A new book, Winner-Take-All Politics (Simon and Schuster), by political scientists Jacob Hacker and Paul Pierson, tells an important story at once familiar and unfamiliar. They shed useful light on the familiar part, which is that over the past 30 years wealth and income inequality in the U. S. have grown — dramatically.
Since the late 1970s the wealthiest 1 percent of the nation's population has pocketed more than 35 percent of the real national income growth, which is more than the bottom 90 percent of the population combined. Or to look at from a different angle, between 1979 and 2006, the bottom 20 percent of the population had real income growth of .3 percent, the middle 20 percent real income growth of .7 percent, while the top 1 percent enjoyed real income growth of an astonishing 260 percent.
We have moved from the "Broadland" of the 30 years before 1979, when growing wealth was broadly shared by all sectors of the population, to "Richistan," where the lion's share of wealth goes to the top 1 percent. The tiny growth in real income of the middle class has been the consequences of working more (more hours and more family members in the job market).
That's the relatively familiar part of the story. The less familiar narrative is how this happened. Authors Hacker and Pierson trace the story of a “Thirty Years War,” that began in the Carter years, when the capital gains tax was slashed, payroll taxes raised, and unions crippled. They argue that this enormous shift in wealth is not the result of usual suspects, economic globalization or technological change that makes knowledge workers and the highly educated wealthy. Nor is it the consequence of the "unfettered market" taking its natural course. Rather, it is the result of government policy, that is, of politics. Politics and resulting policy have tilted the playing field in favor of the wealthy and the super-wealthy, the latter being the top one-tenth of the top 1 percent of the population.
Since the late '70s, business and corporate interests have fought, successfully, for lower tax rates (especially for the most affluent), deregulation of financial markets and executive pay, and erosion of the powers of countervailing groups, chief among them labor unions.
Though the campaign of organized business interests and their political allies began in the late '70s, it reached its zenith in the "aughts," the period from 2001 to 2007 just before today’s Great Recession. Beginning in 2001 there were six years of consecutive economic growth in America. And yet, during that period, the median income of non-elderly households actually fell while the percent of people living in poverty rose. As Hacker and Pierson drily note, “The news wasn’t all bad. Between 2002 and 2007 the real pretax incomes of those in the top 1 percent rose by 10 percent. Per year.”
The balance of their readable book tells the story of the Thirty Years War: the tremendous growth in conservative PACs, think-tanks, and advocacy groups; the huge sums of money raised to support the agenda of tax cuts; the ever obstructionist tilt of the Republican Party; and the role of the Democratic Party, which pretty much went with the flow, sometimes actively, sometimes passively.
But in some ways there may also be a real story beyond both the familiar story — growing income inequality and the widening gap between haves and have-nots — and the unfamiliar story — that this wasn’t the inevitable result of technological change or an emerging global economy, but the consequence of government policies which skewed the playing field and redistributed income and wealth upward.
The real story is the decline, even degradation, of the American middle class, which has gone from being the secure bulwark of American democracy and countless civic institutions to a social class where many are, as the saying goes, "just two pay checks from homelessness."
Where the middle class has stayed even economically, and that’s all they have done despite overall growth in the economy, it has been either by working more or borrowing more, often both. With the Great Recession, which was induced in large part by the failure to regulate banks and financial institutions so that the wealthiest might become wealthier still, neither option, working more nor borrowing more, remains available. The decline of a stable and secure middle class, who carried the freight for civil society, is the shocking story of the last 30 to 40 years in America.
A subplot of particular relevance to Seattle is what Hacker and Pierson describe as the shifting of liberalism away from the traditional "bread-and-butter" focus of older groups such as organized labor, to the social concerns of the more affluent — abortion rights, women's rights, environmentalism, and civil liberties. Advocacy groups for all these issues proliferated in this 30-year period. “And yet, they almost never focused their attention on the economic issues that most powerfully affected the working and middle classes," the authors write. "The result was a boon for the post-materialist causes of more affluent liberals, but it left traditional material causes with only a handful of energetic backers.”
One can see such an evolution in heavily liberal Seattle. Once a strong union city and a place where middle and working class people could afford to live, Seattle became increasingly focused on "post-material" cultural issues related to race, gender, sexual orientation, civil liberties, and the environment. Such a shift, whether locally or nationally, leaves the working class and much of the middle classes without any political champion for their material interests.
The result is both the "tax revolts" of the 1980s and '90s and more recently the Tea Party. The Republicans have managed to capture much of this vote, in large part by deploying the rhetoric of populism while playing a very different game in the policy trenches. The Bush Tax Cuts of 2001 are a good example of that scheme, with the bottom 80 percent of taxpayers receiving a $600 reduction in taxes, while the top 1 percent received $38,500.
But if the Republicans have been the spear carriers, the Democrats haven't been far behind. It was Bill Clinton who in 2000 signed legislation exempting financial institutions from regulation of derivates and other exotic financial instruments.
The larger point is that with a New Liberalism abandoning material concerns for post-material causes, working and middle-class voters not only had no one championing their mounting economic concerns but their worries and stresses were hardly even noticed.
Hacker and Pierson find bad news and good news in their main story line of the widening gap between the wealthy and the rest of us that is the fruit of government policy-making and politics. The bad news is that politics is the culprit and most Americans have remained clueless about how this unfolding redistribution of wealth and jeopardizing of the middle class has come about. The good news is that these changes are not the result of historical destiny or forces beyond our control. They are political and can be altered, though doing so will prove very difficult as the first two years of the Obama Administration have demonstrated.
The larger bad news is a culture in decline amid economic growth and incredible affluence for some.