Confessions of a class worrier

Will the U.S. continue with policies that promote income inequality?

August 17, 2010|By Robert Reich

The decline of America's middle class can be charted directly. In the three decades after World War II, the median wage (smack in the middle) grew rapidly, right along with productivity gains. Even as late as 1980, the richest 1 percent of Americans received only about 9 percent of the nation's total income.

But starting in the 1980s — and increasingly since then — the economy has made the rich far richer without doing squat for the vast middle. The median hourly wage has barely grown, if you take inflation into account. Indeed, it dropped in the last so-called "recovery" between 2001 and 2007. And health care and pension benefits have declined; we've gone from defined-benefit pensions to do-it-yourself pensions, while health insurance premiums, deductibles and co-payments have skyrocketed.

Meanwhile, the rich have been getting a larger and larger portion of total income. From 9 percent in 1980, the top 1 percent's take increased to 23.5 percent by 2007. CEOs who in the 1970s took home 40 times the compensation of average workers now rake in 350 times. Financiers who 40 years ago made only modest fortunes today, even after the Great Recession they helped bring on, routinely earn seven and eight figures.

In 2009, when most of the nation's middle class was deep in recession, the 25 best-paid hedge-fund managers took in an average of $1 billion each. (Their marginal income tax, by the way, was barely more than 17 percent, while the typical family paid a marginal tax far higher.)

What happened? It wasn't just greed. It was also the systematic and ever cleverer manipulation of laws and rules by those able to pay lobbyists, legislators, lawyers and accountants to do their bidding. As income and wealth have risen to the top, so has the power to manipulate the system in order to acquire even more money and more influence.

To be sure, globalization and technological change have bestowed gains disproportionately on those with the education and connections to benefit most from them, while burdening Americans without the education and connections most needed.

But instead of enlarging the circle of prosperity so that the vast middle class could come out winners as well — instead of strengthening trade unions, improving public education, deepening public investments, enlarging safety nets and making the tax system more progressive — the nation took direction from those at the top, and did the opposite.

It is not surprising America's middle class is increasingly frustrated and is venting its anger: at politicians, the leaders of big business and Wall Street, as well as global traders, immigrants and others who are easy targets of resentment.

A politics of audacious hope has turned into a politics of fear — meaner-spirited than at any time in recent memory.

I'm not a class warrior. Call me a class worrier.

Our choice in the years ahead is either demagoguery that turns Americans further against one another and the rest of the world, or genuine reform that enlarges shared prosperity. It is the responsibility of all of us to fight the former and work toward the latter.

Robert Reich is a former U.S. secretary of labor. His next book, "Aftershock: The Next Economy and America's Future," will be published in September, and he blogs at http://www.robertreich.org.

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