American workers need a raise

Recently there’s been concerted “right-wing” attack against public employees and public retirees.  The attack is that their salaries and pensions are adding to the federal debt and state and local budget shortfalls.  So much so that they are somewhat seriously being looked at as a place to cut spending. This from the AFL-CIO blog, Time to Backlash at Public Employee Bash.

Public employees, the folks who teach our kids, fix our streets, put out our fires and protect our families, have been getting raked over the PR coals lately. Right-wing lawmakers, anti-government hysterics and some mainstream media have blasted—quite wrongly—their work ethic, skills, pay and pensions.

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But as AFSCME President Gerald McEntee noted at Huffington Post, Zuckerman, “one of the world’s wealthiest men,” never mentions

the reprehensible behavior of the investment and banking community in causing an economic collapse that wiped out half a generation of retirement savings (including the home equity that many had counted on), nor acknowledges that wealthy Americans pay less in taxes than they did 60 years ago.

Click here to read McEntee’s entire column.

It sint’ that public employees and retirees are being paid too much, it’s that private workers have been underpaid for too damn long.  And taking money away from workers, who are going to spend it, certainly won’t help the economy but only hurt it more at this point.

And that’s what Robert Reich points our today in a must read, The Root of Economic Fragility and Political Anger.  Wages have been damn near stagnant for over three decades now and working Americans are pissed.  They see the wealthy and the banksters getting back to normal but their situation only seems to stay the same or get worse.  And those that were elected to fix it are don’t seem to be very concerned about them.

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.

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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.

We all know what happened in the years immediately following these twin peaks—in 1929 and 2008.

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The problem isn’t that typical Americans have spent beyond their means. It’s that their means haven’t kept up with what the growing economy could and should have been able to provide them.

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The crash of 2008 didn’t turn into another Great Depression because the government learned the importance of flooding the market with cash, thereby temporarily rescuing some stranded consumers and most big bankers. But the financial rescue didn’t change the economy’s underlying structure — median wages dropping while those at the top are raking in the lion’s share of income.

That’s why America’s middle class still doesn’t have the purchasing power it needs to reboot the economy, and why the so-called recovery will be so tepid—maybe even leading to a double dip. It’s also why America will be vulnerable to even larger speculative booms and deeper busts in the years to come.

It wasn’t always this way? What happened?

But starting in the late 1970s, and with increasing fervor over the next three decades, government did just the opposite. It deregulated and privatized. It increased the cost of public higher education and cut public transportation. It shredded safety nets. It halved the top income tax rate from the range of 70–90 percent that prevailed during the 1950s and ’60s to 28–40 percent; it allowed many of the nation’s rich to treat their income as capital gains subject to no more than 15 percent tax and escape inheritance taxes altogether. At the same time, America boosted sales and payroll taxes, both of which have taken a bigger chunk out of the pay of the middle class and the poor than of the well-off.

Companies were allowed to slash jobs and wages, cut benefits and shift risks to employees (from you-can-count-on-it pensions to do-it-yourself 401(k)s, from good health coverage to soaring premiums and deductibles). They busted unions and threatened employees who tried to organize. The biggest companies went global with no more loyalty or connection to the United States than a GPS device. Washington deregulated Wall Street while insuring it against major losses, turning finance—which until recently had been the servant of American industry—into its master, demanding short-term profits over long-term growth and raking in an ever larger portion of the nation’s profits. And nothing was done to impede CEO salaries from skyrocketing to more than 300 times that of the typical worker (from thirty times during the Great Prosperity of the 1950s and ’60s), while the pay of financial executives and traders rose into the stratosphere.

It’s too facile to blame Ronald Reagan and his Republican ilk. Democrats have been almost as reluctant to attack inequality or even to recognize it as the central economic and social problem of our age. (As Bill Clinton’s labor secretary, I should know.) The reason is simple. As money has risen to the top, so has political power. Politicians are more dependent than ever on big money for their campaigns. Modern Washington is far removed from the Gilded Age, when, it’s been said, the lackeys of robber barons literally deposited sacks of cash on the desks of friendly legislators. Today’s cash comes in the form of ever increasing campaign donations from corporate executives and Wall Street, their ever larger platoons of lobbyists and their hordes of PR flacks.

All of this has caused the vast majority or Americans to see the political elites as ignorant, unfeeling, and unaware of their plight.

What we get from widening inequality is not only a more fragile economy but also an angrier politics. When virtually all the gains from growth go to a small minority at the top — and the broad middle class can no longer pretend it’s richer than it is by using homes as collateral for deepening indebtedness — the result is deep-seated anxiety and frustration. This is an open invitation to demagogues who misconnect the dots and direct the anger toward immigrants, the poor, foreign nations, big government, “socialists,” “intellectual elites,” or even big business and Wall Street. The major fault line in American politics is no longer between Democrats and Republicans, liberals and conservatives, but between the “establishment” and an increasingly mad-as-hell populace determined to “take back America” from it.

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.

“May” being the operative word. See the Alterman post below which surmises that until a serious movement gets organized to fight for the needed changes it won’t happen.  It’s time for the wealthy to start paying their fare share again.