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Just Sayin'

Paul Adair is a 21-year Germantown resident, retired scientist, writer, and lecturer.

Get Everybody in the Deal

Political, U.S., Wisconsin, Economy

Income inequality is a serious problem in the United States. By any objective measure, there is a much wider income gap today than at any time since 1929. For example, in 1944, the top 1% of earners collected 11.3% of all pre-tax income while the bottom 90% received 67.5%. By 2012 the top 1% received a full 22.5% of all pretax income, while the bottom 90% earned a paltry 49.6%.

Many smart people are speaking-out about income inequality. Standard and Poor's issued an August report stating that US income inequality acts as a drag on our economy. Thomas Piketty wrote an unlikely best-seller on the topic, Capital in the Twenty-First Century . Economist Robert Reich examines the problem in the movie, Inequity for All. Today, I would like to focus on two men, Vice President Joe Biden and billionaire Nick Hanauer, who have recently addressed the issue.

Joe Biden gave an awesome Labor Day speech in Detroit. He and the President advocate policies to grow the middle-class, preferring "bottom-up and middle-out" growth to the patently-failed "trickle-down" approach. While the Administration's policies, such as infrastructure investments, student loan changes, Wall Street reform, saving the auto industry, and medical insurance reform have greatly helped the middle class, there is so much more to do.

Biden spoke yesterday about the need to re-establish the bargain between workers and management that once carried America to prosperity- that you share in the wealth that you helped to create. According to Joe, "we need to get everybody in the deal". 

Under the old rules, those which existed when the US had high rates of unionization, "if you contributed, you got the benefit of that contribution". He pointed to the fact that in 1968, 20% of US workers were unionized and the 52% of all income went to the middle class.With today's much lower 11% unionization, the middle class share of income has plummeted to 45%.

Biden remarked, "If the middle class is doing fine, then everybody does fine. The wealthy get very wealthy and the poor have a way up."  Biden also made the point that a strong middle class is what for years made America "so stable economically, politically, and socially." And that stability is being threatened as the middle class has steadily disappeared.

Ultra-rich entrepreneur, Nick Hanauer, takes Biden's last point even further. In a recent article, ominously titled "The Pitchforks Are Coming-For Us Plutocrats", Hanauer argues that the extreme levels of equity seen in the US today make for a very unstable society. He says, "there is no example in human history where wealth accumulated like this and the pitchforks didn’t eventually come out. You show me a highly unequal society, and I will show you a police state. Or an uprising. There are no counterexamples. None. It’s not if, it’s when."

Mr. Hanauer makes a strong case for policies that grow the middle class, including raising the minimum wage. He says, that we should "help the 99 percent and preempt the revolutionaries and crazies, the ones with the pitchforks—that will be the best thing possible for us rich folks, too."

OK, so having a strong middle class is good for the long-term stability of our country. It certainly is good for economic stability, since more middle-class people means more middle-class consumers. Getting everybody "in the deal" is good for social and political stability, too. What can we do to reverse the trend of increasing economic disparity and a shrinking middle class?

Promote union representation- Union jobs are good paying jobs, jobs that built the middle class. Policies that promote union membership increase the middle class. However, too many politicians feel obliged to fight unions. So-called Right-to-Work laws, interference with union votes, and shutting-down public sector unions hurts the pay of both union and non-union employees.

Strengthen public schools- Education allows many to escape poverty. A good public school system is a great equalizer between the rich and not-so-rich. However, too many politicians advocate starving public schools and using a dwindling pot of education funds to subsidize private schools.

Increase the minimum wage- Increasing the minimum wage is the quickest way to pull millions of workers off of public assistance and into the middle class. However, too many politicians deny the need for any minimum wage at all, let alone an increase. An intransigent Congress and Wisconsin state legislature refuses to even allow increases to come to a vote.

Fix the US tax code-The current tax code favors unearned income, such as inheritances and capital gains, over earned income. Treating the two types of income the same would go a long way toward decreasing economic disparity. We also need to change the corporate tax laws that reward companies that ship middle-class US jobs overseas. However, too many politicians are too beholden to their donors to even consider these tax law changes.

Increased economic inequity and the erosion of the middle class are serious problems for America. If we are to re-build a vibrant middle class, we need to take decisive actions in Madison and Washington. We need to elect politicians that champion these changes. We need to reject those politicians whose policies only intensify income inequity.

 

 

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