Blog Post Jan 2015

If You Think the GOP Is 'Refocusing' on the Wealth Gap, I've Got a Bridge to Sell You

Posted: 01/27/2015 8:31 am EST Updated: 4 hours ago

The New York Times reported last week that in the closed-door Republican Senate Caucus retreat, Republican Leader Senator Mitch McConnell "encouraged the Republican troops to refocus policy on the stagnant middle class."

That would be like asking the wolves of the world to stop hunting and refocus on cultivating asparagus.

But, of course, McConnell didn't really mean he wanted his fellow Republicans to do something about the wealth gap. He wanted them to look like they were doing something about the wealth gap while they actually deliver the goods for the owners of the Republican Party. The Republican Party, after all, is now a wholly owned subsidiary of the .01% and doing something meaningful about the gap in wealth and income in America -- revitalizing the middle class -- requires taking wealth and income that is now being siphoned off by the .01% and giving it to the people who earned and created it -- the vast majority of ordinary Americans.

Of course, Republicans and apologists for Wall Street dispute that assumption. They argue that the economy is not a so-called "zero sum game" -- that the best way to improve the standard of living or ordinary Americans is to grow the economy. And they say that the best way to do that is to allow the wealthy to control more and more of the nation's wealth, since they invest that wealth in new productive enterprises that create more and more new jobs.

That premise, of course, is the essence of "trickle-down economics." The problem is that we know empirically that "trickle-down economics" doesn't work. Economic growth does not necessarily increase the incomes of ordinary Americans.

In fact, over the last 35 years we've had lots of economic growth. Over that period per capita income has increased by a whopping 77% and made America wealthier per capita that any society in the history of the world. That should mean the average American is 77% better off today then he or she was three and a half decades ago. Problem is, we aren't. Instead, the real buying power of the wages of ordinary Americans has barely increased at all. Instead, all of that growth had been siphoned off to the top one percent -- and most to the top .01%. That is not a theory. It is a documented fact.

Don't get me wrong. Economic growth -- growth in productivity -- is a very good thing. It is the foundation of a better life. But growth by itself doesn't guarantee that the growing economic bounty will be widely shared.

In fact, today the stock market is at record heights, corporate profits are at record highs and the percentage of national income going to wages is at a record low.

Fixing these things requires that we change the rules of the economic game so they require that those who do the work to create the new wealth can share its benefits.

Rules like:

·         Minimum wage laws that guarantee that everyone who works 40 hours a week must be paid a living wage -- a wage that allows them to support a family;

·         Laws guaranteeing that workers in every workplace can bargain through their unions and demand middle class wages and good working conditions -- since union wages are consistently higher than non-union wages;

·         Laws that require that women who do similar work are paid just as much as men;

·         Rules that require employers to pay overtime to all employees except well-paid executives and professionals;

·         Financial regulation that prevents big Wall Street banks from siphoning off and then risking billions of dollars on speculative gambling schemes;

·         Laws preventing the sons and daughters of multi-millionaires from using the Trust Fund loophole to avoid paying billions in taxes -- thereby forcing the rest of us to pay the difference if we want decent public services.

·          

In his State of the Union Speech, President Obama outlined a program for Middle Class Economics that does just that. Not surprisingly, it was met with a resounding NO from the GOP -- all the while they feigned increased interest in addressing the problem of stagnating middle class wages.

In fact, in his State of the Union speech, President Obama outlined the terms of the debate that will define the political dialogue over the next decade in American politics.

Recall that when President Obama was inaugurated, the economy was bleeding 800,000 jobs per month. The President that preceded him, George Bush, was the first President since the depression to preside over an economy that did not produce one new net private sector job. The financial markets were melting down because of the reckless speculation of the country's biggest banks. The auto industry was on the verge of collapse.

The Obama administration intervened immediately to save the auto industry, and prevent the collapse financial markets from causing another Great Depression. And it proposed and passed an economic stimulus bill that jump-started the economy and led to 58 months of private sector job growth -- the longest recovery in history. The federal deficit fell at a faster rate than ever before in history as well.

The Republicans tried to stop him at every turn, claiming that his actions would explode the deficit, and stifle new investment. Turns out just the opposite was true. But the GOP did succeed in defending the share of the recovery that went to the richest .01%. Proving again that economic growth does not automatically guarantee that the benefits are widely shared.

That's why President Obama has proposed robust new steps to change the rules of the economic game.

You'd think that the fact that we've had 35 years of long-term economic growth without any increase in the wages of ordinary Americans would be enough to completely discredit the Republican "trickle down" economic narrative. But history shows that if the facts undercut your own self-interest, there are no limits to lengths the rich and their minions will go to rationalize their privileged status.

For years. the tobacco companies hired fleets of scientists to contest the indisputable evidence that smoking can cause cancer.

For decades. Big Oil has done everything in its power to discredit the fact that human activity is warming the world's climate.

Wall Street speculators -- and their apologists like Mitt Romney -- brazenly try to convince the world that they are the "makers" and that people who get on the train at 5 a.m. to work two jobs doing hard physical work are somehow the "takers." In fact, of course, most of the "masters of the universe" that are attracted by Wall Street's gigantic bonuses do nothing for a living but gamble. They themselves are the "takers" in America who don't create a dollar of new value and live off the labor and creativity of ordinary American workers.

And this kind of self-justifying, fact-defying, logic is nothing new. The Kings and Queens who dominated Europe in the Middle Ages convinced their subjects that they ruled by "divine right."

The aristocrats of the 19th and early 20th century that we watch struggle to protect their privilege in PBS's Downton Abby justify their privilege by claiming to use their superior breeding and education to paternally protect the interests of the lower classes.

Of course none of this is any more than an elaborate justification for kleptocracy -- for the right of the few to live off of the labor of the many. And it completely flies in the face of the core democratic principles that define America.

In the end, economic systems are not simply about efficiency and productivity. They are about right and wrong.

In America we believe that if someone works hard, they should have the ability to get ahead -- to earn their way to a better life.

We believe the accident of birth should not define your future. Yet an increasing percentage of the America's store of wealth is owned by people who inherit it, rather than people who create it themselves.

In fact, over the last several decades an increasing percentage of our national income goes to people who own something -- land or capital -- and a smaller and smaller percentage goes to people who earn it by working for it.

This fact alone guarantees that more and more wealth is concentrated in fewer and fewer hands. It is a mathematical certainty. Today, 75% of wealth is already concentrated in the hands of the top 10% and almost 35% in the hands of the top 1%. That means that only 25% of the country's wealth is controlled by the bottom 90% of the population. So, the top 1% -- that own 35% -- own more of the nation's wealth than the bottom 90%.

If more and more of our national income accrues to those who get it from owning wealth, it stands to reason that more and more income -- and ultimately more and more wealth -- will be concentrated in the hands of a few.

But none of this is inevitable. By changing the rules of the economic game -- through the kind of Middle Class Economics outlined by President Obama in his State of the Union speech -- it is entirely possible to end the cycle of increasingly concentrated wealth and once again allow the millions of Americans who actually produce the wealth to share in its benefits.

We know it's not impossible because we've done it before. Just half a century ago, America was in the midst of what economist Paul Krugman calls "the great compression" -- decades of declining concentration of wealth and income -- and widely spread, robust economic growth that benefited everyone. That, not incidentally, coincided with the New Deal and with growing union membership.

And that gets us to the most ironic fact of all. It turns out that far from being the enemy of robust economic growth, higher wages for ordinary Americans spur long-term growth by putting more money in the hands of consumers who buy more products and services. That in turn entices more investment and creates more jobs.

The real job creators are consumers with money in their pockets, not corporations and Wall Street titans. Don't worry, you don't have to do these guys any special favors. If there are consumers out there ready to buy, they will put up the money to invest in the capacity to meet the demand. And without that demand, they won't invest no matter how many tax breaks the rest of us dole out to provide them incentives.

In fact, if consumer incomes don't keep pace with growing economic productivity, it turns out that they don't have enough money to buy all of those new goods and services that increased productivity produces and the economy stagnates.

That's why in the long run, Republican economics is bad for everyone - even some of those corporate CEO's who would happily use slave labor if the law allowed.

In fact, history shows us indisputably that the most robust economic growth goes hand in hand with high wages and declining economic inequality.

Of course, the Republicans and Wall Street never tire of making dire warnings that any action by government that increases the share of income going to the middle class will cause the economy to collapse.

But it turns out, in fact, that over the last quarter century, Democratic administrations have massively out-performed Republican administrations when it comes to economic growth.

Annual per-capita real economic growth was just a tad over $200 per year during the two Bush administrations. Under the Clinton administration it was over $1,000 per year, and even though President Obama took over with the economy in a free-fall, per capita income grew about $750 per year during his administration -- more than three times the rate that it grew during the two GOP Presidents who occupied the White House since 1988.

I guess that's why they used to say, "if you want to live like a Republican, vote like a Democrat."

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Robert Creamer is a long-time political organizer and strategist, and author of the book: Stand Up Straight: How Progressives Can Win, available on Amazon.com. He is a partner in Democracy Partners and a Senior Strategist for Americans United for Change. Follow him on Twitter @rbcreamer.