As Washington Fiddles over the Fiscal Cliff, the Real Battle Over Inequality Is Happening in the Heartland

Washington has a way of focusing the nation’s attention on tactical games over partisan maneuvers that are symptoms of a few really big problems. But we almost never get to debate or even discuss the big problems because the tactical games overwhelm everything else.

The debate over the fiscal cliff, for example, is really about tactical maneuvers preceding a negotiation about how best to reduce the federal budget deficit. This, in turn, is a fragment of a bigger debate over whether we should be embracing austerity economics and reducing the budget deficit in the next few years or, alternatively, using public spending and investing to grow the economy and increase the number of jobs.

Even this larger debate is just one part of what should be the central debate of our time — why median wages continue to drop and poverty to increase at the same time income and wealth are becoming ever more concentrated at the top, and what should be done to counter the trend.

With a shrinking share of total income and wealth, the middle class and poor simply don’t have the purchasing power to get the economy back on solid footing. (The wealthy don’t spend enough of their income or assets to make up for this shortfall, and they invest their savings wherever around the world they can get the highest return).

As a result, consumer spending — fully 70 percent of economic activity — isn’t up to the task of keeping the economy going. This puts greater pressure on government to be purchaser of last resort.

The dilemma isn’t just economic. It’s also political. As money concentrates at the top, so does power. That concentrated power generates even more entrenched wealth at the top, and less for the middle class and the poor.

A case in point is what’s now happening in Michigan. In the state where the American labor movement was born – and where, because of labor unions, the American middle class once had the bargaining power to gain a significant portion of the nation’s total income – Republicans and big money are striking back.

Legislators in the Michigan state House, followed almost immediately by Republicans who dominate the state Senate, voted Thursday afternoon to eliminate basic union organizing and workplace protections for both public and private-sector workers. Michigan Republican Governor Rick Snyder says he’ll sign the measure.

This anti-labor blitzkreig was launched and coordinated by “Americans for Prosperity” – a group developed and funded by the right-wing industrialists and billionaire campaign donors Charles and David Koch, to “pave the way for right to work in states across our nation.”

The Koch brothers are the same ones, not incidentally, who several years ago backed a group called “Citizen’s United,” on its way to the Supreme Court for an opinion by the Court’s Republican majority that opened the floodgates to big money corrupting our federal and state governments. (The brothers Koch have also entertained Justices Scalia and Thomas at strategy meetings they’ve organized of Republican donors.)

Connect the dots: As unions have withered, the middle class’s share of total income and wealth has dropped. The decline of the median wage in America over the last three decades correlates exactly with the declining percentage of American workers who are unionized.

And as the super-rich have grown even wealthier, they’ve been able to extend their power through the Supreme Court and the Republican Party – advancing a war on the middle class.

These moneyed interests may lose a skirmish or two, particularly at the federal level when the public’s attention is focused there (Michigan voters went overwhelmingly for President Obama and Democratic Senator Debbie Stabenow on November 6). But the moneyed interests are patient and relentless and, as is evident in Michigan, able to strike suddenly with extraordinary organization and precision.

They’ve taken on our tax system, successfully raising taxes on the middle class and the poor (Social Security payroll taxes, sales taxes, and user fees) while reducing their own top marginal tax rates. They’ve taken on public spending — cutting government workers and programs the poor and middle class depend on (teachers and school budgets, social workers and family support services, job training and unemployment insurance, to name only a few.)

And they’ve taken on the unions that once negotiated good wages on behalf of the middle class and of those who aspired to join it.

The result has been a degree of inequality this nation hasn’t witnessed since the days of the robber barons of the late nineteenth century – an inequality that’s harming our economy as much as it’s undermining our democracy.

As Washington fiddles over the fiscal cliff, a larger battle over inequality is being waged all over America.

This piece is cross-posted from Robert Reich.org with permission.

5 Responses to "As Washington Fiddles over the Fiscal Cliff, the Real Battle Over Inequality Is Happening in the Heartland"

  1. DINESH DESAI   December 18, 2012 at 5:19 am

    ECONOMIC POWER WIELDS POLITICAL POWER AND POLITICAL POWER, IN TURN, WIELDS ECONOMIC POWER. BUT, WHICH POWER IS STRONGER? I BELIEVE, ECONOMIC POWER IS THE DOMINANT POWER. POLITICIANS ARE INFLUENCED BY WEALTHY DONORS. NOT THE OTHER WAY AROUND. AS A RESULT, WEALTH PERPETUATES MORE WEALTH AND POWER. IT IS A CYCLE THAT IS DIFFICULT TO BREAK, NOT IMPOSSIBLE TO CHANGE. HOWEVER, ELECTIONS CANNOT BE BOUGHT AS THERE ARE WEALTHY DONORS/SUPPORTERS ON BOTH SIDES OF THE ISLES. THE RISING CAPITAL INTENSITY OF THE AMERICAN ECONOMY IS LIKELY TO BESTOW MORE POWER TO CAPITALISTS AND LESS TO LABOR. THIS BODES ILL FOR THE FUTURE OF LABOR MOVEMENT.

  2. Doug   December 18, 2012 at 7:59 am

    What a putz this Reich is. Deriving from the fiscal cliff fracas that the central question of our time is stagnating middle classs wages? Geez. That is so tenuous as to be ludicrous – Reich's idee fixe. The fiscal cliff is a piece of one of the central questions of our time – that question is "What is the proper role of government?" Riech's a smart guy (I guess) but he so completely misses everything. There is no mystery to stagnating wages of the middle class and it is not "THE MONEYED INTERESTS" conspiracy. The "rich" pay a larger share of the taxes the federal government takes in now than at any time in history, nearly double what they did when tax rates were in the golden years of Reich-desired high taxes on the rich – 90% marginal rate at one time (but no one actually paid that.) Some might think more important factors for stagnating wages are that the US added millions of new workers to the work force (women), that the developed nations are moving their billions from subsistence agriculture to commerce and industry, just as the US did in the 1800s, and competing with the midwestern middle class. That maybe this increasing supply of labor keeps or even drives wages down. Or that in those Reich-imagined halcyon days, the US was in a position so commanding it could demand wages well above what the economics could justify and that wages are simply adjusting to the lack of US commercial predominance in the world. Or, or, or. But for a professor of economics to flog conspiracy theories as the prime, maybe even sole reason for existing economic realities, ….. Well, that just goes to show bad off it is in California.

  3. Alexander Sjöblom   December 18, 2012 at 8:15 am

    The profits generated today are very often a result of speculation or simply the "borrowed money” – which means that this money often doesn’t really exist anywhere – they're not a result of any production or have any other value (eg. gold).
    At the same time today’s lack of proper political conduct even damages the world's climate and can even destroy it, if it will continue as today. I think these two things are what create the major problems for a future society. The problems are not just how more people in the world can get a decent life, but also how the world shall come to terms with this “waste of resources” – and do it without negatively affecting those who already are living on the margins… If everyone's politic focus is only “to get as big of a piece of the pie as possible”, it will never solve any of these main problems. Therefore, to start solving the problems, it is true that it's necessary to change society fundamentally, which will not be easy, because everyone tends to keep their own privileges.

  4. Bonnie Goodell   December 18, 2012 at 3:02 pm

    The foremost and preferred political/economic tactic in separating labor from the profit of its work, and government from the value created by its infrastructure and human resource development investments, and attaching that profit and value to the capital side is and has always been "divide and conquer." State against state, vying to lure companies, and campaigns carefully staged by company lobbyists. Country against country, same smell. Just read the right wing arguments for lowering business taxes and taxes on capital – it is all about how we will lose out to countries who give a better deal. No different from playing races against each other to bust unions. The only way to win, by the rules as written by capital, is for government to become the tool for enslaving its own citizens to provide the cheapest possible slave labor for capital. The US has a recent history of just that to look to for instruction. Using enslaved black prisoners in the south, arrested for loitering and delivered to capital by local governments, to profit U.S. Steel, as documented in "Slavery by Another Name." And, in order to accomplish that the vicious culture intentionally promulgated a view of southern white laborers as "trash" as well. What is amazing is that so many still fall for this manipulation, everywhere.

  5. edvv   December 18, 2012 at 5:33 pm

    Union leadership in the US has become more oligarchical, enriching themselves rather than representing their union members. Michigan unions tried to legislate their permanent existance in the state's constitution, which failed. In response, the elected legislature who is Republican led transformed the state into a right-to-work one. It is hard to argue that this action happened in a vacuum. I haven't heard Mr. Reich volunteer to redistribute any of his riches.