40 YEARS OF CLASS WARFARE

ABSTRACT: Class warfare has been going on in the US for 40 years, but most people either haven’t realized that it is class warfare, or deny its existence. Inequality between the wealthy, elite class and the middle and working class has grown dramatically. This is the result of policy decisions made by federal and state governments not the accidental or inevitable result of non-political events or changes in our economy.

Since 1979, workers’ productivity has grown by 65% but their median pay has grown by only 8%. Large employers’ profits after taxes have increased 239% since 1980.

Since the 1970s, changes in government policies have tended to reward corporations, their executives and investors, at the expense of workers. Trade policies, deregulation, tax policies, and labor laws are key examples. As the incomes of the richest 1% have grown dramatically, the income tax rate for those with the highest incomes has been reduced from 70% to 39%, with even lower rates on income from investments (as opposed to income from work). Meanwhile, the minimum wage has failed to even keep up with inflation.

Increasing incomes for the working and middle class doesn’t just benefit them and their families, it will benefit the whole economy by increasing the purchasing power of the average consumer. Consumer spending is two-thirds of our economy.

It’s time to acknowledge that 40 years of class warfare has occurred, that government policies have been its weapons, and that tremendous (and growing) inequality has been the result. It’s time to work to improve the pay, benefits, and job security of the working and middle class. And it’s time for our wealthy individuals and corporations to pay their fair share of our taxes. Policy changes to achieve these results are possible and will be essential to strengthening our economy and reducing the startling inequality present in America today.

FULL POST: Class warfare has been going on in the US for 40 years, but most people either haven’t realized that it is class warfare, or deny its existence. The incomes and wealth of the wealthiest individuals and families in the US have grown dramatically, while the vast majority of Americans have seen their incomes stagnate, at best, and their wealth fall with the crash of home prices and the financial system in 2008. Large employers’ profits have grown significantly as well, while workers’ pay has stagnated or fallen.

As a result, inequality between the wealthy, elite class and the middle and working class has grown dramatically. This is the result of policy decisions made by federal and state governments, driven by wealthy campaign donors and lobbyists. It is not the accidental or inevitable result of non-political events or changes in our economy.

It used to be that as our economy and worker productivity grew, the rising tide lifted all boats. From 1947 to 1973, workers’ productivity grew by 97% and their median pay grew by 95%. That changed in the 1970s when the 40 years of class warfare began. Since 1979, workers’ productivity has grown by 65% but their median pay has grown by only 8%. The share of the national economy’s income going to workers in wages and salaries has declined from 67% (where it had been for decades) to 58% (the lowest level since this statistic has been recorded). Meanwhile, the share going to corporate profits is at a record high. [1] Large employers’ profits after taxes have increased 239% since 1980. [2]

Since the 1970s, changes in government policies have tended to reward corporations, their executives and investors, at the expense of workers. Trade policies, deregulation, tax policies, and labor laws are key examples. These policy changes have allowed and provided incentives for corporations to shift jobs overseas, reducing jobs and wages in the US. Financial deregulation has benefited Wall St. corporations and executives while hurting average American homeowners, credit card holders, and borrowers. Small businesses have been hurt by trade policies, deregulation, and tax policies that favor big corporations.

Changes in labor laws have shifted the balance of power toward employers, especially large employers, at the expense of workers. The use of part-time workers, “temporary” employees, and “independent” contractors instead of full-time employees has stripped workers of job security, benefits, and labor law protections, including the ability to unionize.

During the first 30 years of this class warfare, workers made up for the lack of income growth by working more hours (especially by women in two-parent households) and by borrowing, most notably against their homes (mortgages, second mortgages, and home equity loans), through their credit cards, and for the costs of higher education. Then, the Great Recession hit and the incomes and assets (primarily homes) of the middle and working class crumbled.

The result of this multi-faceted warfare against the working and middle class is the following (all figures adjusted for inflation):

• Bottom 90% of the US population
  • Average household income: $31,000, down 24% since 1980
• Top 10%
  • Average household income: $175,000, up 46% since 1980
• Top 1%
  • Average household income: $700,000, up 124% since 1980

The top 10% of Americans as a group now have as much income as the bottom 90% for the first time in 100 years. And the average US CEO’s salary is now 331 times the average workers’ pay. [3] The inequality in wealth is even greater than the inequality in income; the top 1% have 76% of wealth in the US.

If the incomes of all classes had grown at the same rate since 1979, low and middle income families would be earning $6,000 – $8,000 more each year than they are. [4]

In perhaps the starkest example of this class warfare, as the incomes of the richest 1% have grown dramatically, and as inequality has grown dramatically, the income tax rate for those with the highest incomes has been reduced from 70% to 39%. And many of those with the highest incomes pay a far lower effective income tax rate because of tax loopholes (such as offshore tax havens) and even lower rates on income from investments (as opposed to income from work).

Another stark example of this class warfare is that as upper incomes have soared, the minimum wage has failed to even keep up with inflation. This is a clear example of the eroding power of workers and a significant factor underlying their eroding incomes. Although successful efforts to increase the minimum wage have recently occurred in some states and cities, this is only one piece of a much larger puzzle. Much more will need to be done if workers are to regain the financial well-being and stability they enjoyed from the end of World War II until the 1970s.

Increasing incomes of the working and middle class doesn’t just benefit them and their families, it will benefit the whole economy by increasing the purchasing power of the average consumer. Consumer spending is two-thirds of our economy and the current economic recovery has been slow and weak because consumers simply don’t have money to spend.

It’s time to acknowledge that 40 years of class warfare has occurred, that government policies have been its weapons, and that tremendous (and growing) inequality has been the result. It’s time to work to improve the pay, benefits, and job security of the working and middle class. And it’s time for our wealthy individuals and corporations to pay their fair share of our taxes. Policy changes to achieve these results are possible and will be essential to strengthening our economy and reducing the startling inequality present in America today.

[1]       Meyerson, H., July / August 2014, “Why Democrats need to take sides,” The American Prospect

[2]       Gilson, D., Sept. / Oct. 2014, “Survival of the richest,” Mother Jones

[3]       In These Times, Sept. 2014, “Just the facts,” In These Times

[4]       Horowitz, E., 8/23/14, “Mass. Economy still hasn’t rebounded,” The Boston Globe