As perennially pointed out by Nobel laureate Joseph Stiglitz, and Emmanuel Saez and Thomas Piketty, and the Center on Budget Policy Priorities, the numbers on income and wealth are getting worse. In the recovery from the 2001 recession, the top one percent collected two-thirds of the income gains. This time around, they've taken in 121 percent of gains because income for the bottom 99 percent fell.
As the chart above shows, "real" median household income, that is, inflation-adjusted, is now 8.1 percent below where it was in January 2009.
In his latest column, former Clinton-era Labor Secretary Robert Reich explains what he thinks is going on to make this happen. Read about it below the fold.
First, productivity gains. Corporations have been investing in technology rather than their workers. They get tax credits and deductions for such investments; they get no such tax benefits for improving the skills of their employees. As a result, corporations can now do more with fewer people on their payrolls. That means higher profits.To be fair, Reich was on board with the free trade, pro-globalization, knowledge economy approach favored by the Clinton administration in the mid-1990s. He once supported the policies contained in his third point above.
Second, high unemployment itself. Joblessness all but eliminates the bargaining power of most workers — allowing corporations to keep wages low. Public policies that might otherwise reduce unemployment — a new WPA or CCC to hire the long-term unemployed, major investments in the nation's crumbling infrastructure — have been rejected in favor of austerity economics. This also means higher profits, at least in the short run.
Third, globalization. Big American-based corporations have been expanding and hiring around the globe where markets are growing fastest — even while the U.S. market is lackluster. Tax policies and trade policies have encouraged them.
Finally, the Fed's easy-money policies. They've pushed investors into the stock market because bond yields are so low. On Tuesday, the yield on the 10-year U.S. Treasury note was just 1.9 percent.
But unlike others, he's wised up since then, although he still downplays the need for more homegrown manufacturing.
Moreover, Reich was in favor of a U.S. "industrial policy" when Larry Summers was in the Treasury department arguing against such so-called meddling. China has an industrial policy. India has one. Whatever their problems, both have soaring economies. Germany has an industrial policy too, and it is a major factor in that country's phenomenal growth in renewable energy. In fact, almost all the developed nations have an industrial policy and a large proportion of the developing ones do as well.
Though we desperately need an industrial policy focused on sustainable economics, even if the U.S. developed a worker-friendly one that strove to create more manufacturing jobs at home, that wouldn't cure the inequalities of income and wealth that now plague us even as the stock market sets new records. Accomplishing that means reforming tax policy (and not by lowering the top rates again), restoring unions whose collective bargaining can garner a fair chunk of productivity gains for workers, flushing the inequities out of free trade agreements and creating policy that spurs experimenting with alternatives like cooperatives and other worker-owned entities.
Difficult as it is even to get a hearing for such ideas, these are what should be coming from the Congressional Progressive Caucus, much like their People's Budget. Some critics will argue that this is a waste of time because no way will the Congress pass any such policies or programs because we don't have the votes.
True. The political clout isn't there right now. But the way to get that clout is to persuade voters to support more far-sighted candidates. Not by saying this stuff can't be done. Getting it done requires repeatedly showing voters the kind of policies that would be adopted to make their lives better if progressives did have that clout. Is that a tough path? You bet. But it sure beats moaning about our current inability to make what needs to happen happen.