Tag Archives: middle class

How the 1 percent is systematically destroying the middle class

The idea of a property-owning democracy has long roots in American political thought. In their book, “The Citizen’s Share,” Joseph R. Blasi, Richard B. Freeman and Douglas Kruse argue that the Founding Fathers wanted everyone (well, everyone who was white and male) to own a small slice of property. Both Madison and Washington praised the relatively equal distribution of property in the United States (compared with Europe). Thomas Jefferson wrote, “It is not too soon to provide by every possible means that as few as possible be without a little portion of land. The small landholders are the most precious part of a state.” Indeed, the concept is still popular today, even on the right. James Poulos writes, “Without an ownership society, where citizens are prudent stewards of broadly distributed private property, freedom tends to become what it was in revolutionary France — an abstract ideal that can easily arouse destructive political feelings that know no bounds.” But new data suggests America may no longer be such a society, and that has worrying implications for democracy.

The idea of a property-owning democracy is no longer the reality in the United States. Edward Wolff finds that the wealthiest 10 percent own 90.9 percent of all stocks and mutual funds, 94.3 percent of financial securities but only 26.5 percent of the debt. For the middle class, their home makes up 62.5 percent of their limited wealth. (The bottom 40 percent have negative wealth.) The Gini coefficient for net worth has increased from 0.803 in 1962 to 0.871 in 2013. (By way of comparison: A Gini coefficient of 1 means that 1 person owns all of the wealth.) As the chart below shows, financial instruments and wealth are far more unequally distributed than income.

The United States is no longer more equal than European nations, but actually deeply more unequal. The chart below shows that the United States has the most unequal distribution of the wealth of any Organisation for Economic Co-operation and Development (OECD) member country examined. Across the OECD, the bottom 60 percent own about 13.3 percent of the wealth. (The bottom 40 percent own only 3.3 percent.) In Canada, the bottom 60 percent own 12.5 percent of the wealth, and the bottom 40 percent own 2.2 percent. In France, the respective numbers are 11.6 percent and 1.8 percent. And in Britain, they are 16 percent and 4.7 percent.

In the United States, however, the bottom 60 percent own a mere 2.5 percent of the wealth and the bottom 40% own negative 0.4 percent of the wealth.

As wealth and stock ownership has become more concentrated, good jobs that lead to a middle class lifestyle are increasingly eroded. Unfortunately, not enough people seem to be noticing.

Indeed, the Wall Street Journal recently reported that “apps do your chores” — but the unfortunate reality is that workers, not “apps,” are doing those chores. The workers are called “contractors,” instead of employees, meaning that they don’t get the protections full-time employees do. And examples of exploitation are piling up.

A startup called CrowdFlower Inc. — which, according to WSJ “breaks down digital jobs, such as data entry, into tiny tasks performed by millions of workers” — was recently sued for paying some of those workers between $2 and $3 an hour. Industry leader Uber, meanwhile, has been criticized for exaggerating the wages of its contractors.  This practice is becoming widespread. A recent study finds that 53 million Americans are doing some sort of freelancing work. Of those, 40 percent are full-time independent contractors, meaning they have no other source of income.

The rich are driven by two main desires: First, to make sure they have more money; and, second, that someone else does the work. There is literally no job the rich are not lazy enough to outsource. Because they cannot figure out the location of their post office, they need “Shyp.” With “Luxe,” they can get a person to park their car for them. And with “Saucey,” they can save themselves a trip to the liquor store. In a recent article for  The New Yorker, Patricia Marx describes some of the more absurd tasks that were included on TaskRabbit, including “Lego sorting,” locating “a reptile handler who is in legal possession of a rattlesnake” and finding a fake wedding ring that looks just like a real one.

It is not of insignificant concern that the rich may cease to be capable of performing the basic tasks necessary in the modern economy. The result is something like the dystopia described in the recent science-fiction film “In Time,” except that the rich elongate their lives by making the poor do their mundane tasks.

Robert Kuttner writes of TaskRabbit:

To get an assignment, an aspiring Rabbit offers to do the chore for less money than he or she thinks other prospective Rabbits are bidding. That’s what makes it a metaphor for the new economy, a dystopia where regular careers are vanishing, every worker is a freelancer, every labor transaction is a one-night stand, and we collude with one another to cut our wages.

Together these trends should be worrying: The vast majority of Americans own no assets, but are instead laden with debt. The social safety net is being shredded by plutocrats and their political henchmen. Conservatives say workers should instead get benefits from their (preferably privately owned) employers. But those companies are supporting workers less and less: Defined benefit pensions are a thing of the past, and even basic retirement plans are in decline. And that’s just for those who are lucky enough to have jobs with benefits. Many workers are misclassified, or are never employees to begin with, meaning they must manage for retirement and health insurance without all the benefits the government funnels through the employee-employer relationship.

As Matt Bruenig notes, in the United States,

“employers often handle sickness (health insurance, subsidized by federal government), old-age insurance (401k and defined-benefit pensions, subsidized by federal government), survivor’s insurance (life insurance, subsidized by federal government), family benefits (paid leave and health insurance for children), unemployment (severance, though more typically rely heavily on public unemployment insurance), on top of providing socially adequate levels of cash income.”

That is, government has funneled important social benefits through corporations. This not only makes a corporate job more cushy than otherwise, it also makes freelance work more precarious. Christopher Mims notes that, “Uber isn’t the Uber for rides — it’s the Uber for low-wage jobs.” A large portion of Americans now have two choices: Become servants to the rich for minimal wages, or starve to death. The idea that low-wage work is merely a short-term part of the rung towards a better life is also largely illusory: Upward mobility has been destroyed.

America has fallen into neo-feudalism: A wealthy capital-owning class exists behind a servile class with no assets, and only a life of drudgery ahead of them. The master-servant relationship will only further degrade social trust and civic values. Americans can’t see themselves as equals in the political sphere when large portions are consigned to wait upon the whims of new aristocracy. Conservative politics relies on the middle class making a devil’s bargain, believing they have more in common with the rich than the poor. It won’t be long before that facade crumbles.

This piece originally appeared on Salon. 

Rubio Will Likely Be The Republican Nominee

Barring a massive strategic blunder, Marco Rubio is well-positioned to become the Republican nominee for President in 2016. The Florida senator is the ideal candidate to expand the Reagan coalition while holding on to the conservative base and he can take shots at Clinton that would sound hypocritical coming from Bush. While his power as a candidate has yet to emerge in the polls, a misstep by Bush will send him straight to the top.

Right now the Republican party is deeply fractured, and its coalition, at least at the presidential level, is weak. Republicans have failed to win the popular vote in 5 of the last 6 elections, and when they were successful, it was largely because of George W. Bush’s modest success with Latinos. The problem Republicans face going into 2016 is that the rise of the nativist Tea Party makes it difficult for them to woo Latino voters without losing their base. Rubio offers them such a bridge candidate.

Before exploring why Rubio could act as a bridge between conservatives and Latinos, it’s important to explode a key myth — that Republicans simply can’t win Latino voters; as I’ve noted before, there are indications that they can.. The problem is that appeals to Latino voters will often alienate the more nativist Tea Party portions of the Republican base. Thus, the GOP needs to find a candidate that can perform well enough to neutralize the Latino vote but also ensure that the conservative base turns out to vote.

According to data from a recent Economist/Yougov poll, while no Republican candidate has a net favorability with Latinos, Rubio dramatically outperforms Bush. The split among conservatives is perhaps even starker: Rubio holds a 37 percent net favorability and Bush holding a 15 percent net favorability.

Republicans will also want to make inroads with the poor, the middle class and youth. Here again, Rubio has a distinct advantage, polling strongly with young people and the middle class (those making between $40,000 and $100,000). Among those making less than $40,000, Bush and Rubio are at a dead heat. (Scott Walker polls significantly better than both in this category, however.)

It could be that as Rubio becomes more well known, he’ll become less popular. This has clearly happened to Bush, who has seen his net favorability drop from negative 5.9 points in February 4, 2013, when 42 percent of respondents said that had “not heard enough” to judge him, to negative 16.2 points on April 21, 2015, with only 16.8 percent of respondents saying they had “not heard enough.” But even this argument doesn’t sink Rubio. In the same Yougov poll, Rubio’s “do not know enough” score is only 4 points higher than Bush among Latinos, 6 points higher among young voters (18-29) and 8 points higher with the middle class. Even assuming all of these “don’t knows” dislike Rubio (unlikely) his net favorability would still be higher than Bush’s.

As the chart below from Sam Wang shows, as a Republican becomes more well-known, he also becomes less popular. Bush fits perfectly on the trend, while Rubio is slightly above it and Walker is slightly below it. In a recent Wall Street Journal/NBC Poll, completed before Rubio announced his candidacy, 56 percent of Republican primary voters said they could see themselves supporting Rubio, with only 26 percent saying they couldn’t. Only Scott Walker, with 53 percent and 17 percent respectively, had better numbers, and Jeb Bush pulled in a squalid 49 percent in favor, 42 percent against.

Republicans consider who their nominee will be must also consider how they are going to run against Clinton. It’s likely that they will prefer three major criticisms: First, that she’s dynastic; second, that she’s too old (an argument with sexist undertones, to be certain, but it may still resonate with voters); and third, that her Washington-insider status should disqualify her. Each of these arguments will be muted in the case of a Bush nomination, but could be much more persuasive coming from Rubio — the son of a immigrant father and a working class mother with strong Tea Party connections. He’s young and he’s targeted much of his rhetoric towards benefitting the middle class (no matter their dubious merit).

To test whether Rubio might be a better foil to Clinton, we can look at the Real Clear Politics General Election Match-Ups. The current average suggests that in a head-to-head election with Clinton, Rubio would lose by 7.5 points. The three most recent polls show Clinton up by 14 points, 2 points and 4 points respectively. In all three, Rubio loses. However, his margin is still lower than Bush, who loses by 8.9 points on average, and 17 points, 7 points and 4 points respectively. Walker loses by 8.6 points on average (22 points, 5 points and 6 points, respectively).

The most recent polls, taken from March and April, are shown below, where each bar corresponds to Hillary Clinton’s margin of victory in a hypothetical matchup:

The other conceivable option on the table is Scott Walker, who does poll well with blue-collar Americans. The problem is that his strategy for winning the White House relies entirely on maintaining the old Republican coalition, which won’t be appealing to party elites. Recently, for example, he signaled opposition to immigration reform, which isn’t surprising given his vision of the party’s future, but will ultimately doom him as a candidate. Without making inroads into the Latino vote, Republicans will never take back the White House.

The arguments against Rubio, meanwhile, are melting away. Worried about his embarrassing SOTU response? Witness his energetic and moving announcement speech. Worried he won’t get the support of big backers? Sheldon Adelson may back his campaign. The failure of immigration reform in 2013? No support among party elites? Rubio just got kind comments from Brooks and Douthat. Stagnant wages and stunted upward mobility? Marco Rubio said it best in his announcement:


Indeed, Rubio’s biggest problem seems to be that his impressive qualities show up everywhere but in the polls: Real Clear Politics still puts him below Walker and Bush. However, Rubio offers a perfect embodiment of the Republican vision of the American Dream. He’s offering a vision that may can win enough Latinos, working-class white, youth and Republican regulars to credibly threaten Hillary. He’ll likely be the Republican candidate.

This piece originally appeared on Salon

How Racism is Destroying the Middle Class















This piece originally appeared on Salon.

How To Take Back Democracy On November 4th

Bold prediction: Rising inequality of income and wealth will be the most important political battleground over the next few decades.

Just take a look at the figures. The share of income accruing to the top 1 percent increased from 9 percent in 1976 to 20 percent in 2011. The richest 0.1 percent controlled 7 percent of the wealth in 1979 and 22 percent of the wealth in 2012. Meanwhile, there are a number of studies out there showing that the most effective way to reduce this inequality would be higher taxes on income and wealth, but the rich won’t let it happen.

Consider also this: The rise of income inequality and wealth inequality are intimately connected, and causes all sorts of problem over the long term. As Emmanuel Saez and Gabriel Zucman write,


That is, income is a flow, which quickly becomes a stock. The rich make enough money to save; in contrast middle-class and low-income workers don’t have enough money to live, so they are increasingly burdened by debt. They can’t build up wealth, which means they are deprived of opportunity. This creates a self-perpetuating cycle of wealth on the top and debt on the bottom.

In a comedy bit on wealth, Chris Rock claims, “You can’t get rid of wealth.” The empirical research on the question largely supports his assertion. In “The Son Also Rises,” Gregory Clark finds that wealth remains in a family for 10-to-15 generations and notes,



But, of course wealth and income inequality weren’t always as bad as they are today. What happened? In a word: cheating. Although many people try to explain rising inequality away by arguing we live in a winner-take-all economy or that inequality is the result of skill-biased technological change, these arguments are bunk. Inequality has been driven by public policy choices that favored the richthe decline of unions and the rise of finance. As the chart below shows, tax rates on both income and inheritance were high during the relatively equal ’60s, ’70s and ’80s and then fell dramatically paving the way for the inequality we see today (Chart Source).

The best way to reduce inequality would be to tax income and wealth. While conservatives often claim that this would reduce economic growth, such claims have very little economic support. For instance, Thomas Piketty, Emmanuel Saez and Stefanie Stantcheva find no correlation between economic growth and tax cuts. Because of this, they find, “the top tax rate could potentially be set as high as 83%.” (Chart Source)

Nobel Prize-winner Peter Diamond argues that the top marginal tax rate could safely breach 73 percent, and indeed, such a rate might even be “optimal.” Another recent studyfinds the top marginal tax rate could be as high as 90 percent. Republicans sometimes claim that inequality is necessary for economic growth; in fact, the evidence suggests rather the opposite is true: High levels of inequality imperil growth.

But, here’s the problem: The same political forces that allowed the 1 percent to take our political system hostage have only worsened in the past decade. As Nick Hanauer notes in a recent Intelligence Squared debate,

At the same time, the percent of — of labor — the percent of GDP devoted to labor has gone from 52 to 42.  So that difference is about a trillion dollars annually.  So that — here’s the thing you have to understand.  That trillion dollars isn’t profit because it needs to be or should be or has to be.  It’s profit because powerful people like me and [Edward Conrad] prefer it to be.  That trillion dollars could very easily be spent on wages. Or — or on discounts for consumers.  This isn’t a consequence of some magical law of economics.  This is a consequence of differentials in power.

Nick hits on a very important point: The rising concentration of economic power hascoincided with a concentration of political power. A recent paper by Adam Bonica and others illustrates that as inequality has increased, the rich have spent more money on the political system:


As Benjamin Page, Larry Bartels and Jason Seawright recently found that the wealthy tend to be more economically conservative than the population at large. But a particularly startling finding is that, “on economic issues wealthy Democratic respondents tended to be more conservative than Democrats in the general population.” The wealthy are usingthe political system to turn their income into wealth and then that wealth into more wealth. They’re going to keep doing it, unless we stop them.  One solution is to reduce the massive turnout gap between the rich and poor.

Studies show that states with more low-income turnout have higher minimum wages, more generous child health insurance programs and stricter anti-predatory lending policies. They also have more generous welfare benefits. The fight against inequality will be a long one, but the first step is turning out to vote — the most radical step one can take in our country is actually believing democracy is more than just an idea.

This piece originally appeared on Salon

Conservatives defend inequality out of self-interest — nothing more






The answer is class interest.










Originally published on The Week. 

Do the 1 percent create jobs?

A friend of mine, AJ, posted this on his blog:

Open letter to Jamie Johnson, director of “The One Percent”:

Dear Jamie,

You are an arrogant idiot. Your perception of a “just” America is one that is far from free, and your efforts have hurt the poor much more than they have helped them. You foolishly talked to Milton Friedman in various clips from your documentary “The One Percent”, who gave solid reasoning for why we need wealthy people for job creation. He’s Milton Friedman! You just don’t argue with him when you’re an ignorant “non-economist”–especially disrespectfully. You’ve taken Kanye West as my least favorite person, and I sincerely hope you drop your disposition and ignorance and buy a simple economics textbook. Heck, I’ll buy it if you’ll read it. Let me know.

It’s as good as any example of a tendency I’d like to address again. The idea, at its heart, is whether cutting taxes on the wealthy will create jobs, and therefore the converse, will increasing tax rates on the wealthy (to finance a stronger social safety net) decrease jobs? No. A few reasons here. First you have the Stiglitz argument that Nick Hanauer has adopted: rich people need demand. But more importantly, the amount of investment in the economy doesn’t depend on tax rates, but how much investment there is to be had. At some point, cutting taxes is just pushing on a string. In a depressed economy with little private investments available, it makes sense to make public investments financed by taxes. But even in a non-depressed economy, there is no correlation between economic growth and marginal tax rates on the wealthiest.



I want to plaster this chart up on every subway on the nation, because it shows, empirically, what the left has been saying for decades: cutting taxes on the rich doesn’t stimulate the economy. Why is this important? Well I was talking to my dad over the break, and I asked him why he voted for Bush, given the tax breaks for the rich. Once I established that these tax breaks primarily helped the rich, and hurt him by giving the government less money for say, Social Security or college loans, he told me this:

I just figured that the money being in the hands of someone who could invest it and create jobs, rather than me, who would just consume it.

We now know empirically that this simply isn’t true. For one, my dad can invest, he can easily take out money in the stock market, he could help me and my brother go college (or grad school). More importantly, he can spend! That creates opportunities to invest! That creates jobs! The rich want to place themselves at the center of the economy, but it’s the middle class that is the engine for growth. Don’t forget that.

Let’s talk politics quick. What my father is expressing is a classic example of what Engels would call “false consciousness.” Generally speaking, we would expect people to vote for their class interests, but often they don’t. Thomas Frank proposes that they are swayed by social issues. Steinbeck, proposes aspiration as the motivation (I have frequently invoked this as well). Other political scientists suggest that when material standards cease to become an issue, people vote symbolically (i.e. Bush is just like me!). But all of these arguments understate the extent to which the middle class is entirely unaware how misaligned the interests of the wealthy are with their interests. I find it hard to believe that prejudice against gays, aspiration and symbolism can explain why the middle class would forgo $19,000 in yearly income (how much more money the median family would have if incomes had grown proportionally over the last 30 years). That is, voters have not made rational choices, because they were deceived.

So we are back to the Marxist explanation: the central feature of all capitalist societies is obfuscating class interest and exploitation. As my mother said, “Sean, you should really tell people about this.” So I am. The rich have been screwing you. Your interests are not theirs. It’s as simple as that.

P.S. My ideas on history (and my Christianity) prevent me from being a full-on Marxist, but we really need to start understanding Marx as a classical, Enlightenment economist. This would make our public discussion of his ideas far less prone to the vulgarity * it descends to today.

*Classic sense