Who Will Step Up and Save the Middle Class?

[Dave Anderson]

a very important article...

Dave Anderson

http://prospect.org/article/who-will-step-and-save-middle-class

Who Will Step Up and Save the Middle Class?

JEFF FAUX MAY 23, 2012
Liberals must face the stark truth: Both parties have agreed to
sacrifice the middle.


In the eyes of most of the world and in our own, to be an American is
to be an optimist—entrepreneurial, positive-thinking, and
future-oriented. It is not surprising, then, that our politics has not
come to grips with the question of national decline. Yes, our
governing elites have long debated America’s power in the world and
whether it’s eroding. But about the future of Americans, as opposed to
the future of the geopolitical hegemon, America, our most important
politicians and pundits have much less to say. Despite the bitter
public arguments over tax and budget policies, they share the implicit
assumption that even harder times are ahead for the majority of
Americans—if not 99 percent then at least 75 percent to 80 percent.
But doom and gloom does not play well in American politics. So,
whenever our policymakers cannot avoid the word “sacrifice,” it is
gingerly presented as a temporary inconvenience, to someone other than
the listener, necessary to rebalance the government’s books and return
us to pre-crash prosperity in some unspecified, but surely near-term,
future.

The evidence in front of our eyes is that on our current economic
trajectory, the American middle class is headed for a further fall in
its living standards, and the probability that the country’s two-party
governing class will change course is close to zero.

The conventional chatter from the nation’s punditry declares that
Washington has been made “dysfunctional” by excessive partisanship and
incivility. A day does not go by without prominent editorialists,
talking heads, and bloggers calling for Democrats and Republicans to
come together in a “grand bargain” over budget policy. Yet from the
point of view of its most influential clients, Washington is actually
functioning quite well. Indeed, the most important grand bargain has
already been consummated.

After three decades of policies that have undermined the country’s
global competitiveness and the bargaining position of its workers, the
United States economy can no longer provide the means to support its
three most politically important American dreams: Wall Street’s dream
of subsidized limitless profits; the military-industrial complex’s
dream of global supremacy; and the middle class’s dream of rising
incomes.

One out of three? Certainly. Two out of three? Perhaps. All three? No way.

The deal is done. The middle class will be sacrificed. The partisan
disagreement is now over the details: how much pain there will be and
how fast it will come.

The deal was not negotiated in some smoke-filled back room. It is the
accumulation of decisions made and not made since 1981, when the Age
of Ronald Reagan replaced the Age of Franklin Roosevelt. The 1970s had
brought the first signs that America’s post–World War II global
economic dominance was shrinking—an oil-price crisis and the
appearance of our now-chronic trade deficit. One response was Jimmy
Carter’s plan to wean us from dependence on imported oil. Another was
a call by prominent business and political figures for a
government-led strategy to respond to rising competition from a
recovering Europe and Japan. But these efforts stopped dead with
Reagan’s election; our collective economic future would be left to the
market.

We remain in Reagan’s shadow. As Republicans Dwight Eisenhower and
Richard Nixon governed within the New Deal framework established by
FDR, so Democrats Bill Clinton and Barack Obama have governed within
Reagan’s vision of a deregulated and privatized America. As the upbeat
Reagan demonstrated in his victory over the dour Carter, placing
ourselves at the mercy of inherently unstable global markets requires
even more optimistic faith in Americans’ privileged destiny. The point
was not lost on the Democrats: Clinton proclaimed that he was the “man
from Hope”; Obama, that he had the “Audacity of Hope.”

Appropriate enough to an era brought to us from Hollywood, the economy
enjoyed 30 years of illusionary prosperity. In 2007, the year before
the financial crash, a typical worker was making roughly the same
hourly earnings—adjusted for inflation—that his or her counterpart had
been making in 1979. Yet over those three decades, Americans bought
more and bigger houses, crowded into shopping centers, paid for
college educations, and retired better off than their parents. They
did it in two ways. First, families responded in the 1980s by sending
more people—typically wives—to work. Second, they borrowed, almost
doubling the amount of consumer debt relative to income over three
decades—with money lent to our banks by the Chinese.

Both of these financial cushions have deflated. There are now as many
women in the workforce as men, and some 70 percent of married women
with children have a job. The credit crash, which left millions
bankrupt and insolvent, demonstrated that spending more than you are
earning is not sustainable. So, unless a resurgence of real wages
occurs over the next decade or so, most American families will be less
able to maintain a middle-class income.

In his first few months as president, Barack Obama defined the central
question. Borrowing a metaphor from the Sermon on the Mount, he told
Americans, “We cannot rebuild this economy on the same pile of sand.
We must build our house upon a rock … a foundation that will move us
from an era of borrow and spend to one where we save and invest, where
we consume less at home and send more exports abroad.”

Rebuilding our economic foundation is no easy task. But neither is it
beyond our technical capacity. For years now, center-left economists
have been piling up various plans for a “high road” strategy toward
raising future living standards. Progressives may differ over the
precise blueprint, but the main elements are clear. They include
massive investment in infrastructure, education, and research; trade,
tax, and regulatory policies to support domestic production; a
universal, efficient health-care system; incentives for corporations
to pursue longer-term investment horizons; restored
collective-bargaining rights; and a large and sustained increase in
the minimum wage. The problem, as these plans and manifestos typically
conclude, is not in the economics but in the politics.



The financial crisis was thus a historic opportunity: We could pump up
the economy today with massive government investments that would renew
America’s competitiveness tomorrow. As we know, the opportunity was
blown. Three years later, the economy remains stuck on the sandpile.
Indeed, it has arguably sunk deeper.

Wall Street, which drove us over the cliff by systematically diverting
the nation’s capital from long-term productive investment to its own
speculative excesses—in which the “future” can now be defined in a
nanosecond—remains untamed. Profits and bonuses in the financial
sector have roared back thanks to the munificent government bailout
and continued interest-rate subsidies. Bankers and brokers are busily
exploiting the regulatory loopholes that their lobbyists drilled into
the Dodd-Frank reform law. As their financial power has become more
concentrated, the assumption that the largest are too big for the
government to let them fail is even more enshrined.

Nor have the trade policies that have systematically undermined
American competitiveness since the 1980s changed. Just as Bill Clinton
drove the Reagan/George H.W. Bush trade agenda through Congress, so
Obama collaborated with Republicans to pass George W. Bush’s trade
deals with Korea, Panama, and Colombia and is now promoting a similar
pact with at least eight more nations of the Pacific Rim. After each
trade agreement, imports have risen faster than exports, cutting jobs
and putting downward pressure on wages. First the lower-paid
work—clothing, shoes, and toys—was offshored. Then the high-paid
factory jobs—autos, steel, electronics. Then the call centers and
computerized services jobs. Then engineering and systems design. Now
accountant, research, and legal work are moving out. In response, for
all but the most talented and well-connected, workers at virtually
every level are taking lower salaries and accepting less job security
and deteriorated working conditions.

Not to worry, replies the governing class. We are, it is claimed, on
the cusp of a revival in American manufacturing. General Electric, for
example, recently brought back the production of a water heater from
China to a facility in Kentucky. Missing from the press release is the
fact that the GE workers who used to make $22 an hour now make $13 an
hour. American workers have only one option for meeting the
competition: reduced wages.

Yet the happy face remains. Like George W. Bush and Bill Clinton
before him, Barack Obama tells us that Americans will somehow become
smarter than everyone else. Last year he pledged that by 2020, the
United States would have the highest proportion of college graduates
in the world. “That’s our goal,” he announced in a Miami high-school
auditorium. “That’s how we’ll out-educate other countries. That’s how
we’ll out-compete with other countries tomorrow. That’s how we’ll win
the future for the United States of America.”

Little evidence exists, however, that inadequate education and
training are primarily responsible for stagnant wages. Even if you
believe that, the proposition that we will solve the problem for the
future by sending more kids to college is not credible.

As Obama spoke, we ranked 12th among advanced nations in the share of
younger workers with a two-year associate degree or better. As for the
next generation, public universities and community colleges have been
in a free fall of shrinking departments and cutting programs since the
onslaught of the Great Recession. Primary and secondary schools have
been shutting down, teachers laid off, classrooms overcrowded, and
school years shortened. To top it off, the education system is
engulfed in a civil war over privatization, whose champions include
Obama’s own education secretary.

The central problem is not an inadequate supply of educated workers;
it is inadequate demand. The Bureau of Labor Statistics now projects
that of the ten occupational groups that will add the most jobs
between 2010 and 2020, five do not even require a high-school
education. Three require high school, and one category requires a
two-year associate degree. The tenth, Educational, Training and
Library Jobs, requires a doctorate or a professional degree but is
largely in sectors that depend on government funds; as a result, it is
much less likely to be a major source of growth in an age of
public-sector austerity.



As economist and former Federal Reserve Vice Chairman Alan
Blinder—himself a free-trader—acknowledged six years ago,
globalization is leaving American workers to compete in “personal
service” jobs that require human contact and thus cannot be offshored.
These include jobs like housecleaning, sports trainers, massage
therapists, and pet handlers. An economy dominated by personal
services is an economy of low productivity and therefore low wages.

Even with optimistic assumptions—unemployment reduced, Europe
recovered, no new war—most Americans will have to sell their labor for
less, whether they are industrial or service workers. The political
mantra of both Obama and Mitt Romney is “jobs, jobs, jobs,” but the
subtext is “lower wages, lower wages, lower wages.”



Whatever your view of the president (is he a compromising wimp? A
closet conservative? A brave liberal mauled by a vicious GOP political
mob?), he was arguably the best that the political system could have
produced in its hour of crisis. The Republican candidates were in way
over their head. The only alternative, Hillary Clinton, would have
hired the same Wall Street economic advisers from the Bill Clinton
administration. So the important lesson of the last three and a half
years is not about Obama; it is about the narrow and corrupted values
that prevent our politics from grappling with the reality facing the
average American.

Rebuilding our economic foundation to support a brighter future for
the average American is beyond the capacity of our political class.
The problem is not just Tea Party reactionaries or business
conservatives but liberal Democrats as well. “It is clear we must
enter an era of austerity,” said Nancy Pelosi last July when she
agreed to support Senate Majority Leader Harry Reid’s budget proposal
for deep spending cuts and no tax increases.

In effect, Democrats have trapped themselves into accepting the
Republican view that deficits are the cause, rather than the result,
of the slowdown in incomes. Grappling with the roots of our
crisis—financial speculation, offshoring, a deteriorated
infrastructure, the bloated health-care system—has been excluded from
the economic-policy debate. Decisions about the future are now
centered on how to cut the deficit. Given an economy plagued by anemic
spending growth, this will make our sick economy sicker.

 In our economic-policy calendar, the future is next December. As per
the agreement after the breakdown in budget talks last summer,
Republicans and Democrats will have to negotiate some new combination
of less spending and higher taxes over the next ten years or accept
$1.2 trillion of automatic across-the-board cuts. The two parties’
budget negotiators insist that everything is on the table. For
liberals, “everything” means military spending.

Many areas could be sharp-penciled out in that budget, but the fact
that the Pentagon has never allowed a comprehensive audit of its books
suggests that the chances are slim. The left wing of the Democratic
Party and the libertarian right of the Republican Party may dissent,
but the vast majority, and certainly the most influential, of the
country’s politicians and pundits insist on maintaining a large,
aggressive military presence around the world. Until that changes, no
meaningful budgetary relief will come from the Pentagon.

The debacles in Afghanistan and Iraq have not led to a serious
rethinking of the country’s role in the world any more than the
debacles of the financial crash have led to a rethinking of Wall
Street’s role in the economy. Nor, despite the predictable
election-year return of populism, have three and a half years of high
unemployment and shrinking incomes led the leadership of the
Democratic Party to rethink its policies of accommodating both Wall
Street and the Pentagon. In the absence of a fundamental shift in
strategy, we are left with … hope.

The country’s policy intelligentsia tells us that the future will be
more or less like the past. The economic forecasts of the
Congressional Budget Office routinely predict a recovery based on the
assumptions that the U.S. economy in the 2010s will resemble the
economy of the 1980s or 1990s. The Budget Office is silent on the
question of wages. The economist Robert Hall summarized the catechism:
“In America, the bet is still that we will somehow find ways to get
people spending and investing again.”

Somehow something will come up. Perhaps Apple will invent a device
that can only be made in America, or CEOs will stop resisting labor
unions, or the Chinese will decide to finance our trade deficits
forever. Perhaps. But one thing is clear: There is no plan to reverse
the middle-class slide.



The public’s view of the future is a bit more complex but, in the end,
not less hopeful. People are worried about their jobs and income, and
majorities think that the next generation will be worse off than this
one. Yet polls show that they have faith that they, personally, and
their kids will be OK, which reinforces the belief that government is
irrelevant to the future.

On our present trajectory, though, they will not be OK. Debt-burdened,
college-educated 20-somethings working as waiters, office temps, and
SAT tutors will become 30-somethings still stuck in jobs that did not
require a college degree. Most of those lucky enough to find
professional work will be in pitiless competition with people all over
the world who are just as smart and trained as they are but willing to
live and work for much less. Among nonprofessionals, the bottom of the
two-tier wage system will expand. As older workers retire, the average
compensation throughout a range of industries will gradually be
lowered. Jobs that used to pay $22 an hour and now pay $13 an hour
will ratchet down to $11.

The pain of rising inequality will not just show up in the paycheck;
it will also show up in the spirit. An extended era of low wages and
austerity will continue to undercut the New Deal institutions—trade
unions and public-safety nets—that provide American workers with
protection from assaults on personal dignity from dog-eat-dog job
competition. A union contract, or the threat that they might demand
one, gives workers a voice in the small things that make up a person’s
self-esteem: the right to go to the bathroom without asking
permission, a lunchtime to yourself, a paid vacation. Seniority means
that older and younger workers are not in mortal combat for daily
survival on the job and that older workers will not be laid off just
because younger workers can be hired for lower pay.

With these protections gone or greatly diminished, class lines will
harden and social mobility in America—already below that of many other
advanced nations—will decrease further. The humiliations of working
life under raw capitalism before the New Deal will return. Bosses will
be more arrogant and demanding. Overworked bureaucrats at shrunken
government agencies will be less responsive. The distinction between
service and servitude will blur.

This scenario or something like it will have a profound impact on our
politics. Given the lessons of history, no progressive should harbor
the illusion that a frustrated, angry working middle class will
respond by moving left.

James Baldwin once wrote, “Not everything that is faced can be
changed. But nothing can be changed until it is faced.” For
progressives, facing up to economic reality and ridding ourselves of
false hope is a prerequisite for a politics that might give us some
real hope of changing our otherwise depressed—and depressing—future.

First, we should stop lying to ourselves. The re-election of Barack
Obama is a defensive imperative. But there will be no transformational
second term. Any bargains between the Republican Party, owned by
corporate America, and the Democratic Party, which merely rents itself
out, will not reverse the existing grand bargain that preserves
prosperity for Wall Street, power at the Pentagon, and austerity for
the rest of us.

Second, we should stop lying to the people. Given the economic
outlook, baby steps in a progressive direction will not lead to bigger
steps later. Thus, for example, progressives by and large stood by
while the Obama administration trashed efforts to debate a
single-payer health plan. Now we are left defending a sordid deal that
forces young workers to pay for the profits of private insurance and
pharmaceutical companies and does little to reduce the wasteful
system’s burden on the country’s competitiveness.

Third, inasmuch as the central obstacle to policies that would promote
a high-wage path to the future is the infestation of our political
system with corporate money, it follows that getting that money out of
politics should be a strategic priority.

Campaign-spending reform has rarely energized voters. But it has been
primarily argued as a high-minded issue of democratic procedure rather
than the central cause of citizens’ economic distress. As the noose of
austerity tightens, the issue can now be cast as an indispensible step
to avoiding the destruction of the American dream.

The obstacle is the Supreme Court’s bizarre interpretation of the
Constitution as a document equating spending money with free speech
and corporations with people. This can only be overcome with a
constitutional amendment. The route to amending the Constitution will
be hard. But the benefits could arrive before any final
enactment—namely in mobilizing against corporate power and blunting
the right-wing campaign to convince the public that government, labor
unions, and other institutions of the liberal left are to blame for
the coming age of austerity.

A 2011 survey reported that 79 percent of all voters—and 68 percent of
Republicans—favor a constitutional amendment “to overturn the Citizens
United decision and make clear that corporations do not have the same
rights as people,” and this, with no visible campaign to persuade
them.

Campaign financing is not the only way in which money corrupts
government, of course. The hint of a future job, the chance to
socialize with the rich, the hiring of a relative or a friend, are
among others. But nothing matches raising large amounts of money to
get you re-elected.

The odds in favor of driving corporate money out of elections may be
long. But the odds of securing our future are even longer if we don’t
do it. Unless we can confront the root cause of our national
paralysis, future historians will look back at this generation and
conclude that our failure was not that we didn’t know what was coming;
it was that we didn’t act on what we knew.

Jeff Faux is a distinguished fellow at the Economic Policy Institute,
which he founded. He is currently writing a book on America’s future