The two Americas

Jim Fain

September 11, 1990|By Jim Fain

WASHINGTON — THE LAND of the free is in danger of becoming the preserve of the very rich. The Economic Policy Institute offers the latest reminder that we're on the road to a two-class society of (1) the super-wealthy and (2) everybody else.

In the 15 years through 1988, the poorest two-fifths of U.S. families saw their percentage of national income drop from 17 to 15. The richest fifth over the same period went from 41 to 44 percent. The after-tax income of those at the top skyrocketed.

Nothing new about this. Each new analysis documents the rich getting richer; the poor, poorer, and the middle-class hanging on by its fingernails, staying about even through two-worker households, longer hours and moonlighting.

"State of Working America" is more detailed than most. It documents the plight of young families (one-fifth of American kids are below the poverty line). It shows that home ownership, health insurance and, in many cases, even adequate shelter are beyond their financial reach.

No one now challenges the truism that theirs is the first generation since the Depression to inherit a living standard lower than that of its parents. From 1947 to '62, the average family income rose by 111 percent. It's gone up only 9 percent since, all attributable to middle-class housewives being driven into the labor force. Most now work outside the home, not because they want to but because it's how they keep their families eating.

Much of the widening gap between rich and poor resulted from President Reagan's crusade to shift the tax burden from the wealthy to the middle class. He lowered the rate on millionaires from 70 to 28 percent and sharply raised the regressive Social Security payroll tax.

Some of it is due to the globalization of the marketplace, reducing the clout of unions and forcing workers to compete with cheaper labor overseas.

All of it's a reminder that the free market, which conservatives now sanctify as a religion, has not proved to be the solution to all mankind's problems. Communism is a colossal economic failure, but unbridled capitalism has been no panacea. The robber barons of a century ago spread their share of misery among their fellow citizens, as did the architects of industrial revolution who created the children's sweatshops in Dickens' England.

If the Depression and New Deal proved anything, it was that greedy capital has to be restrained and regulated by government to keep it from victimizing the poor and weak. There are no regulatory mechanisms for today's global markets. We need to invent some.

America made a unique contribution to the new economics by creating mass markets through raising workers' pay. That was transfer of wealth at its most productive. What do we do for an encore?

We also pioneered a progressive income tax that required those who profit most from the system to pay their full share of its upkeep. This Reagan all but demolished, merrily transferring the burden to those least able to pay, thereby inviting the extremes of wealth and poverty that feed social tensions and even revolution.

Blind worship of the raw market has taken us farther down that road than we think. We need to restore the balance that has been this country's unique strength. The '91 tax bill would be a good place to start.

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