Nel's New Day

July 25, 2013

U.S. Needs To Bring Back the Middle Class

“This growing inequality isn’t just morally wrong; it’s bad economics. When middle-class families have less to spend, businesses have fewer customers. When wealth concentrates at the very top, it can inflate unstable bubbles that threaten the economy. When the rungs on the ladder of opportunity grow farther apart, it undermines the very essence of this country.” –

President Obama made the above statement yesterday in an address about fixing the U.S. economy.  Capitalism is like playing Monopoly: when all the money is the hands of one person, the game is finished. That’s what’s happening in the United States.

Investments in growing the middle class include investment in education, infrastructure, energy, and innovation; closing loopholes for the wealthy and huge corporations; retirement and health care security; affordable housing; and a higher minimum wage.

  • Income inequality in the United States is higher than at any other time since the Great Depression.
  • Between 1979 and 2007, the income of the richest top 1% of American households almost tripled while middle class incomes remained largely stagnant.
  • The income of the average CEO rose nearly 40% since 2009, but the average person in the country earns less than he or she did in 1999. Last year the average CEO pay went up 16 percent; in the first quarter of 2013, hourly wages dropped 3.8 percent.
  • Both Presidents Reagan and George W. Bush cut taxes for corporations and the wealthy; they saw slower economic growth and job growth during their presidencies than President Clinton, who raised taxes in 1993.
  • The years following the Bush tax cuts were the worst for job creation since the government began keeping records and the worst for business investment since World War II.
  • About 62% of the wealth recovered during this recovery has come in the form of higher stock prices, which overwhelmingly benefits the wealthiest Americans but does little for the middle class and almost nothing for those living in poverty.

Growing research indicates that the strength and size of the middle class has a strong effect on the all the key factors that propel an economy forward. Deregulation promoting home ownership loses its sustainability when the bubble burst, saddling millions of families with mortgages they could no longer afford. The trend for the last 40 years has been to build the wealth of the top while tearing down that of everyone else, a reversal of the previous 30 years.

The premise of Daron Acemoglu’s How Nations Fail is that politics and government determine economic institutions of a country and these economic institutions determine whether a country is poor or prosperous. Economic power is hampered if political power is concentrated in an economic elite with a policy that works to their advantage.

In the 1970s, the United States moved toward an exclusive institution when unions lost power, states limited voter rights, and the Supreme Court gave record-breaking campaign spending rights to corporations. Lost were the political support for public education and infrastructure, vital to economic growth. More and more, children’s opportunities are being limited by their parents’ incomes.

A common complaint is that businesses have a shortage of skilled workers. Decades of rapidly increasing higher education costs have reduced the pool of these workers. China is now making a $250 billion annual investment to create the next generation of skilled workers; the United States wants students to pay for Bush’s deficit. A narrow interest group that monopolizes political power is rapidly eliminating innovation and investment in this country.

Eighty-two percent of people in the U.S. support a raise to $10.10 an hour, including more than 90 percent of Democrats and even two-thirds of Republicans, as well as nearly 80 percent of those who make more than $100,000.  Voters also decided to raise the wage in three cities in November, and in fact when ballot initiatives include a raise, voters nearly always approve it by substantial majorities.

Fifty-six percent think that raising the minimum wage will help the economy. They know that a federal minimum wage worker who works a standard 40-hour week cannot afford fair market housing in any one of the 50 states. [See map below for the number of salaried hours necessary for a minimum-wage earner to rent a two-bedroom apartment.] Thirty million workers would benefit from an increase in the minimum wage. Raising the minimum wage to only $9 would give an additional $48 billion into the economy by next year and ease the income gap for 15 million low-wage workers.

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The elite tells falsehoods in order to keep increasing their already obscene wealth. Charles Koch, worth $43 billion, said that the minimum wage is an obstacle to economic growth. Although he opposes government-run health care, he lists countries with this security as examples of leaders in economic freedom. Ironically, he refers to assistance for low-wage workers as a “culture of dependency” on the government while his own industries receive oil subsidies, government contracts, and bailouts.

False arguments against raising the minimum wage:

  • It will decrease jobs. No, studies show that this is not true. In fact, it will increase jobs because people have more money to spend, and they will spend it. The states with higher minimum wages than the federal minimum don’t have higher unemployment rates.
  • It will hurt small businesses and force increases in prices. No, two-thirds of businesses employing minimum-wage workers have more than 100 employees. Companies like Walmart and McDonald’s force wages down so their CEO’s can take the money. Modest increases in the minimum has little effect on total corporate costs.
  • Most minimum wage workers are kids, working in the summer or part-time while going to school. Definitely not. Ninety percent of minimum wage workers are adults; most of those are long-term employees who rely on their job to support themselves and families. Approximately two-thirds of those working minimum wage jobs are women.  “Kids” can also use a raise to pay for college and/or specialized training—or to help their families survive .

Today corporate profits are a record high, and workers wages are at a record low. If the minimum wage were equal to 1968 dollars, it would be $10.71 instead of the current $7.25. In the past 45 years, minimum wage has shrunk by one-third.

In the last 22 years since the tipped wage was set at $2.13 and gas cost $1.10 a gallon, Congress has raised its own salary 13 times. In the last two years of recession recovery, the top 1 percent of people in the United States gained 110 percent of income growth while the bottom 99 percent lost ground. Thirty million people in this nation would benefit from increasing the minimum wage to $10.10. If workers don’t get fair pay, they can’t buy. When they can’t buy, the economy can’t grow. And if they get more money, they pay more taxes.

Conservatives are wasting dozens of votes in the House to take health care security from millions of people in the nation. Conservatives constantly threaten to shut down the government if progressives refuse to vote for the failed, trickle-down, austerity policies. Conservatives want to cut even more from education, medical research and infrastructure in order to give even greater tax cuts to the rich and huge corporations.

The wealthy are not the job creators. The real job creators are the middle class consumers who buy what businesses sell.

The looting class believes that there is no threat of democracy breaking out when people are poor and focused on meeting their basic needs. In March, Sen. Tom Harkin (D-IA) and Rep. George Miller (D-CA) introduced The Fair Minimum Wage Act of 2013 to raise the minimum wage from $7.25 an hour to $10.10 an hour over the next three years. Once it reaches $10.10, the minimum wage would be raised automatically each year to account for inflation and ensure that it never loses its purchasing power. The bill also raises the wages of those who rely on tips, phasing in an increase until the “tipped minimum”–currently stuck at $2.13 an hour—reaches 70 percent of the regular minimum wage.

Miller’s bill went to the House committee yesterday. We need to support it and bring back the middle class.

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2 Comments »

  1. The Looting Class. That says it all.

    Like

    Comment by Lee Lynch — July 26, 2013 @ 3:18 PM | Reply

  2. The Looting Class – words could not be more accurate.

    Like

    Comment by Lee Lynch — July 26, 2013 @ 1:17 PM | Reply


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