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Do the Rich Need America? November 15, 2010

Posted by Dwight Furrow in Dwight Furrow's Posts, politics.
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Bill Moyers (former press secretary for Lyndon Johnson and long-time journalist) has always been an acute of observer of American politics. Moyers recent speech at Boston University neatly lays out the consequences of increasing inequality that threatens our nation’s future.

Here is a short excerpt:

So the answer to the question: “Do the Rich Need the Rest of America?” is as stark as it is ominous: Many don’t. As they form their own financial culture increasingly separated from the fate of everyone else, it is “hardly surprising,” Frank and Lind concluded, “ that so many of them should be so hostile to paying taxes to support the infrastructure and the social programs that help the majority of the American people.”

You would think the rich might care, if not from empathy, then from reading history. Ultimately gross inequality can be fatal to civilization. In his book Collapse: How Societies Choose to Fail or Succeed, the Pulitzer Prize-winning anthropologist Jared Diamond writes about how governing elites throughout history isolate and delude themselves until it is too late. He reminds us that the change people inflict on their environment is one of the main factors in the decline of earlier societies. For example: the Mayan natives on the Yucatan peninsula who suffered as their forest disappeared, their soil eroded, and their water supply deteriorated. Chronic warfare further exhausted dwindling resources. Although Mayan kings could see their forests vanishing and their hills eroding, they were able to insulate themselves from the rest of society. By extracting wealth from commoners, they could remain well-fed while everyone else was slowly starving. Realizing too late that they could not reverse their deteriorating environment, they became casualties of their own privilege. Any society contains a built-in blueprint for failure, Diamond warns, if elites insulate themselves from the consequences of their decisions, separated from the common life of the country.

Yet the isolation continues – and is celebrated.

[…] Socrates said to understand a thing, you must first name it. The name for what’s happening to our political system is corruption – a deep, systemic corruption. I urge you to seek out the recent edition of Harper’s Magazine. The former editor Roger D. Hodge brilliantly dissects how democracy has gone on sale in America. Ideally, he writes, our ballots purport to be expressions of political will, which we hope and pray will be translated into legislative and executive action by our pretended representatives. But voting is the beginning of civil virtue, not its end, and the focus of real power is elsewhere. Voters still “matter” of course, but only as raw material to be shaped by the actual form of political influence – money.

The whole speech is worth reading as he dissects the inner workings of American plutocracy.

book-section-book-cover2 Dwight Furrow is author of

Reviving the Left: The Need to Restore Liberal Values in America

For political commentary by Dwight Furrow visit: www.revivingliberalism.com

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Losing Our Country October 11, 2010

Posted by Dwight Furrow in Dwight Furrow's Posts, politics, Uncategorized.
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I have blogged often about the increasing concentration of wealth in this country over the past 30 years. It is important to recognize that this has political consequences.

Economist Robert Reich lays out these political consequences:

Not only is income and wealth in America more concentrated in fewer hands than it’s been in 80 years, but those hands are buying our democracy as never before – and they’re doing it behind closed doors.

Hundreds of millions of secret dollars are pouring into congressional and state races in this election cycle. The Koch brothers (whose personal fortunes grew by $5 billion last year) appear to be behind some of it, Karl Rove has rounded up other multi-millionaires to fund right-wing candidates, the U.S. Chamber of Commerce is funneling corporate dollars from around the world into congressional races, and Rupert Murdoch is evidently spending heavily.

No one knows for sure where this flood of money is coming from because it’s all secret.

But you can safely assume its purpose is not to help America’s stranded middle class, working class, and poor. It’s to pad the nests of the rich, stop all reform, and deregulate big corporations and Wall Street – already more powerful than since the late 19th century when the lackeys of robber barons literally deposited sacks of cash on the desks of friendly legislators.

Credit the Supreme Court’s grotesque decision in Citizens United vs. the Federal Election Commission, which opened the floodgates. (Even though 8 of 9 members of the Court also held disclosure laws constitutional, the decision invited the creation of shadowy “nonprofits” that don’t have to reveal anything.)

According to FEC data, only 32 percent of groups paying for election ads are disclosing the names of their donors. By comparison, in the 2006 midterm, 97 percent disclosed; in 2008, almost half disclosed.

Last week, when the Senate considered a bill to force such disclosure, every single Republican voted against it – thereby revealing the GOP’s true colors, and presumed benefactors. (To understand how far the GOP has come, nearly ten years ago campaign disclosure was supported by 48 of 54 Republican senators.)

Maybe the Disclose Bill can get passed in lame-duck session. Maybe the IRS will make sure Karl Rove’s and other supposed nonprofits aren’t sham political units. Maybe pigs will learn to fly.

In the meantime we face an election that marks an even sharper turn toward plutocratic capitalism than before – a government by and for the rich and big corporations — and away from democratic capitalism.

As income and wealth has moved to the top, so has political power. That’s why, for example, it’s been impossible to close the absurd tax loophole that allows hedge-fund and private-equity managers to treat much of their income as capital gains, subject to a 15 percent tax (even though they’re earning tens or hundreds of millions a year, and the top 15 hedge-fund managers earned an average of $1 billion last year). Why it proved impossible to fund expanded health care by limiting the tax deductions of the very rich. Why it’s so difficult even to extend George Bush’s tax cuts for the bottom 98 percent of Americans without also extending them for the top 2 percent – even though the top won’t spend the money and create jobs, but will blow a $36 billion hole in the federal budget next year.

The good news is average Americans are beginning to understand that when the rich secretly flood our democracy with money, the rest of us drown. Wall Street executives and top CEOs get bailed out while under-water homeowners and jobless workers sink.

A Quinnipiac poll earlier this year found overwhelming support for a millionaire tax.

But what the public wants means nothing if our democracy is secretly corrupted by big money.

Right now we’re headed for a perfect storm: An unprecedented concentration of income and wealth at the top, a record amount of secret money flooding our democracy, and a public in the aftershock of the Great Recession becoming increasingly angry and cynical about government. The three are obviously related.

We must act. We need a movement to take back our democracy. (If tea partiers were true to their principles, they’d join it.) As Martin Luther King once said, the greatest tragedy is “not the strident clamor of the bad people, but the appalling silence of the good people.”

Reich has some advice about what we can do:

What can you do?

1. Read Justice Steven’s dissent in the Citizens United case, so you’re fully informed about the majority’s pernicious illogic.

2. Use every opportunity to speak out against this decision, and embarrass and condemn the right-wing Justices who supported it.

3. In this and subsequent elections, back candidates for congress and president who vow to put Justices on the Court who will reverse it.

4. Demand that the IRS enforce the law and pull the plug on Karl Rove and other sham nonprofits.

5. If you have a Republican senator, insist that he or she support the Disclose Act. If they won’t, campaign against them.

6. Support public financing of elections.

7. Join an organization like Common Cause, that’s committed to doing all this and getting big money out of politics. (Personal note: I’m so outraged at what’s happening that I just became chairman of Common Cause.)

8. Send this post to your friends (including any tea partiers you may know).

That is all well and good but the most important thing we can do is vote in every election and vote Democratic.

Why the Democrats? It is true that the Democrats depend on campaign contributions. That is how the game is played. You don’t win if  you don’t play.

But there is an enormous difference between a political party that thinks it not only permissible but moral virtuous that the richest 1% control the political process, and a political party that does not endorse that as part of their ideology.

The Democrats may be the reasonable wing of the ruling class.

But these days “reasonable” is nothing to sneeze at.

book-section-book-cover2 Dwight Furrow is author of

Reviving the Left: The Need to Restore Liberal Values in America

For political commentary by Dwight Furrow visit: www.revivingliberalism.com

Race and Gender Cannot Explain Increasing Inequality September 14, 2010

Posted by Dwight Furrow in Current Events, Dwight Furrow's Posts, Uncategorized.
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As I have noted often on this blog, inequality—the Great Divergence—has increased rather dramatically in the U.S.

The question is why, a question Timothy Noah is attempting answer in his series of articles at Slate.

Most discussion about inequality in the United States focuses on race and gender. That makes sense, because our society has a conspicuous history of treating blacks differently from whites and women differently from men. Black/white and male/female inequality persist to this day. The median annual income for women working full time is 23 percent lower than for their male counterparts. The median annual income for black families is 38 percent lower than for their white counterparts. The extent to which these imbalances involve lingering racism and sexism or more complex matters of sociology and biology is a topic of much anguished and heated debate.

But we need not delve into that debate, because the Great Divergence can’t be blamed on either race or gender. To contribute to the growth in income inequality over the past three decades, the income gaps between women and men, and between blacks and whites, would have to have grown. They didn’t.

The black/white gap in median family income has stagnated; it’s a mere three percentage points smaller today than it was in 1979. This lack of progress is dismaying. So is the apparent trend that, during the current economic downturn, the black/white income gap widened somewhat. But the black/white income gap can’t be a contributing factor to the Great Divergence if it hasn’t grown over the past three decades. And even if it had grown, there would be a limit to how much impact it could have on the national income-inequality trend, because African-Americans constitute only 13 percent of the U.S. population.

Women constitute half the U.S. population, but they can’t be causing the Great Divergence because the male-female wage gap has shrunk by nearly half. Thirty years ago the median annual income for women working full-time was not 23 percent less than men’s, but 40 percent less. Most of these gains occurred in the 1980s and early 1990s; during the past five years they halted. But there’s every reason to believe the male-female income gap will continue to narrow in the future, if only because in the U.S. women are now better educated than men. Ever since the late 1990s female students have outnumbered male students at colleges and universities. The female-male ratio is currently 57 to 43, and the U.S. Department of Education expects that disparity to increase over the next decade.

Far from contributing to the Great Divergence, women have, to a remarkable degree, absented themselves from it.  […] during the past three decades, women have outperformed men at all education levels in the workforce. Both men and women have (in the aggregate) been moving out of moderately skilled jobs—secretary, retail sales representative, steelworker, etc.—women more rapidly than men. But women have been much more likely than men to shift upward into higher skilled jobs—from information technology engineer and personnel manager on up through various high-paying professions that require graduate degrees (doctor, lawyer, etc.).

These findings suggest that women’s relative gains in the workplace are not solely a You’ve-Come-a-Long-Way-Baby triumph of the feminist movement and individual pluck. They also reflect downward mobility among men.

And as Noah reports, conservative arguments that inequality is a product of single parents or the breakdown in the family also don’t wash.

But it would be difficult to attribute much of the Great Divergence to single parenthood, because it increased mostly before 1980, when the Great Divergence was just getting under way. By the early 1990s, the growth trend halted altogether, and though it resumed in the aughts the rate of growth was significantly slower.

Also, single parenthood isn’t as damaging economically as it was at the start of the Great Divergence. “That’s mostly because the percentage of women who are actually working who are single parents went up,” Jencks told me. In a January 2008 paper, three Harvard sociologists concluded that the two-thirds rise in income inequality among families with children from 1975 to 2005 could not be attributed to divorce and out-of-wedlock births. “Single parenthood increased inequality,” they conceded, “but the income gap was closed by mothers who entered the labor force.” One trend canceled the effects of another (at least in the aggregate).

So there is little evidence supporting either liberal or conservative arguments regarding increases in inequality.

book-section-book-cover2 Dwight Furrow is author of

Reviving the Left: The Need to Restore Liberal Values in America

For political commentary by Dwight Furrow visit: www.revivingliberalism.com

The Myth of Equality September 9, 2010

Posted by Dwight Furrow in Dwight Furrow's Posts, Political Philosophy, politics, Uncategorized.
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In 1915, the richest 1% garnered 18% of the nations income, according to Timothy Noah, writing a serious of articles about inequality on Slate

This was the era in which the accumulated wealth of America’s richest families—the Rockefellers, the Vanderbilts, the Carnegies—helped prompt creation of the modern income tax, lest disparities in wealth turn the United States into a European-style aristocracy. The socialist movement was at its historic peak, a wave of anarchist bombings was terrorizing the nation’s industrialists, and President Woodrow Wilson’s attorney general, Alexander Palmer, would soon stage brutal raids on radicals of every stripe. In American history, there has never been a time when class warfare seemed more imminent.

[…] Today, the richest 1 percent account for 24 percent of the nation’s income. What caused this to happen?

Over the next couple weeks, Noah will try to explain this trend toward greater inequality. But getting the timeline right is essential for a coherent account.

Incomes started to become more equal in the 1930s and then became dramatically more equal in the 1940s.  Income distribution remained roughly stable through the postwar economic boom of the 1950s and 1960s. Economic historians Claudia Goldin and Robert Margo have termed this midcentury era the “Great Compression.” The deep nostalgia for that period felt by the World War II generation—the era of Life magazine and the bowling league—reflects something more than mere sentimentality. Assuming you were white, not of draft age, and Christian, there probably was no better time to belong to America’s middle class.

The Great Compression ended in the 1970s. Wages stagnated, inflation raged, and by the decade’s end, income inequality had started to rise. Income inequality grew through the 1980s, slackened briefly at the end of the 1990s, and then resumed with a vengeance in the aughts.

…from 1980 to 2005, more than 80 percent of total increase in Americans’ income went to the top 1 percent. Economic growth was more sluggish in the aughts, but the decade saw productivity increase by about 20 percent. Yet virtually none of the increase translated into wage growth at middle and lower incomes, an outcome that left many economists scratching their heads.

Why don’t we pay more attention to this increase in inequality?

One reason may be our enduring belief in social mobility. Economic inequality is less troubling if you live in a country where any child, no matter how humble his or her origins, can grow up to be president. In a survey of 27 nations conducted from 1998 to 2001, the country where the highest proportion agreed with the statement “people are rewarded for intelligence and skill” was, of course, the United States. (69 percent). But when it comes to real as opposed to imagined social mobility, surveys find less in the United States than in much of (what we consider) the class-bound Old World. France, Germany, Sweden, Denmark, Spain—not to mention some newer nations like Canada and Australia—are all places where your chances of rising from the bottom are better than they are in the land of Horatio Alger’s Ragged Dick.

Guyana, Nicaragua, and Venezuela, not to mention Germany, France, and the UK have income distributions more equal than ours, yet this seldom is a successful campaign issue. The myth of American commitment to equality dies hard.

If we are to get a handle on this issue, we will need to know the cause of the growing inequality—so I will be following Noah’s installments as he lays out the explanation.

book-section-book-cover2 Dwight Furrow is author of

Reviving the Left: The Need to Restore Liberal Values in America

For political commentary by Dwight Furrow visit: www.revivingliberalism.com

Why Recession and Unemployment Will Continue July 13, 2010

Posted by Dwight Furrow in Dwight Furrow's Posts, politics.
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In most of the discussions of recessions, stimulus, bailouts etc. the real reason why our economy flounders is seldom mentioned. But Robert Reich hits the nail on the head today.

Missing from almost all discussion of America’s dizzying rate of unemployment is the brute fact that hourly wages of people with jobs have been dropping, adjusted for inflation. Average weekly earnings rose a bit this spring only because the typical worker put in more hours, but June’s decline in average hours pushed weekly paychecks down at an annualized rate of 4.5 percent.

In other words, Americans are keeping their jobs or finding new ones only by accepting lower wages.

Meanwhile, a much smaller group of Americans’ earnings are back in the stratosphere: Wall Street traders and executives, hedge-fund and private-equity fund managers, and top corporate executives. As hiring has picked up on the Street, fat salaries are reappearing. Richard Stein, president of Global Sage, an executive search firm, tells the New York Times corporate clients have offered compensation packages of more than $1 million annually to a dozen candidates in just the last few weeks.

We’re back to the same ominous trend as before the Great Recession: 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.

As Reich points out, this is not a new phenomenon.

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.

These facts were papered over by Obama’s stimulus plan that dumped a lot of cash into the economy to prevent an utter catastrophe. But as the effects of that stimulus wanes, reality will set in although I suspect much of the public and the media will not acknowledge it. If we don’t find a way to shift more money to the middle class we will face permanently high unemployment, increasing poverty, and continuing decline in our living standards.

That of course will hurt global corporations as well since demand for their products will be sluggish.  But I’m sure they will find a way to blame liberals.

Reich ends his piece on a note of optimism.

When they understand where this is heading, powerful interests that have so far resisted fundamental reform may come to see that the alternative is far worse.

But this is Tuesday, not my optimistic day.

book-section-book-cover2 Dwight Furrow is author of

Reviving the Left: The Need to Restore Liberal Values in America

For political commentary by Dwight Furrow visit: www.revivingliberalism.com

Wealth, Inequality, and Europe January 15, 2010

Posted by Dwight Furrow in Dwight Furrow's Posts, Political Philosophy, politics.
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American political writers constantly claim that Europe, although a nice place to visit, doesn’t really produce enough wealth to make it livable. This column by Ross Douthat is the most recent of the genre. This belief is part of the narrative that social democracies, because they devote lots of resources to public goods and a social safety net, are less efficient than full-blown capitalist economies.

Matt Yglesias has the right response to this argument.

There are three main differences in living standards between the United States and Europe. One is that the US has long been somewhat wealthier than the biggest European countries, dating back to the 19th century. Two is that the US is much less egalitarian than Europe—a bigger share of European output is in the hands of the poor and the middle class, and a smaller share in the hands of the rich. The third is that Americans work more than most western Europeans…

These last two show us what I think is the real meaning of social democracy for a developed country—you get more equality and more vacation, with no real impact on the rate of growth. There’s a case to be made that less vacation and better televisions are a better deal than more vacation and worse televisions (the two things I like to do on vacation are go to Europe and watch TV, so I have mixed feelings about this) and there’s a tradition of philosophical argument which holds that the failure of modern mixed economies to be sufficiently solicitous of the interests of the wealthy is a major source of injustice. But though some level of income inequality would seem to be necessary to achieve economic growth, within the range that actual developed countries exist at there’s no evidence that inegalitarian policies boost growth.

This article by Lane Kenworthy contains a primer on the correlation between inequality and growth—it turns out there isn’t any. Here is one of his charts:

doesmoreequality-figure1-test

Aside from the outlier, Ireland, it is hard to see a correlation between growth rate and inequality.

This is another right-wing talking point that needs to be scrapped.

book-section-book-cover2 Dwight Furrow is author of

Reviving the Left: The Need to Restore Liberal Values in America

For political commentary by Dwight Furrow visit: www.revivingliberalism.com