How many of you dealt with that chaos when it came to wrestling with the unemployment insurance system last year? Some of the rhetoric we heard was, “well that chaos was just the pandemic crush overwhelming the system”. Yes, that’s true in a very narrow sense—the system collapsed in many places, meaning people who were desperate to get a check to pay rent or for food had to wait months and months for a first check…and lots of people just gave up.
But, here’s the truth, folks—that’s a feature not a bug. So, as enhanced unemployment benefits are about to expire at the end of March but seem likely to be extended in a new stimulus bill, is this chaos going to continue to be as bad as it was a year ago? Michele Evermore, a senior policy analyst at the National Employment Law Project and a leading national expert on the unemployment insurance system, tells us the status and how we fix the broken system.
Remember during the presidential campaign when Joe Biden promised not to raise taxes for anyone making less than $400,000? I thought, “well, that’s dumb”. Why should someone making say $250,000—which puts them in the one percent—not pay higher taxes? I figured right then that that line-in-the-sand $400K number was a purely stupid political calculation—let’s not piss off the people in the suburbs who voted for Trump who we want to get.
Really? Why not try a direct populist argument to reach a whole lot of people who are making under $100,000 and get angry about taxes because they have to pay a heavy load but see people making $250,000 paying a relatively small sum? I talk with Matt Gardner, senior fellow at the Institute for Taxation and Economic Policy, about taxing people above $400,000, why other well-off people shouldn’t pay higher taxes as well and, bonus, how Netflix is paying less than one percent taxes on a massive revenue boost (hint: legalized corruption!)
This blog originally appeared at Working Life on February 3, 2021. Reprinted with permission.
About the Author: Jonathan Tasini is a political / organizing / economic strategist. President of the Economic Future Group, a consultancy that has worked in a couple of dozen countries on five continents over the past 20 years.
To grasp the sheer magnitude of U.S. economic inequality in recent years, consider its two major stock market indices: the Standard and Poor (S&P) 500 and Nasdaq. Over the last 10 years, the values of shares listed on them grew spectacularly. The S&P 500 went from roughly 1,300 points to over 3,800 points, almost tripling. The Nasdaq index over the same period went from 2,800 points to 13,000 points, more than quadrupling. Times were good for the 10 percent of Americans who own 80 percent of stocks and bonds. In contrast, the real median weekly wage rose barely over 10 percent across the same 10-year period. The real federal minimum wage fell as inflation diminished its nominal $7.25 per hour, officially fixed and kept at that rate since 2009.
All the other relevant metrics likewise show that economic inequality in the United States kept worsening across the last half-century. This happened despite “concerns” about inequality expressed publicly across the years by many establishment politicians (including some in the new Biden administration), journalists, and academics. Inequality worsened through the capitalist downturns after 1970 and likewise through the three capitalist crashes of this century (2000, 2008, and 2020). Nor did the deadly pandemic provoke soul-searching or policies adequate to stop, let alone reverse, the ongoing redistribution of income and wealth upward.
No advanced economics is required to grasp that divisions, bitterness, resentment, and anger flow from such a persistently widening gap between haves and have-nots. Among millions who search for explanations, many become prey for those mobilizing against scapegoats. White supremacists blame Black and Brown people. Nativists (calling themselves “patriots” or “nationalists”) point to immigrants and foreign trade partners. Fundamentalists blame those less zealous and especially the non-religious. Fascists try to combine those movements with economically threatened small-business owners, jobless workers, and alienated social outcasts to form a powerful political coalition. The fascists made good use of Trump to assist their efforts.
U.S. history adds a special sharpness to the search for explanations. The dominant argument for capitalism in the 20th century after the 1930s Great Depression was that it “produced a great middle class.” Real U.S. wages had risen even during the Depression. They were generally higher than elsewhere across the globe, and especially in comparison with those in the USSR. High wages showed the superiority of U.S. capitalism according to the system’s apologists in politics, journalism, and academia. Demolition of that middle class at the end of the 20th and into the new century pained especially those who had bought the apologies.
And indeed, the Great Depression and its aftermath had lessened inequality significantly, enabling such a defense of capitalism to have some semblance of validity. However, for that defense to be persuasive required two key facts to be forgotten or hidden. The first is that the U.S. working class fought harder for major economic gains in the 1930s than at any other time in U.S. history. The Congress of Industrial Organizations (CIO) then organized millions into labor unions utilizing militants from two socialist parties and a communist party. Those parties were then achieving their largest-ever numerical strengths and social influences. That is how and why together the unions and the parties won the establishment of Social Security, federal unemployment compensation, a minimum wage, and a huge federal jobs program: all firsts in U.S. history. The second fact is that capitalists in the 1930s and afterward fought harder than ever against each and every working-class advance. The “middle-class” status achieved by a large portion of the working class (by no means all and especially not minorities) happened despite not because of capitalism and capitalists. But it was certainly clever propaganda for capitalism to claim credit for working-class gains that capitalists tried but failed to block.
The reduction of U.S. economic inequality accomplished then proved temporary. It was undone after 1945. Particularly after 1970, capitalism’s normal trajectory of deepening economic inequality resumed through to the present moment. Simply put, capitalism’s basic structure of production—how it organizes its enterprises—positioned capitalists to reverse the New Deal’s reduction of economic inequality. Much of the temporary U.S. middle class is now gone; the rest is fading fast. Over the last half-century, U.S. capitalism brought inequality to the extremes surrounding us now. No wonder a population once persuaded to support capitalism because it fostered a middle class now finds reasons to question it.
In capitalist enterprises, tiny minorities of the persons involved occupy positions of leadership, command, and control. The owner, the owner’s family, the board of directors, or the major shareholders comprise such minorities: the class of employers. Opposite them are the vast majorities: the class of employees. The employer class determines, exclusively, what the enterprise produces, what technology it uses, where production occurs, and what is done with its net revenue. The employee class must live with the consequences of employers’ decisions from which it is excluded. The employer class uses its position atop the enterprise to distribute its profits partly to enrich itself (via dividends and top executive pay packages). It uses some of its profits to buy and control politics. The goal there is to prevent universal suffrage from moving the economic system beyond capitalism and the economic inequality it reproduces.
Deepening U.S. inequality flows directly from this capitalist organization of production—its class system. Occasionally, under exceptional circumstances, rebellious social movements win reversals of that inequality. However, if such movements do not change the capitalist organization of production, capitalists will render such reversals temporary. To solve the extreme inequality of U.S. capitalism requires systemic change, an end to capitalism’s specific class structure pitting employers against employees. If production were organized instead in enterprises (factories, offices, stores) that were democratized—one worker, one vote—as worker cooperatives, economic inequality could and would be drastically reduced. Democratic decisions over the distribution of individual incomes across all the participants in an enterprise would far less likely give a small minority vast wealth at the expense of the vast majority. The same logic that dispensed with kings in politics applies to employers in capitalism’s enterprises.
This article was produced by Economy for All, a project of the Independent Media Institute.
About the Author: Richard D. Wolff is professor of economics emeritus at the University of Massachusetts, Amherst, and a visiting professor in the Graduate Program in International Affairs of the New School University, in New York. Wolff’s weekly show, “Economic Update,” is syndicated by more than 100 radio stations and goes to 55 million TV receivers via Free Speech TV. His three recent books with Democracy at Work are The Sickness Is the System: When Capitalism Fails to Save Us From Pandemics or Itself, Understanding Marxism, and Understanding Socialism.
The path toward economic recovery in the U.S. has become sharply divided, with wealthier Americans earning and saving at record levels while the poorest struggle to pay their bills and put food on the table.
The result is a splintered economic picture characterized by high highs — the stock market has hit record levels — and incongruous low lows: Nearly 30 million Americans are receiving unemployment benefits, and the jobless rate stands at 8.4 percent. And that dichotomy, economists fear, could obscure the need for an additional economic stimulus that most say is sorely needed.
The trend is on track to exacerbate dramatic wealth and income gaps in the U.S., where divides are already wider than any other nation in the G-7, a group of major developed countries. Spiraling inequality can also contribute to political and financial instability, fuel social unrest and extend any economic recession.
The growing divide could also have damaging implications for President Donald Trump’s reelection bid. Economic downturns historically have been harmful if not fatal for incumbent presidents, and Trump’s base of working-class, blue-collar voters in the Midwest are among the demographics hurting the most. The White House has worked to highlight a rapid economic recovery as a primary reason to reelect the president, but his support on the issue is slipping: Nearly 3 in 5 people say the economy is on the wrong track, a recent Reuters/Ipsos poll found.
Democrats are now seizing on what they see as an opportunity to hit the president on what had been one of his strongest reelection arguments.
“The economic inequities that began before the downturn have only worsened under this failed presidency,” Democratic presidential nominee Joe Biden said Friday. “No one thought they’d lose their job for good or see small businesses shut down en masse. But that kind of recovery requires leadership — leadership we didn’t have, and still don’t have.”
Recent economic data and surveys have laid bare the growing divide. Americans saved a stunning $3.2 trillion in July, the same month that more than 1 in 7 households with children told the U.S. Census Bureau they sometimes or often didn’t have enough food. More than a quarter of adults surveyed have reported paying down debt faster than usual, according to a new AP-NORC poll, while the same proportion said they have been unable to make rent or mortgage payments or pay a bill.
A historic House vote on marijuana legalization will take place later this month. We break down why Democrats are voting on the bill despite the fact that it’ll be dead upon arrival in the Senate.
And while the employment rate for high-wage workers has almost entirely recovered — by mid-July it was down just 1 percent from January — it remains down 15.4 percent for low-wage workers, according to Harvard’s Opportunity Insights economic tracker.
“What that’s created is this tale of two recessions,” said Beth Akers, a labor economist with the Manhattan Institute who worked on the Council of Economic Advisers under President George W. Bush. “There are so obviously complete communities that have been almost entirely unscathed by Covid, while others are entirely devastated.”
Trump and his allies have seized on the strength of the stock market and positive growth in areas like manufacturing and retail sales as evidence of what they have been calling a “V-shaped recovery”: a sharp drop-off followed by rapid growth.
Some economists have begun to refer to the recovery as “K-shaped,” because while some households and communities have mostly recovered, others are continuing to struggle — or even seeing their situation deteriorate further.
“If you just look at the top of the K, it’s a V — but you can’t just look at what’s above water,” said Claudia Sahm, director of macroeconomic policy at the Washington Center for Equitable Growth. “There could be a whole iceberg underneath it that you’re going to plow into.”
The burden is falling heavily on the poorest Americans, who are more likely to be out of work and less likely to have savings to lean on to weather the crisis. While recessions are always hardest on the poor, the coronavirus downturn has amplified those effects because shutdowns and widespread closures have wiped out low-wage jobs in industries like leisure and hospitality.
Highly touted gains in the stock market, meanwhile, help only the wealthiest 10 percent or so of households, as most others own little or no stock.
The disconnect between the stock market and the broader economy has been stark. On the same day in late August that MGM Resorts announced it would be laying off a quarter of its workforce, throwing some 18,000 workers into unemployment, its stock price jumped more than 6 percent, reaching its highest closing price since the start of March.
“The haves and the have-nots, there’s always been a distinction,” Sahm said. But now, she added, “we are widening this in a way I don’t think people have really wrapped their head around.”
Without further stimulus, the situation appears poised to get worse. Economic growth until now had been led by increasing levels of consumer spending, buoyed by stimulus checks and enhanced unemployment benefits that gave many people, including jobless workers, more money to spend.
Low-income consumers have led the way, and they spent slightly more in August than they did in January, according to the Opportunity Insights tracker — even as middle- and high-income consumers are still spending less.
But those low-income consumers were also the most dependent on the extra $600 per week in boosted unemployment benefits, which expired in July. Since that lapsed — and since Congress appears unlikely to extend it any time soon, if at all — “we’re likely to see other macroeconomic numbers really fall off a cliff in the coming weeks,” Akers said.
The expected drop in spending, paired with the expiration of economic relief initiatives like the Paycheck Protection Program, could also spell trouble for businesses in the coming months. Many economists expect a wave of bankruptcies and business closures in the fall, contributing to further layoffs.
In that sector, too, owners are feeling disparate impacts. More than 1 in 5 small business owners reported that sales are still 50 percent or less than where they were before the pandemic, according to a recent survey from the National Federation of Independent Business, and the same proportion say they will need to close their doors if current economic conditions do not improve within six months.
At the same time, however, half said they are nearly back to where they were before, and approximately 1 in 7 owners say they are doing better now than they were before the pandemic, the survey showed.
Those diverging narratives could be understating the need for further stimulus by smoothing over some of the deeper weaknesses in the labor market and the economy, experts say.
“This is a case where the averages tell a different story than the underlying data itself,” said Peter Atwater, an adjunct economics professor at William & Mary.
While Republicans appear to be embracing the idea of further “targeted” aid, they are also touting what Trump has called a “rocket-ship” economic recovery and emphasizing record-breaking growth while downplaying the record-breaking losses that preceded it.
“There’s no question the recovery has beat expectations,” said Rep. Kevin Brady (R-Texas), the top Republican on the House Ways and Means Committee, this week on a press call with reporters.
“People are in these bubbles,” Atwater said. “And if people aren’t leaving their homes, are not really getting out, it’s unlikely that they’re seeing the magnitude of the downside of this K-shaped recovery.”
This article originally appeared at Politico on September 7, 2020. Reprinted with permission.
About the Author: Megan Cassella is a trade reporter for POLITICO Pro. Before joining the trade team in June 2016, Megan worked for Reuters based out of Washington, covering the economy, domestic politics and the 2016 presidential campaign. It was in that role that she first began covering trade, including Donald Trump’s rise as the populist candidate vowing to renegotiate NAFTA and Hillary Clinton’s careful sidestep of the Trans-Pacific Partnership.
A D.C.-area native, Megan headed south for a few years to earn her bachelor’s degree in business journalism and international politics at the University of North Carolina at Chapel Hill. Now settled back inside the Beltway, Megan’s on the hunt for the city’s best Carolina BBQ — and still rooting for the Heels.
Pandemics might be one of the single best mass events to shine a light on class warfare, especially in the U.S. Rich people don’t have to worry about getting sick—they can afford extensive care in a country in which millions of working-class people can’t even afford to see a doctor for a run-of-the-mill reason. If a rich person gets sick, well, he can just sit home in his pajamas for as long as needed and never worry about paying next week’s rent, while a fast food worker or other service worker on an hourly wage is forced to go to work, even when sick.
What the corona virus has shown, quite sharply and clearly, is that a country without paid sick leave is not only an immoral society but also, on a practical level, a country which denies the most basic benefits that could contain a health threat—which is what I talk about today with Judy Conti, government affairs director for the National Employment Law Project.
Then, you probably can’t find many people in Congress who are bigger shills for the corporate world than Steny Hoyer—and McKayla Wilkes is aiming to send Hoyer quickly into the world he really aspires to, that of a lobbyist for corporations. I talk with her today about her primary challenge.
This blog originally appeared in Working Life on March 11, 2020. Reprinted with permission.
About the Author: The author’s name is Jonathan Tasini. Some basics: I’m a political/organizing/economic strategist. President of the Economic Future Group, a consultancy that has worked in a couple of dozen countries on five continents over the past 20 years; my goal is to find the “white spaces” that need filling, the places to make connections and create projects to enhance the great work many people do to advance a better world. I’m also publisher/editor of Working Life. I’ve done the traditional press routine including The Wall Street Journal, CNBC, Business Week, Playboy Magazine, The Washington Post, The New York Times and The Los Angeles Times. One day, back when blogs were just starting out more than a decade ago, I created Working Life. I used to write every day but sometimes there just isn’t something new to say so I cut back to weekdays (slacker), with an occasional weekend post when it moves me. I’ve also written four books: It’s Not Raining, We’re Being Peed On: The Scam of the Deficit Crisis (2010 and, then, the updated 2nd edition in 2013); The Audacity of Greed: Free Markets, Corporate Thieves and The Looting of America (2009); They Get Cake, We Eat Crumbs: The Real Story Behind Today’s Unfair Economy, an average reader’s guide to the economy (1997); and The Edifice Complex: Rebuilding the American Labor Movement to Face the Global Economy, a critique and prescriptive analysis of the labor movement (1995). I’m currently working on two news books.
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