What is Hammering the Middle Class

Here is an insight by Peter Steinfels (co-director ofthe Fordham University Center on Religion and Culture, a university professor at Fordham ) .

Jacob S. Hacker of Yale and Paul Piersonat Berkeley collaborated with Hacker on a study of the Republican Party. In Winner-Take-All Politics are proposing a new narrative for understanding the past three decades of our democratic life, a “thirty-year war” in which a long slow struggle through much of the twentieth century for greater equality of income and wealth has been reversed. And what a reversal!

“From 1979 until the eve of the Great Recession, the top 1 percent received 36 percent of all gains in household income.” Between 2001 and 2006, that top 1 percent amassed over half the gains, while the median income of nonelderly households actually fell. In fact, the top one-tenth of that top 1 percent “received over 20 percent of all after-tax income gains between 1979 and 2005, compared with the 13.5 percent enjoyed by the bottom 60 percent of households.” The total of new income, in other words, going to roughly 300,000 people was one and a half times the size of the total going to roughly 180 million people!

In the past four decades, our democracy has become the most economically unequal nation in the advanced world. The rich and super-rich have shares of national income and wealth comparable to banana republics. Social mobility from one generation to the next is now lower in the United States than in every affluent nation studied except (very barely) Britain and Italy. Meanwhile the working and middle classes have either fallen behind or kept up by going into debt and having more family members work longer hours. We currently face millions of lost homes and 25 million Americans suffering from some form of prolonged or even permanent joblessness.

How did this happen? After all, political thinkers have traditionally assumed that democracy was inherently inclined toward equality, if not even dangerously biased toward leveling. The answer, Hacker and Pierson suggest, is organization. Voters are not dumb, but they can hardly track the fine print of things like financial regulation or health-care reform. Without organizations to monitor, articulate, publicize, and advocate policy choices, voters remain in the dark or fall prey to the most inflammatory bumper-sticker notions.

The real game-changer in recent politics, they argue, was not an election but the mobilization of business interests in the 1970s and the concomitant economic radicalization over the next two decades of the Republican Party. During the seventies, the National Association of Manufacturers moved to Washington; the Business Roundtable was founded; the Chamber of Commerce tripled its budget; firms with registered lobbyists went from 175 to 2,500 and corporate PACs from a few hundred to 1,200. The American Enterprise Institute and the newly founded Heritage Foundation soon had budgets more than equaling that of the venerable liberal Brookings Institution, and they devoted far more effort to PR and promoting free-market ideology.

The result? Two years before the “Reagan Revolution,” a Democratic president with a Democratic Congress tried to establish an office giving consumers an advocate in federal regulatory activities, tried to pass a measure supporting union organizing, and tried to reform the tax code. Outspending and outlobbying the Carter administration and its allies, coalitions of business groups shot down the first two proposals and turned the last into a dramatic tax cut for the wealthy, setting the stage for Reagan’s tax-cutting bill in 1981.

In this narrative, another moment of truth was not so much Clinton’s recovery of the White House for Democrats in 1992 as the 1990 Republican rebellion. Then Newt Gingrich and his tax-cutting allies slapped George H. W. Bush in the face, rejecting their own president’s budget and sending a signal to Republican moderates about who was in charge. A decade later George W. was not going to make that mistake. The Republicans completed their transformation to a cut-taxes-for-the-wealthy-and-deficits-be-damned party that Ronald Reagan would scarcely have recognized and that, indeed, a number of his old policy advisors have denounced.

Yet even Bush II could not escape that new development. In 2008, when he begged Congress to pass the TARP and prevent financial meltdown, two-thirds of House Republicans voted no and the bill was defeated. That triggered the greatest single-day loss (777 points) in the Dow’s history. A panicked House quickly passed a revised version, but the Bush administration still could not get a majority of Republican votes.

If Republicans have been the perpetrators, Democrats have been the enablers. Struggling to remain competitive by courting similarly conservative or wealthy sources, they went along with GOP tax cuts, backed deregulation during the 1990s, and blocked measures that could have added consumer protection or restrained executive pay. By 2008, Democrats finally matched Republican fundraising. But all this has come at a cost: more than a quarter-century during which, according to Hacker and Pierson, “the organizational landscape of American politics has tilted dramatically.” They report that during the debate on the 2001 tax bill “the AFL-CIO had only a single lobbyist working quarter-time to fight tax cuts for the wealthy.”

Nor do the media fill the vacuum. During that 2001 tax-cut debate, Hacker and Pierson found that USA Today, the country’s largest-circulation daily paper, “printed seventy-eight stories about the tax cuts, many of them on the front page.” Unfortunately, “only six were primarily about the content of the legislation” rather than the political jockeying. “Only one was about the distributional effects of the proposed changes.” But isn’t this embarrassing—running on about the rich? So nineteenth-century! So Karl Marx! So positively class warfare! So biblical! What difference does it make if a tiny slice of the population has oversized yachts, extravagant parties, expensive art collections, and more homes than they can keep track of without help? Does this threaten anything besides envy?

The question practically answers itself these days. That population slice has just garnered a $120 billion payoff for not blocking benefits for the long-term unemployed and/or triggering higher taxes on the middle class. Millions of Americans have been plunged into insecurity or misery because of the deregulation and legal and financial impunity acquired by that rich slice. The constraints on solutions for virtually any of the grave domestic problems facing the nation—growing deficits, energy dependence, environmental threats, climate change, jobs shortages, deteriorating infrastructure, health-care costs, pension shortfalls, and so on—are set by the ability of that slice’s money to influence elections. And its high-power lawyers and lobbyists can fiddle with the details of any complex policy.

The Obama administration made one accommodation after another, in appointments, in bailing out the too-big-to-fail, and in preemptive deals with sectors of the medical industry. Nonetheless, the Chamber of Commerce spent $145 million in 2009 to kill health-care reform, financial regulation, and climate-change bills—and then even more in 2010 to defeat Democrats at the polls and assure the continuation of the Bush tax cuts for the rich. Hacker and Pierson remind us of the obvious: the power of money is exerted not only to get government to do things but also to keep government from doing things, especially from updating safeguards when new technologies or inventions emerge, whether expensive therapeutic devices, risky executive pay practices, or Wall Street’s concoction of exotic financial instruments. This veto on effective government action has been greatly abetted by the now-entrenched requirement for a sixty-vote supermajority in the Senate to pass almost any substantial piece of legislation, a quasi-constitutional amendment that most of the public doesn’t understand.

Hacker and Pierson’s account of the past three decades of “organized combat” suffers from some significant gaps. They say almost nothing about race, immigration, war, terrorism, and international tensions, all so potent in channeling insecurities, anxieties, and patriotic sentiments. They take only passing note of the culture wars and the emergence of faith-based conservatism on the right and a new, “postmaterialist” liberalism on the left. The latter concentrated on environmentalism, abortion, women’s issues, gay rights, and civil liberties but “almost never focused...attention on the economic issues that most powerfully affected the working and middle classes.” It is left to readers to factor these important developments into Hacker and Pierson’s fundamentally economic analysis. Doing so will widen and deepen the story of the “thirty-year war” but not, I believe, undermine the authors’ thesis.

Their book ends with the requisite call to arms, to rectify “the enormous imbalance in organizational resources between the chief economic beneficiaries of the status quo and those who seek to strengthen middle-class democracy,” or, as they say a few pages later, to develop “groups that can provide a continuing, organized capacity to mobilize middle-class voters and monitor government and politics on their behalf.”