The politics of America’s wealth chasm

October 14, 2011

By David Callahan
The opinions expressed are his own.

Economic inequality – the meta concern of the Wall Street protesters – is not an issue that typically gets much traction in American politics. Anger at the Haves tends to surge when times are tough, only to melt away when former Have Nots are again flush enough to go back to the mall.

A year ago, with the economy improving, it seemed the U.S. was well along in this cycle. The wrath against Wall Street had died down, replaced by a more familiar conservative politics blaming “big government” for America’s ills.

Suddenly, though, the rich are once more under attack, with protesters even marching this week on the swanky Upper East Side digs of JP Morgan Chase chief Jamie Dimon. What happened?

Hard times stuck around, that’s what happened. And, looking ahead, the old rules about class and politics may cease to apply. If high rates of unemployment continue, as many economists predict, the chasm between the wealthy and everyone else – now at record levels – could become one of the hottest issues in national life.

Inequality has surfaced as a political issue in all the recessions of the past three decades, particularly the downturn of early 1990s, which came on the heels of  the “greed is good” excesses of the Reagan era. Opinion polls during these periods showed rising public concern about corporate power, CEO pay, and the fairness of American society. Writing in 1993, the political prognosticator Kevin Phillips argued that middle class anger at getting shafted was hitting a “boiling point” and could remake American politics. A newly elected Bill Clinton raised taxes on the rich and sought to limit CEO pay.

Just a few years later, though, amid happy boom times, Americans were too busy swapping stock tips to worry much about inequality. The recession of 2001-2002 briefly put inequality back on the agenda, only to have Americans get distracted once more by all the play money created by the housing bubble. So what if the Gini co-efficient (which measures inequality) is going up, as long as re-fi rates are falling?

Class resentments are built into the political DNA of many European countries, with their long histories of feudalism. But attacking inequality has always been an uphill battle in the United States, thanks to the mythology that anyone can get ahead with enough pluck. The American Dream ethos – which political scientist Jennifer Hochschild has called the nation’s “dominant ideology” – puts the onus for economic betterment on the individual, leading people to blame themselves, not the economic system, for setbacks and hardship.

That’s usually the case, anyway. But prolonged hard times can snap Americans out of this disempowering trance. A century ago, the gross inequities and recurrent crises of early industrial capitalism fueled a powerful Progressive movement that won reforms to curb the clout of moneyed interests and protect worker rights. Later, the deep and sustained economic pain of the Great Depression led to a bigger push for more equity, with a vast expansion of labor rights and the creation of a modern social safety net.

Today’s hard times, it is often said, are the worst to grip the nation since the Great Depression. So it should be no surprise if the current crisis begins to resemble past traumas by putting inequality on the political agenda.

What would this mean in practice? While Occupy Wall Street may lack specific demands, there are plenty of detailed plans lying around to force the Haves to share the wealth. In fact, President Obama laid out one such plan a few weeks ago when he called for $1.5 trillion in tax hikes on the affluent. The White House is also making a big push to get the new Consumer Financial Protection Bureau up and running by seeking confirmation for its first director, Richard Cordray.

Steps like these – while very popular with the public – face intense opposition on Capitol Hill. For now, anyway. If times remain bad, even today’s Republican Party may find that defending the rich is a losing proposition.

David Callahan is the author of Fortunes of Change: The Rise of the Liberal Rich and the Remaking of America (Wiley).

Photo: Members of the Occupy Wall St movement shout while demonstrating outside the home of JP Morgan Chase CEO Jamie Dimon during a march through the upper east side of New York October 11, 2011.  REUTERS/Lucas Jackson


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The Tea party marched for less government and these folks want more government! One group syas ask what you can do for your country and other, ask what your country can do for you! Yes, let’s raise taxes on the top 1-10%, but anyone that thinks we can swell government (Fed, state & local-look it up!) beyond the 40% of US GDP it is or our debt beyond the 100% of GDP, or spend more when 40 cents of every dollar is borrowed, HAS A SCREW LOOSE! A vision withouyt a way to pay for it is dangerous foolishness now!

Posted by DrJJJJ | Report as abusive

Much ofthe disparity is caused by those that choose to pick the lkowest fruit and take the path of least resistance! Witht he 50% HS grad rate we’re now facing, it’s likely to get worse! Please thank your local education union!

Posted by DrJJJJ | Report as abusive

Posted by DrJJJJ : You assumptions about the Occupy objectives show you have a screw loose. No one is saying to increase the national debt, they are saying to level the playing field because these bankers got trillions of dollars to stabilize the economy and all they did was inflate their bank accounts due to their well-oiled connections.

Go to a Tea Party and tell me those people don’t have their screws loose to do the bidding of the Koch Brothers and that ARAB-AUSTRALIAN “NEWS” channel and serial propagandist/criminal Murdoch.

Posted by zygote9111 | Report as abusive

Whenever our species power forward, the global environment suffers, that,s Inequality.

Posted by Philipnaxxar | Report as abusive

[…] The politics of America’s wealth chasm […]

Posted by Demonstrators rampage through Rome, clash with police – Top news – Financial news | Report as abusive

What happened, you ask?

The Gini Coefficient measures the level of Income Unfairness in a nation. The value of 1 means that one individual has earned all the income within a country (which is impossible). A value of 0 means that all individuals have equal incomes (which is not impossible but very, very rare in a market economy).

Have a look at the Gini Coefficent here: ince_WWII.svg

Note how, for the US, it has be consistently above a value of 0.35 and has risen since 1980. It is now at about 0.43.

Who was elected president in 1980? Who reduced marginal income taxation from 70% to 30%? Yes, Reckless Ronald Reagan. Why is everybody surprised that the OWS movement has garnered so much attention.

George Santayana: “Those who refuse to learn the lessons of history are condemned to repeat it”

Posted by deLafayette | Report as abusive

[…] article: The politics of America's wealth chasm | The Great Debate Posted in News, Uncategorized | Tags: debt, economy, energy, environment, facebook, india, […]

Posted by The politics of America's wealth chasm | The Great Debate | Report as abusive

Taxation inequality is discriminatory. Everyone should have to pay the same tax rate. Income should not be a determining factor. Fairness is to share the burden of taxation as an equal percentage to each persons income.

Posted by optimistmiser | Report as abusive

The greatest threat to Social Security is Social Security itself.

Posted by optimistmiser | Report as abusive

{Anger at the Haves tends to surge when times are tough, only to melt away when former Have Nots are again flush enough to go back to the mall.}

True enough – as the Romans said, “Give them games, porridge and wine”. Is our world that much different today?

It is beyond most people that the Great Recession could easily happen again because there is something fundamentally wrong with our economic system.

That wrong has been well-identified – it is called Income Unfairness and the inequity is awesome. Reckless Reagan precipitously brought down our marginal income taxes from levels of 70% to 30% (effectively 20/24% after deductions), which caused a massive shift of wealth upwards to create the Plutocrat Class in America.

That class, after three decades of net income (after tax) transfers has meant that the top 1% own 43% of our financial wealth and the top 20% own 94% of it. (See info-graphic here: a/power/wealth.html )

This glaring imbalance is at the heart of income unfairness today and the root cause of the demonstrations across America.

And how is that inequity corrected. Easily, by increasing marginal income (and capital gains taxes) to levels where they were for for years (from the late 1930s to 1970) – see info-graphic here: debt.png

Note also in that info-graphic the inflexion point of the green line (National Debt) that coincides with the reduction of higher marginal income taxes in 1980 – when Reagan began to pull taxes down.

Posted by deLafayette | Report as abusive

Why people never learn from history? For better or worse, there were three things that came out of the Great Depression of the 30′: Communism, Fascism, and the Second World War. Keeps this going, and such will be the eventual result. Rhetoric, propaganda can go on forever. But when people face extreme hardship, they will revolt. Don’t push others to the wall, they will fight back. And when they do, things will get ugly. Fast.

Posted by hereiam2005 | Report as abusive

The Gini coefficient might not says much for many people. Numbers may not says much.

But some numbers are more significant than others. a/power/wealth.html. (Thanks to deLafayette).

The last 40% American has 0.3% of the wealth in America. Takes US total wealth at 55,000 billion USD, this means 120 million people have 165 billions in wealth. Or each one of those people have 1,375 USD. In wealth. A little more than a thousand dollars.
Is this the greatest nation on earth?

Posted by hereiam2005 | Report as abusive

DrJJJJ: NOT ONE of the protesters is asking for “more government”…. What they are asking for is ‘equal opportunity’ … Either get your facts straight, or change your handle to DrJ_Liar

Posted by edgyinchina | Report as abusive

@CarlOmunificent- excellent remarks. The “less government” ideology of Reagan is slowly destroying America. Reagan quietly abandoned this philosophy a few years into his presidency, when he found it wasn’t working… nomics-and-prudent-taxation/

@DrJJJJ: If America was being taxed at 40% of GDP, I would certainly recommend the Republican Party and its policies to you (and if it was 50-60%, I’d perhaps even recommend the Mad Hatter’s Tea Party). Only, your figures are wildly inaccurate. US Federal outlays are running at just under 25% of GDP. US Federal tax receipts? Just under _15%_!!! Is this a sustainable policy? No. I’m curious where you get your 40% figure from? Here’s where I get mine: displayafact.cfm?Docid=200

If people are protesting now, they’ll be revolting in a few years time if the government does not tackle the problem while they can… The strange thing is that the protesters’ demands are actually fairly rational! Now if only the American politicians would get off their high horses and ask the Chinese for help fixing the system of world trade. Can we be weaned off the kool-aid?

Posted by matthewslyman | Report as abusive

Carlomunificent writes: Ultimately, I think the military will swoop in with Flying Monkeys and occupy power for a few generations. On the bright side, that would give the US a chance to write a modern constitution.

I have been thinking that ten years ago it already started. It will be ironic if China or India and the LA countries become more truly democratic while this country becomes a repressive nightmare. It is more likely that no one will be democratic except at the ritual of voting day.

If agricultural subsidies are removed in the developed countries, the cost of food could add a new dimension to the frustration fueling OWS. The developing countries don’t like the developed country’s agricultural subsidies.

The OWS movement shouldn’t waste their time on protest movements. If they really don’t see a place for themselves in the larger society – they should try to make alternatives. The hippies were too young and inexperienced to succeed at the communes that used to spring up. These people might stand a chance. They shouldn’t try for utopia but something that can sustain them while the rest of the economies of the world may be having a very hard time providing for basic needs.

I think the only reason the US didn’t become as firmly class riven as European and LA society was that it still had vast undeveloped territory until about 100 years ago and that territory took some time to develop. They should be building life rafts while they have a chance. They might even have a chance to rough out that new constitution CarlOmunificent mentions.

I am afraid the future will see a country where the entrenched will be inclined to see all others as pests, expensive tax burdens and military fodder. You can hear the attitude in many of the comment threads in this news site.

The periodic plagues that swept the civilized world since the days of the Roman Empire were one force that acted as a leveler of the constant tendency for economic power to accumulate at the top. Is the world over populated, not sufficiently organized or will it matter? A very crowded world where many are idled or pushed out of chances to make their own way will get on everyone’s nerves.

The best way to avoid mob thinking is not to get caught in one and that may not be possible.

Posted by paintcan | Report as abusive