It’s no secret the U.S. middle classes are headed into the economic crapper. They know it (as evidenced by the continued drop in the 'consumer confidence index' and pulling in spending) and the political and economic elites damned well know it. But perhaps there are those who haven’t caught up with the news and need a reminder of how bad things have gotten in the past 37 years. So, for that we turn to The Financial Times (‘Goodbye American Dream’, July 31)
The article explores the downward fortunes of two middle class American families, both just one job loss away from economic calamity or homelessness. But what’s equally interesting, to the spectacle of one family earning $70,000 a year living in a 700 sq. ft. home, and another with half the income living in a home twice the size but with eight people (son and daughter newly moved in), is the statistical background. As the FT authors note, “the annual incomes of 90% of U.S. families have been essentially flat since 1973….while the incomes of the top one percent have tripled”.
What the authors mean by “flat” is that over the past 37 years the median income of the bottom 90th percentile has gone up a meager 10% - but that 10% has been snuffed out by inflation, leading to ZERO increase. The economic eggheads and gurus have coined this “median wage stagnation”.
Obviously, something is systemically amiss in a country in which wages can be so out of kilter. Thus, whatever the source – it must act through the entire economic system as a multiplier, ever increasing the gains of the top ten percent as it erodes those of the bottom 90 percent. The only plausible systemic agent that comes to mind is taxation. It is, effectively, the only agent that is capable of such re-distribution from a progressive system to a highly regressive one.
The article quotes Nobel Prize wining economist Paul Krugman who advances this take, marking its onset with the Reagan era, which essentially sliced taxes on the wealthy –reversing the most progressive aspects of the U.S. tax system as it starved government spending for the masses- even as his regime sought to destroy trade unions.
As the FT article puts it:
“Fewer than a tenth of U.S. private sectors workers now belong to a union. People in Europe and Canada are subjected to the same forces of globalization and technology. But they belong to unions in larger numbers and their healthcare is publicly funded. More than half of household bankruptcies in the U.S. are caused by serious illness or accident”
Thus, Reagan – with his ‘bust the budget’ $2.2 trillion in military spending (still extant today) combined with tax cuts for the wealthy and anti-union push, essentially led the way toward dismantling any future economic security for American middle class workers. His anti—government themes were then dramatically expanded (and with it the economic equality) by Bush JR. aka Dubya, with his lopsided tax cuts favoring the wealthy.
This is also why the same day as the FT article ‘Goodbye,American Dream’, its main editorial (‘The Phoney War Over U.S. Deficits’) castigated both the Democrats and Republicans for even thinking of not letting the Bush tax cuts expire. As the editorial put it:
“Much of the (deficit) debate is disingenuous. The bulk of the fiscal gap was not caused by the (financial) crisis but by Bush-era economic policy endorsed by many who now condemn deficits.”
Further, the FT puts the kibosh on the nonsense (pushed by its reactionary U.S. counterpart, The Wall Street Journal) that the unemployment benefits package was misdirected. The FT editors wisely point out:
“First, tax and spending choices should be shaped to make the recession less painful. Second, it is more important to target the structural parts of the deficit than cyclical ones which growth will take care of. For both reasons, perpetuating the Bush tax cuts is worse for the economy and public finances than a one off extension of unemployment benefits”
The FT article also makes it clear ALL Bush tax cuts need to be allowed to expire- which implies no political pandering to save ass-orted political hides. Now, it's the nation’s interest that supersedes individual political fortunes, and if there are any responsible politicos (other than Sen. Sanders) this is the only option. If all Bush cuts expire, it'll proactively seal a looming $3.5 trillion deficit hole which will otherwise emerge by 2020.
Rather than exacerbate such a deficit chasm – then encourage half-crazed deficit hawk zealots to try to chop entitlements like Social Security and Medicare (or raise retirement ages to insane and impractical levels) – placing the middle class further behind the economic 8-ball, it makes more sense to let them all die now. This will be hard for the pandering battalion, especially weak-kneed Dems, but it's necessary!
In the meantime, I must agree with Sen Bernie Sanders' take in his article, NO, to U.S. Oligarchy (e.g. The Milwaukee Journal-Sentinel, p. 1)
"The American people are hurting. As a result of the greed, recklessness and illegal behavior on Wall Street, millions of Americans have lost their jobs, homes, life savings and their ability to get a higher education. Today, 22% of our children live in poverty, and millions more have become dependent on food stamps.
And while the Great Wall Street Recession has devastated the middle class, the truth is that working families have been experiencing a decline for decades. During the Bush years alone, from 2000 to 2008, median family income dropped by nearly $2,200 and millions lost their health insurance. Today, because of stagnating wages and higher costs for basic necessities, the average two-wage-earner family has less disposable income than a one-wage-earner family did a generation ago. The average American today is underpaid, overworked and stressed out as to what the future will bring for his or her children. For many, the American dream has become a nightmare.
But not everybody is hurting. While the middle class disappears and poverty increases, the wealthiest people in our country are not only doing extremely well, they are using their wealth and political power to protect and expand their very privileged status at the expense of everyone else. This upper crust of extremely wealthy families is hell-bent on destroying the democratic vision of a strong middle class that has made the United States the envy of the world. In its place, the very wealthy are determined to create an oligarchy in which a small number of families control the economic and political life of our country."
To that end, we need to not only get Sanders’ Bill passed, but also make sure our congress critters don’t fold in allowing the Bush tax cuts to meet their end. Any so-called D that won't fall in line needs to be paid a visit either by President Obama or his strong arm right hand man, Rham the Terminator. Obama himself must remove the rose colored glasses and realize that - facing the mammoth deficits he is, and having signed on to a 'deficit commission' - he has no choice but to allow the Bush tax cuts to expire for all citizens, not just the rich. This is far better politically than being the initiator of a commission that finds it necessary to try to cut Social Security benefits because nothing was done when it mattered, to ease the deficit hole. And we DO know the bond traders and ratings agencies are just waiting to do a "Greek sovereign debt" number on this country.
It is Obama's job to ensure it doesn't come to that, and that means acting proactively now, as painful as that may be politically. Country before party!