3 Best Economic Articles of the Week
For the week of 1/13, the winners are…
Inequality, not debt— the hollowing out of the middle class since the 1970s, a phenomenon interrupted only briefly in the 1990s, is America’s core economic problem recovery. This New York Times article provides 4 key reasons:
- Our middle class is too weak to support the consumer spending that has historically driven our economic growth:
- The top 1% of income earners took home 93% of the growth in incomes in 2010.
- Middle households — the true job creators who are the most likely to spend rather than save — have lower incomes than in 1996.
- Workers are unable to invest in their future by educating themselves and their children and starting or improving businesses.
- A weak middle class is holding back tax receipts, especially since top earners are so adroit in avoiding taxes and in getting Washington to give them tax breaks. Thus, the government cannot make the vital investments crucial for restoring long-term economic strength — in infrastructure, education, research and health.
- Returns from Wall Street speculation are still taxed at a far lower rate than other forms of income.
- Inequality is associated with more frequent and severe boom-and-bust cycles that make the economy volatile and vulnerable, as noted by the International Monetary Fund.
- The 1920s — the last time inequality of income and wealth in the United States was so high — ended with the Great Crash and the Depression.
Some chilling facts:
- Children in other rich countries like Canada, France, Germany and Sweden have a better chance of doing better than their parents did than American kids have.
- More than a fifth of our children live in poverty — the second worst of all the advanced economies, putting us behind countries like Bulgaria, Latvia and Greece.
- High unemployment depresses wages: adjusted for inflation, real wages have stagnated or fallen:
- a typical male worker’s income in 2011 ($32,986) was lower than it was in 1968 ($33,880).
- Since most Americans’ most important asset is their home, as home prices have plummeted, so has household wealth:
- median household wealth fell nearly 40 percent, to $77,300 in 2010 from $126,400 in 2007, and has rebounded only slightly.
- Since the Great Recession, most of the increase in the nation’s wealth has gone to the very top.
- Meanwhile, as incomes have stagnated or fallen, tuition has soared. In 2010, student debt, now $1 trillion, exceeded credit-card debt for the first time. Student debt can almost never be wiped out, even in bankruptcy.
- When young people are jobless, their skills atrophy. Youth unemployment rose to twice the national average, sowing the seeds of ever more inequality in the coming years.
- Republican Spending: President George W. Bush’s steep tax cuts in 2001 and 2003 and his multitrillion-dollar wars in Iraq and Afghanistan both created the deficit and exacerbated the great divide. The Republican party’s “newfound commitment to fiscal discipline — in the form of insisting on low taxes for the rich while slashing services for the poor — is the height of hypocrisy.”
- Globalization and technological advances have led to the loss of good manufacturing jobs, not likely to come back. Even if we “save” these jobs, it may be by converting higher-paid jobs to lower-paid ones, which is not a sustainable long-term strategy.
- Weaker Unions: The article states that “globalization, and the unbalanced way it has been pursued, has shifted bargaining power away from workers: firms can threaten to move elsewhere, especially when tax laws treat such overseas investments so favorably. This in turn has weakened unions, and though unions have sometimes been a source of rigidity, the countries that responded most effectively to the global financial crisis, like Germany and Sweden, have strong unions and strong systems of social protection.”
Since there is still so much misunderstanding about health care reform, it is important to refute the myths. This article from Milard Filmore’s Bathtub plays whack-a-mole with some of the right wing media distortions about Obamacare, including the myth that Americans didn’t want healthcare reform, that it increases spending and middle class taxes, that it reduces Medicare benefits, and it provides the reasons that we are much better off because of Obamacare.
Economic Corruption: This article by Paul Blumenthal highlights the many rallies planned across the country from Jan. 17 to 21 to protest Citizens United as it enters its third year. This Jan. 21, 2010 Supreme Court decision overturned decades of campaign finance precedent by freeing corporations and unions to spend unlimited amounts on elections.
Although Justice Anthony Kennedy wrote at the time that “independent expenditures do not lead to, or create the appearance of, quid pro quo corruption,” The law did open the floodgates for the corrupting influence of corporate money in the political system, resulting in history’s most expensive presidential campaign with corporate groups spending more than $1 billion. The 2012 election featured the highest giving by millionaires and billionaires since the current campaign-finance regime was instituted in the 1970s, which included:
- Sheldon Adelson’s $101 million in donations to super PACs
- More than 150 donors giving over $1 million to independent political efforts.
- The top 32 donors to super PACs combined exceeding the total contributions of the 3.7 million small donors, according to a report by U.S. PIRG and Demos.
Growing Public Support:
Given the procedural difficulty of amending the constitution, what would make the difference is an outpouring of public support. A poll commissioned last year found that such support exists:
- 62% percent of respondents opposed the Citizens United decision.
- 55% did not believe that corporations should have the same rights as people.
To mobilize support to demand a constitutional amendment to overturn Citizens United and related decisions, a coalition of groups under the banner of “Money Out, Voters In” are mobilizing support . Interestingly, the effort has largely bypassed Washington in favor of the states, which more effectively builds grassroots support where passage of a resolution can actually be achieved. The resolutions call for an amendment in state legislatures, city councils, municipal governments and other local government bodies, which call on Congress to send an amendment for ratification by the states. Marge Baker, president of progressive advocacy group People For The American Way, testifies to its momentum, which began catching on last year:
Eleven states and more than 350 local governments have already passed legislative resolutions or ballot initiatives to overturn Citizens United.
The 11 states include California, Hawaii, Massachusetts, New Jersey, New Mexico, Rhode Island and Vermont, which all passed resolutions through their legislatures; Colorado and Montana, where voters passed ballot initiatives in support of an amendment; and Connecticut and Maryland, where a majority of state lawmakers sent letters to Congress urging them to send an amendment to the states to ratify. Hawaii was the only state to pass an anti-Citizens United resolution prior to 2012.
Support in Washington: There were 17 constitutional amendments introduced in Congress last year to repeal Citizens United and previous campaign finance decisions, with President Obama stating his support for an amendment, and House Democratic Leader Nancy Pelosi including it in her party’s election-reform task force that will work on legislative language in 2013. Already congressional Democrats are calling for hearings in a letter to the chairmen of the House and Senate Judiciary Committees.
The article notes that a constitutional amendment to overturn Citizens United still has little support among Republicans, and that passage would require two-thirds support in both the House and the Senate, followed by two-thirds support from the nation’s 50 state legislatures. Ultimately, public support will make the difference.