is still suffering from mass unemployment… It’s bad long-run fiscal policy… And it’s a betrayal of everything Obama’s supporters thought they were working for. Just like that, Obama has embraced and validated the Republican world-view… A correspondent writes, “I feel like an idiot for supporting this guy.”

And now he appears to be caving in to the Republican demand for massive tax cuts for the wealthy – a decision that would help to maintain or increase our huge amount of wealth inequality while impeding our ability to combat our current economic crisis with money spent to the advantage of ordinary Americans rather than the wealthy.

Yes, Obama has at least two years, and possibly six years left to be president. But he will succeed in turning our economic situation around only if he ditches his conservative economic advisors and adopts a much more liberal/progressive attitude towards economic matters. There is still time, but it is running out, and with a Republican House it will require a much bolder course of action than it would have required during the first two years of his administration.

SOME FINAL WORDS ON INEQUALITY

Earlier in this post I mentioned Richard Wilkinson’s and Kate Pickett’s book, “The Spirit Level – Why Greater Equality Makes Societies Stronger”, and I’ve talked in much more detail about it in a previous post. The whole focus of that book is the toxic effects of income and wealth inequality on the social fabric of society. I’ll end this post with a quote from near the end of the book:

Nor should we allow ourselves to be cowed by the idea that higher taxes on the rich will lead to their mass emigration and economic catastrophe. We know that more egalitarian countries live well, with high living standards and much better social environments. We also know that economic growth is not the yardstick by which everything else must be judged. Indeed we know that it no longer contributes to the real quality of our lives and that consumerism is a danger to the planet. Nor should we allow ourselves to believe that the rich are scarce and precious members of a superior race of more intelligent beings on whom the rest of us are dependent. That is merely the illusion that wealth and power create… We need to recognize what a damaging effect they have on the social fabric. The financial meltdown of late 2008 and the resulting recession show us how dangerous huge salaries and bonuses at the top can be.