The new American reality that conservative Republicans must face
As I’ve written here before, I think Republicans are mostly in the right when they suggest that Federal tax rates are already in line with the “normal” range of revenue over the last half century.
This chart, from the liberal website Crooks and Liars, shows the trajectory of tax rates as a percentage of GDP.
Yes, revenues have dipped below “mean” tax rates for a few of the years since 2002, and they plunged during the Great Recession.
But the more dramatic and pervasive trend is the surge of spending above historic norms that began in 2008.
The logical conclusion here is that spending must come down and tax rates must be stabilized, and perhaps even lowered, if we are to avoid a significantly higher long-term burden on taxpayers than Americans have accepted.
What appears obvious in the abstract, however, is confounded by a very different reality on the ground. The truth is that the American economic landscape has shifted tectonically.
The truth is that our citizens rely on government more and more, not because we’re lazy or ideologically confused or charmed by socialism, but because hard work in our country no longer produces a stable, secure livelihood.
This video (which Ellen Rocco shared earlier in the week) illustrates dramatically the growing income disparity in the US, which expanded dismally during the last four decades.
What’s clear here is that the old “rising tide lifts all boats” scenario no longer applies. It used to be true that everybody was getting richer in America — some faster, some slower.
But these days, a sizable percentage of our neighbors — even many so-called “middle class” Americans — just don’t earn enough to go it alone. They’re actually moving backwards. Their boats are sinking.
They don’t have the steady, reliable income needed to pay for good healthcare, to buy even a modest home, to pay for college tuition, or set aside money for retirement.
More and more seniors face an end-game that looks more like true poverty and less like the “golden” years.
Before the Great Recession, there were two factors concealing this implosion of the American dream. The first was massive debt, both personal and governmental. We borrowed our way out of reality.
The second was government spending. The public sector provided the backstop, both in terms of employment for the middle class and “safety net” programs for people drifting toward the bottom end of the economic ladder.
Already — and this is an important point — local, state and Federal agencies nationwide have slashed hundreds of thousands of public sector jobs, eliminating one of the last stabilizers of middle class economic expectation.
More job cuts are on the way, as institutions like the US postal service and the military prep for deep cuts in employment that will target tens if not hundreds of thousands of workers over the next decade.
Now, conservatives want equally deep cuts to the social safety net programs that help those Americans dropping off the bottom of the ladder, aiming to slash “entitlement” programs for the unemployed, the elderly, and the poor.
Which brings us to the reality that Republicans aren’t facing. A growing slice of America is now poor. Bluntly and unambiguously impoverished.
And even many in the middle class have no debt-free assets, no job security, no emergency savings, no margin for error.
With income and wealth inequality rising — with the top 1% harvesting more and more of the country’s economic gains — it is mathematically certain that this trend will continue unless something is done.
So here’s what the GOP has to address, in policy terms and politically: What do we do about the “real poor” America? What do we do about full-time employed, two-worker families who have no health insurance, no equity, no assets and no security?
Thus far, the answer to this question from conservatives has been simple. Cut taxes, cut regulation, and jobs will come surging back.
But we’ve tried that for a generation and only a tiny fraction of the country has benefited. And much of the country is measurably, substantially worse off.
It may well be that the Democratic Party’s approach is wrong-headed. Fine. That’s why we have two parties, to offer different ideas and answers.
But to win the political fight over the future of the economy, the GOP will have to go beyond blocking tax increases for the wealthy, beyond promises that vast wealth at the top will somehow, eventually, maybe-next-year begin to trickle down.
They have to move beyond an ideological and abstract posture that makes zero sense to the 20% of full-time American workers who are earning less than $22,000 a year.
Frankly, without better alternatives, the Democratic Party’s solution begins to look more logical, less like socialism and more like fairness and common sense.
If our economy is now structured fundamentally so that everybody’s working really hard but only a tiny percentage of families really benefit, maybe it makes sense to use taxation to redistribute some of that opportunity?
I don’t mean money giveaways.
I mean maybe it makes sense to use higher taxes on the wealthy to fund things like low-cost higher education, job training, infrastructure building, entrepreneurial programs, more affordable healthcare and so on, all designed to boost America’s vast bottom-end economy.
I know, I know. Republicans really want to avoid that model. They don’t believe in the government stimulating economic activity. And they don’t want significantly higher taxes to become the new normal.
Again, fair enough.
But in the long run, blocking that agenda will take more than parliamentary gimmicks and tea party rallies and Ayn Randian magical thinking. It will take fresh, new and better thinking aimed at helping the country’s working poor.
One problems is the amount of debt held by people starting out their working lives.
After WWII our nation benefitted greatly from the large numbers of people who were able to get higher education at minimal or no cost at all to themselves. Today young people are graduating college with so much debt it is like trying to drive your car with your parking brake set.
One solution that people haven’t been considering seriously until recently is telling your kids they don’t need to go to Harvard. Community college should be the path for far more students. The mix of liberal arts and technical offerings at community college provide the opportunity for students to find out what they are interested in while developing skills. At the end of 2 years many students will decide to pursue further education while many others will have found a career path they may never have expected.
The economics are simple. Student A goes to a 4 year school at a cost of $30,000/yr (or much more) = 22 years old and spent $120,000. Student B goes to 2 year school at a cost of $10,000/ yr = 20 years old and spent $20,000.
A lands job at $45,000 x 10 years = $450,000 – $120,000 (ignoring interest) = $330,000 at 34 years old.
B gets job at $29,000 x 12 years = $348,000 – $20,000 = $328,000 at 34 years old.
Granted A will pull away in income in later years in this example. But I am assuming sort of averages. If A became a social worker and B became a plumber B would come out far ahead of A.
I neglected to point out that for the extra years A is either not earning income or paying down debt incurred, B has the ability to accrue assets allowing the power of compound interest to work for her while it is working against A.
khl:
Let me help you finish out your chart.
Obama “saved or created” millions of jobs, so they say.
However, there are over 8,000,000 fewer people in the workforce than when he took office. No matter how thin you slice the baloney, that is the end result.
How, then, can you say that Bush “caused” the deficits? In Obama-speak he “saved or created” a worse depression with tax cuts.
Fiscal 2003: $374 billion deficit
Fiscal 2004: $413 billion deficit
Fiscal 2005: $319 billion deficit
Fiscal 2006: $248 billion deficit
Fiscal 2007: $162 billion deficit
Fiscal 2008: $455 billion deficit”
Fiscal 2009: $1,500 billion deficit – Obama
Fiscal 2010: $1,300 billion deficit – Obama
Fiscal 2011: $1,300 billion deficit – Obama
Fiscal 2012: $1,100 billion deficit – Obama
Holy cats! Batman!
Obama’s 4-years in office ran up:
$3,229 billion more than 8-years of Bush,
and
he’s still in office!
Newt,
On Germany the income I included was household income, not individual wages.
One possible explanation is that many families in Germany can afford to have one person stay home with children; the other is that we work a lot more total hours per family because we have to. Germany has a good social benefits, for example I would bet like in Canada women or men can take substantial time off after the birth of a child and have that covered. I would bet things like that would make us have higher household incomes but lower hourly wages. We may also have more small business people etc, who do not have wages, where in Germany they may have more of a organized labor force.
One thing that is true is that many European countries just don’t have the poverty that we have, there is no reason that we should have the poverty rates that we do.
JDM
You have to look at the numbers in context and not just to try to make a point.
If you reference the chart above you see that Clinton left Bush with a government that was increasing revenues while at the same time decreasing outlays. Bush sharply turned that around, drastically reducing revenue while at the same time increasing spending.
It only takes a second and hardly any work to drive your car into a ravine. It takes a lot of work and a long time to get it back out.
The good news is that if you look further down the timeline of the chart you notice that at the beginning of the Obama administration the spike in outlays starts to drop and income stops plunging and starts to increase – very slowly, to be sure, but in these sorts of graphs spikes in either direction are an indication that something very very bad is happening. An ideal chart would look almost flat with expense and revenue lines being indistinguishable.
Why would you expect people to work maximum effort for minimum wage?
Because you do whatever it is you have to do to live. The opposite of laziness.
Is that what we have come to in this country? You do whatever you have to do to live? What a dreary world you live in.
I always thought you worked hard if your work was appreciated, your boss made you feel like you were accomplishing something, and that the boss really wanted to be able to compensate you for your work to the degree your effort increased value.
I guess I was wrong. Lash these swabs to the oars and whip the slackers! No water for the weak.
Now that I see RC owns a farm, no wonder we are on the same page.
Farming may be beneath some people or deemed old-fashioned work, but perhaps there is no other profession or lifestyle that teaches so much.
One lesson is work ethic. Farming is physically demanding. It builds character. Believe me, I had to work through the unfairness of my friends going places on a sunny summer day while I was baling hay. Funny thing about not getting what you want. It makes you a better person in the long run since there is no Plan B.
That said, it is only natural for some of us to see laziness very quickly. I’ve seen it here time and time again. I’ve raised 8 children and their natural inclination is to be lazy. RC is right. And the way I combated it was a) not giving them everything they wanted; b) made sure they worked. Perseverance, endurance, productivity, responsibility, dependability … do not come out of a book. We are creatures of habit and whatever our habit is that is who we become.
Now I have a Civil Engineer, a BP agent in TX, a Bank of America analyst in Manhattan, a photographer, and one who wants to be a doctor.
Kathy:
I noticed that, too.
“Why would you expect people to work maximum effort for minimum wage?”
I never knew a person who moved their hands and feet in accordance with their wage.
I always knew people who worked industriously, and their wage caught up to them.
Kathy and others –
Working for poverty wages is not the opposite of laziness.
It may, as you point out, be necessary for many men and women. Certainly it’s what a growing number of Americans are doing right now.
But asking for better policy ideas to develop an economy that fosters upward mobility, higher-wage jobs, some decent level of security and employment benefits is not morally questionable.
It’s common sense.
In my experience, people are more decent — not less — when they have a little more economic security. They have time to spend with their kids, to volunteer for their schools, to spend time in church.
They can take better care of themselves and their parents. They can also boost the local economy by spending a little more – beyond basic survival needs.
Yet more and more of American adults are being asked to do what RC suggests: Work really hard for roughly $13,000 a year with no benefits, no healthcare, no sick leave.
These are people with no assets, no safety net.
It takes a lot of chutzpah to suggest that they’re lazy or immoral when they look to the government for help if they get sick or can’t put enough food on the table for their kids or can’t pay their rent.
If you’re going to continue doing it, I think you should come clean about your own safety net. How many of you worked for government?
How many of you are getting checks from the government right now?
How many of you worked your careers and supported your families for $13,000 a year?
My guess is that a lot of this rhetoric come from folks who are comfortable and have themselves enjoyed enormous benefits from government.
–Brian, NCPR
Is that what we have come to in this country? You do whatever you have to do to live? What a dreary world you live in.
KHL, your statement is indicative of my point. A dreary world mindset suggests one would not “lower” themselves to do certain jobs. That’s laziness.
It takes a lot of chutzpah to suggest that they’re lazy or immoral when they look to the government for help if they get sick or can’t put enough food on the table for their kids or can’t pay their rent.
Brian, no one is throwing everyone into that group.
khl:
Here’s some more Obama “success” numbers:
Feb 1, 2013. 89 million people not in the workforce, up from 80.5 million when Obama took office.
Food stamp participants have increased by 49%, from 31.9 million to 47.6 million.
And the low-information media will report today that we’re in a recovery.
And the low-information voters will believe it.
Brian, your last post portrays a perfect world. This is the progressive mindset. Somehow we will make changes and improvements to rid the world of evil and make everything fair.
That doesn’t mean I don’t want change and improvements. It means I don’t see it making everything equal or fair. As long as we have imperfect people we will have an imperfect world. That doesn’t mean we don’t try. It just means we are realistic in our expectations and act accordingly.
There are the truly the poor and struggling who need help and should get it. I want to see more responsible oversight. Nothing wrong with that.
Question.
There was a time when people worked 2 or 3 jobs to make ends meet. Has this become too old fashioned for the liberal/progressive mindset? Too outrageous? Unfair? But it was common place once upon a time and people didn’t think twice about it.
Not true today. Why?
Is it because with our prosperity, we have become too good to lower ourselves to such a life? That somehow, we don’t “deserve” such dreariness?
If this is the land of opportunity, then there are ways to dig oneself out of poverty. I hear inspiring stories all the time of people who refused the government dole and worked 2 jobs, got a degree, and became successful.
Economic advance is not the same thing as human progress. -John Clapham
Yes, I am positive that one of the great curatives of our evils, our maladies, social, moral, and intellectual, would be a return to the soil, a rehabilitation of the work of the fields. -Charles Wagner
Kathy, I have worked some of the “lowest” most back-breaking jobs imaginable with all kinds of people ranging from illegal immigrants, homeless, bikers, recently divorced middle-aged men who lived in their cars, people with drug and alcohol dependencies, college graduates, and squeeky clean Christian fundamentalists. And I’ve worked professional jobs where everyone had a college degree and some co-workers came from highly respected families.
The one thing I found in common with pretty much everyone I ever worked with is that they were all willing to work hard at whatever they were doing if they were treated with dignity. In the work they did day to day the amount they were paid made no difference as to how hard they worked and I can’t think of anyone I worked with who didn’t have aspirations that their hard work would lead to better work and better pay.
Some of the people with addictions or emotional/psychological problems weren’t tremendously dependable. I had to inventory the locker of a middle aged co-worker who was alone in the world and lost the will to live, once. Some people you could tell weren’t trust-worthy and a few turned out to be thieves. But the one thing I can say about almost everyone I ever worked with is that they all tried to pull their own weight when they were working on a crew.
JDM, once again you seem more interested in scoring points than in understanding a problem so that it can be solved productively.
Kathy, I will certainly agree on the point about farming. Farm kids tend to be hard workers and they have developed lots of practical skills and problem solving skills.
Maybe I better get my kids some farming games for the Xbox. Any suggestions?
Just imagine, corporate elites in favor of tax increases? Ah, the good old days when the good of our country came first.
http://www.bloomberg.com/news/2013-03-05/when-the-corporate-elite-supported-raising-taxes.html
And another chart that shows productivity gains decoupling from wages starting about 30 years ago. This happened by deliberate changes in the tax code and economic policy, which we need to reverse.
http://money.cnn.com/2013/03/07/news/economy/compensation-productivity/index.html
I wish I hadn’t abandoned this thread while it was still active. Lots of insightful comments and information.
You know myown, I think part of the issue is people just don’t know what to do with that information. What I mean is for a long time we have been taught by classical economic theory that as GDP and productivity increase real wages will increase. Now part of this was that yes the rich might get really rich however everyone would gain. But this is not the case, our wages are stagnant and for many declining. If you listen to many people they are talking from a mindset that just does not want to accept that. My own beliefs have always been that in general wages would follow a good economy, that productivity in the long run always meant better wages for the worker. The fact is; the data don’t support this right now.
The other belief was that even though these CEO’s were very highly paid, in the end they were worth it, they increased the value of the companies and thus the owners wealth. This is what we pay them to do and if companies are successful workers have jobs and good pay. Well we see after this latest recession, some of these CEO’s were and are barely competent many of these companies would have been better of with the mail room guy running the place. Just horrible horrible ideas and decicisions, yet did they get fired did they when they broke the law go to jail? No, they become very wealthy being very incompetent, these sorts of things baffle most of our regular thinking about how are economy works. I think we are still kind of coming to grips with some of this.
Mervel, I think that a lot of your fellow conservatives are bound and determined not to come to grips with any of it.
Though how it can fail to hit you over the head if you pay any attention at all is beyond me.
Well I know. I think a lot of it is that both sides have an ideology that they feel must be protected and promoted so when presented with data they won’t or can’t step back and really try to understand what is going on, they will try to find other data to support their ideology or question the data shown or say the data is not being interpreted correctly. Both sides do this, although right now I think the conservatives are having a harder time with it.
For me, I still really do believe in free markets and private ownership of property as foundations for a free society, however I think the problem comes with our laws surrounding corporations and capital accumulation. In this corner I think the Green’s are actually on to something. A small businessperson who is not a corporation, if that business owner sells worthless paper, knowing it worthless and it comes crashing down, he or she will personally go broke, there is no veil of protection, they will also personally be prosecuted. The corporation however protects decision makers from personal liability, it is why people sitting on the boards of these fraud corporations and their CEO’s don’t really worry, they say, whoops well I will do better at the next place, they are not personally on the hook for any of their decisions. We need to look at breaking the veil of corporation liability in my opinion.
If you owned stock in a corporation you literally own a part of that company, well what if that company kills a bunch of people in India? Do you get personally sued? Frankly you should, because if owners were all really liable for what these companies did, they would certainly be a lot more interested in what they are doing.
I don’t know about suing the stockholders– what are the odds that they had any idea what was going on? And yet when bad things happen, the stockholder generally suffers from falling stock prices more than the CEO or other executives who were in a position to prevent the wrongdoing, because the execs are so exorbitantly compensated and they’ve got such nice golden parachutes that they generally walk away from the disasters they cause with tens of millions in the bank. It’s all set up very nicely for them, and it’s just getting worse for everyone else.
It reeks of aristocracy. Of course poor folk do become rich folk every now and again, just enough to make it seem like the game’s not rigged. But rigged it most certainly is.
Well that is the problem, the “owners” of the company are totally disconnected from the board and the management structure. If you own a company who is doing bad things or horribly managed or whatever you would change things, yet with the way our corporations are legally constructed owners have no incentive to do so. Basically you get zombies, headless entities that do not have any real vested interest watching what they do. If I own the local hardware store I care about it, I make sure it serves customers that it does not do things that will get me in trouble that it makes money for me. With a corporation the owners just get the upside; they can’t be sued they are not legally responsible for anything their company does, the worst that happens is that their stock loses value or they dump it and move on.
The reason that the corporate structure was and is popular is that it makes it easy to raise capital. If I really had to evaluate the companies I owned certainly I would make different decisions in buying stock of those companies.
Right now it is as if no one is really responsible, so you get these CEO’s who are friends with the Board who conspire to simply take as much as they can, who do not have any vested interest in the long term viability of the company.
This is not 100% true, but the legal structure of the modern corporation leads to these abuses.
Mervel, you make a good point about corporate unaccountability. It definitely is harming capitalism in the U.S. It is interesting that corporate structures and charters vary among countries. In Europe, corporations are required to have broader goals than just maximizing short term profits. They often also have oversight boards to keep CEOs and the Board of Directors in check. In the US we need to review how corporations work (and don’t work) and provide more personal accountability for top executives and directors. Of course big corporations have a vested interest in keeping things the way they are and their lobbyists and campaign contributions buy off the politicians of both parties.
True. You know that is why third parties on the Left and the Right are important. They are not all totally crazy, they are the only ones sometimes talking about these issues. I mean I listen to the Greens and I listen to the Constitution Party I always have liked Nader on some issues and the same goes for Ron Paul.
Jill Stein is pretty impressive.