At long last, some tectonic plates of American politics have begun to move. The stagnation and decline of the incomes of the bottom 90 percent of Americans have finally shown up on the radar of our political class.
The United States’ economic doldrums have been apparent for decades to anyone willing to look. The brief but catastrophic recession of the early 1980s permanently eliminated millions of well-paying manufacturing jobs, chiefly in the Midwest, and few of those displaced workers were able to find work with comparable pay. A gap between productivity gains and average family income — which didn’t exist in the three decades following World War II — opened in the 1970s and has only widened since. The only period during the past 40 years when economic gains registered in workers’ paychecks was the late ’90s, when the economy was close to full employment. But in the current recovery, the marked reduction in unemployment has been accompanied by falling, not rising, wages, with the gains in economic activity going to the wealthiest 10 percent, and most to the wealthiest 1 percent.
But social reality seldom registers simply because it exists (see: Republicans, climate change). It took the Occupy Wall Street movement, the fast-food strikers, the unions that injected the issue of universal health insurance into the 2008 presidential campaign — in other words, it took activists who dramatized the plight of both the poor and the middle class — to bring to the surface problems that tens of millions of Americans experienced but had yet to hear articulated in our political discourse.
They’ve now been articulated quite effectively by President Obama in his State of the Union address. Obama has addressed these issues before, of course, but this time was different. This time, he had a concrete proposal to diminish the shift from income derived from work to income derived from investment — by raising the tax on capital gains and using the income to provide a tax credit to help working parents pay for child care.
This time was also different because he spoke for his entire party — almost certainly including Hillary Clinton. Within the past couple of weeks, Democratic House leaders have introduced proposals to limit tax deductions for corporations that give their chief executives performance bonuses but don’t similarly reward their workers. (They should go further and propose reducing tax rates on companies that give their employees wage hikes keyed to increases in productivity and the cost of living.) Last week, the Center for American Progress — a think tank with close ties to Clinton — released a remarkable study, authored by a group co-chaired by former treasury secretary Lawrence Summers, that went beyond the standard diagnosis blaming globalization and technology for workers’ woes. The conduct of U.S. corporations, the authors asserted, is also to blame.
“Corporations have come to function much less effectively as providers of large-scale opportunity,” they wrote. “Increasingly, their dominant focus has been the maximization of share prices and the compensation of their top employees. In a world where mobility is always a possibility, they have become less committed to their workforces and their communities.” As remedies, the authors proposed extending profit-sharing to companies’ workers, enacting legislation protecting employees who seek to form unions, and making employers responsible for workers they label as “independent contractors.”
Democrats have long sought to represent the interests of both business and labor. At times, this has led them into cul-de-sacs of self-negation (something that the president’s simultaneous advocacy of pro-worker tax policies and yet another trade treaty sadly exemplifies). But they seem to be finding a new ideological and political sweet spot: They’re the party that rewards work, that seeks to increase labor income even if — and you’d better believe they’ve polled on this — it means taking a bite out of capital income. Given the weight of money in politics, theirs will be a halting and incomplete conversion, but the signs of their new faith are too numerous to dismiss. Their new emphasis may also help them win back a share of the white working-class voters who have increasingly been electing Republicans. It likely won’t be a big share, but the Democrats don’t need a big share to build an electoral majority.
Indeed, the new Democratic focus puts Republicans in a bind. The GOP would be happy to increase workers’ incomes if it didn’t involve diminishing the ability of wealthy investors and CEOs to claim the lion’s share of Americans’ incomes for themselves. Alas, for the Republicans, that’s arithmetically impossible. Once the national discourse turns to economic inequality, Republicans, already averse to the claims of science, will also have to dismiss the validity of math.