Along the lines of Morning’s Minion’s earlier post, here’s Robert Reich, at TPM Cafe today:
[A] larger and larger share of total income going to the very top while the vast middle class continues to lose ground.
And as long as this trend continues, we can’t get out of the shadow of the Great Recession. When most of the gains from economic growth go to a small sliver of Americans at the top, the rest don’t have enough purchasing power to buy what the economy is capable of producing.
America’s median wage, adjusted for inflation, has barely budged for decades. Between 2000 and 2007 it actually dropped. Under these circumstances the only way the middle class could boost its purchasing power was to borrow, as it did with gusto. As housing prices rose, Americans turned their homes into ATMs. But such borrowing has its limits. When the debt bubble finally burst, vast numbers of people couldn’t pay their bills, and banks couldn’t collect.
Each of America’s two biggest economic downturns over the last century has followed the same pattern. Consider: in 1928 the richest 1 percent of Americans received 23.9 percent of the nation’s total income. After that, the share going to the richest 1 percent steadily declined. New Deal reforms, followed by World War II, the GI Bill and the Great Society expanded the circle of prosperity. By the late 1970s the top 1 percent raked in only 8 to 9 percent of America’s total annual income. But after that, inequality began to widen again, and income reconcentrated at the top. By 2007 the richest 1 percent were back to where they were in 1928–with 23.5 percent of the total.
Here’s the thing: when most of the gains from economic growth go to the top, that is (eventually) bad for the rich folks who are hogging all the benefits, because the economy eventually runs out of purchasing power, and thus growth stalls. This is what has happened to America in the last 30 years or so: debt financed expansion for while, but now everyone’s credit cards are maxed out (both literally and figuratively.)
It turns out that the New Dealist economic and political arrangements were good (taking the long view) for the top of the income scale in absolute terms because economic growth was more sustainable in the wake of the reforms of the 1930s and after.
I’ve said it before, and I’ll say it again:
1. It is reasonable, legitimate and necessary to use the power of the central government (through progressive taxation, income redistribution and support for labor) to restrain the tendency of big business to concentrate wealth in the hands of an elite few, and thus provide social and economic stability.
2. Believing proposition #1 does not make one a “socialist.”
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