There is, or should be, a democratic element to capitalism — and an economic element to how we define democracy. After all, oligarchy does have an economic element to it; in fact, it is explicitly economic. Oligarchy is the rule of the few, and these few have been understood since Aristotle’s time to be men of wealth, property, nobility, what have you. But somehow, as the definition of democracy has been handed down to us over the years, the word has come to mean the existence and exercise of a few basic rights and principles. The people — the “demos” — are imbued with no particular economic characteristic. This is wrong. Our definition of democracy needs to change. Democracy can’t flourish in a context of grotesque concentration of wealth. This idea is neither new nor radical nor alien. It is old, mainstream and as American as Thomas Jefferson.
So, yes, democracy and the kind of economic inequality we’ve seen in this country in recent decades don’t mix. Some will rejoin that many nations even more unequal than ours are still democracies — South Africa, Brazil, India. But are those the models to which the United States of America should aspire? A number of scholars have made these arguments in recent years, notably Ganesh Sitaraman in his book “The Crisis of the Middle-Class Constitution.” All that work has been vitally important. But now that some politicians are saying it, we can finally have the broad national conversation we’ve desperately needed for years. You don’t have to be a supporter of either of those candidates or their plans to get behind the general idea that great concentration of wealth is undemocratic. Policies built around this idea will not turn America into the Soviet Union or, in the au courant formulation, Venezuela. They will make it the nation the founders intended.
Some plain facts and hard truths: The top one percent of Americans own 40 percent of the country’s wealth and 90 percent of its income. When adjusted for inflation, the average income in the United States has remained approximately the same for the last 40 years. By comparison, over the last two decades the richest Americans have seen their income increase by three times, relative to those of the poorest Americans. If adjusted for economic productivity, the federal minimum wage in America would actually be at least $20 an hour, instead of the $7.25 it is at present. An increasingly large number of Americans are unable to retire and will have to work until they die. Roughly six in 10 Americans don’t even have $1,000 they could use for an emergency. Twenty-six individuals have as much wealth as the bottom half of the world’s population. This is a global plutocracy.
I did not predict Donald Trump per se. But for the last 25 years I have worried with increasing vehemence about the widening divide in this country between a majority that is losing economic security and social standing and a small minority gaining most of the benefits of economic growth. When I was secretary of labor in the 1990s I began to talk about the rise of a series of demagogues who would use fear and anxiety and then channel it towards their targeted scapegoats such as immigrants, African Americans and other minorities. These demagogues would divide the country in order to enhance their power. There was a great fear which seems to have been realized with Donald Trump about the appeal of authoritarianism for many Americans as an alternative to democratic populism. I think it’s very important to emphasize that we are at an inflection point, and a very dangerous one, with great wealth at the top in a relatively few hands, This is incompatible with democracy. This is not the first time this has happened. Louis Brandeis, the great jurist, said in the 1920s, as the United States was coming out of the Gilded Age, “We can have democracy in this country or we can have wealth concentrated in the hands of a few, but we cannot have both.” America made a decision at the end of the Gilded Age to revive democracy and that we called, in hindsight, the Progressive Era and then The New Deal. The last 40 years has been a time of testing. Can we keep our democracy when the median wage has barely risen and a large portion of the gains from economic growth have gone to the top? I do not think America can keep its democracy if that trajectory continues over the next few decades.
To combat right-wing authoritarian populism there needs to be fundamental reform of our political and economic system. The two are intimately related. You cannot reform our political system until you reform the economy. And one of the deepest problems with the economy is that there are so many hidden upward pre-distributions from the poor and middle class to the wealthy that people do not see because they are buried in the new rules of the game. These structural inequalities are the laws and regulations that have been installed by wealthy interests such as big corporations and the very rich. The great irony today is we have a business class that has failed at the job of leadership of America in a spectacular and ultimately devastating way. The business leaders of the 1940s, 1950s and 1960s were not angels by any stretch of the imagination, but at least many of them tried to be corporate statesmen in the sense that they really did support policies that would help lift all boats. This new group of CEOs, of business leaders, are all greedy enablers of Donald Trump and the Republican Party. They will reap the whirlwind. They are sowing the seeds of terrible social dissent, discontent and ultimately their own undoing.
For one thing, the median wage would be substantially higher. By some estimates, instead of it being around $50,000, it would now be closer to $80,000. But a simple discussion of incomes is too simple and superficial an understanding of what Franklin D. Roosevelt was really talking about. If his vision had been followed through on, America would be a more compassionate society and a less stressed society. This is very important. The levels of stress right now in the United States because of harsh capitalism are wreaking great harm. This is manifesting itself not only in terms of ill health but also in the anger and frustrations that many people are feeling. But I want to get back to something that we were talking about a moment ago: Trump is really not the cause of all of this. Donald Trump is the culmination of the consequences of 40 years of a leadership class that failed to do its job and also a public that that has not been told the truth. If the United States and its leaders, citizens and culture do not change there are going to be Donald Trumps as far as the eye can see in the future. We are going to lose our democracy. I also think the very survival of species is at stake in terms of climate change and nuclear proliferation. One of the reasons that I teach is because I am of an age now where there’s very little that I can do directly to change the course of the country. But I want a new generation of young people to understand what’s at stake, because the neoliberal framework that became so dominant in their lifetimes is one of the reasons that the American public never understood the full truth about what has really transpired in this country.
The good news is that the official rate of unemployment is low, but the bad news is that we have a record number of people, as a percentage of the American work force, working part-time or in insecure jobs who would rather work full-time and have more job security. There are a large number of people who are working in jobs which they are overqualified for in terms of their education and experience. We’ve got many people who are too discouraged to even look for work. We still have a wage, for most people, that has barely kept up with inflation. It has moved upward slightly over the last several years. But with this level of unemployment one would expect much higher wages under normal circumstances. Beyond that, you have people who no longer have pension or health benefits with their jobs. You’ve got a great number of Americans who have no health insurance at all. Thirty million people are not even reached by extended Medicaid or the Affordable Care Act, and Trump is doing everything he can to take health insurance away from them.
Housing costs are soaring. More and more people are renting. Fewer and fewer people are buying homes. This is not a successful economy for most Americans. Now, in terms of the stock market and more conventional measures of where the economy is going, we are ripe for what Wall Street euphemistically calls a “correction,” one that is likely to be a substantial downturn. And the reason for the downturn has to do with the failure of what economists call “aggregate demand.” If people are not being paid enough, and most Americans are not, to buy up all of the goods and services that this increasingly productive economy is able to generate, and if export markets are deteriorating because of Trump’s policies and also because of a spreading worldwide slowdown, then there really is not enough demand to sop up what we can produce. The stock market has been artificially maintained through stock buybacks. That is about to come to an end. It cannot continue because there is just a limited amount of money for stock buybacks — and most of it came from the Trump tax cuts. And I haven’t even gotten to issues concerning the deficit or cumulative debt.
My hopes really do outweigh my fears. I’m basically optimistic about the future, notwithstanding everything I’ve said. I’m optimistic first because I am a student of history. I know that there are dark moments in American history. After the first Gilded Age we did repair our system considerably between 1901 and ultimately 1940. We are now in a second Gilded Age, and I think the pendulum will swing back accordingly. I’m also very optimistic about grassroots political movements. Donald Trump’s only positive legacy, I think, will be the revival of progressive politics at the grassroots all over this country. Many people are getting involved for the first time. Some people who got involved during the civil rights and anti-Vietnam War movements are now becoming re-involved and reactivated. The third thing that makes me optimistic is young people. They are idealistic and committed. They are dedicated to the fundamental principles of our economy and democracy in ways that are very powerful. I’ve been teaching for 40 years. I’ve never taught a generation of young people as committed to reforming the system as young people today.
Republicans are unhappy about public perceptions of their tax cut. What happened was simple: they paid lots of attention to the business tax cuts and lots of attention to the tax cuts for this rich, but not so much attention to the tax cuts for the working and middle classes. The middle classes, of course, pay the bulk of their federal income tax via withholding, and they don’t always notice small weekly changes. What they do notice is their tax refund at the end of the year. Long story short, the supposed party of the common man didn’t realize that. So when Trump’s Treasury Department changed the withholding schedules, they withheld less in hopes that people would notice that their paycheck was bigger. They didn’t. But the reduced withholding also meant that tax refunds would be smaller than usual. People did notice that. Thus the public perception that they got screwed by the tax cut. Republicans gave the working class (and the middle class) a temporary and minuscule tax cut while the rich got a big, permanent one. Then, because they don’t really understand the middle class at all, they futzed around with the withholding tables so that lots of people got smaller refunds. Then they wonder why ordinary people aren’t impressed. The answer is simple: it’s because they got close to nothing except a big surprise on tax day. Why would you expect them to be anything but resentful over that?
The flood of fiscal stimulus from the Republican tax cut bill is about to slow to a trickle. It’s been more than a year since the GOP passed its $1.5 trillion Tax Cuts and Jobs Act, which the White House and congressional leaders said would serve as a major boon to the economy, even promising it would pay for itself. (Most economists agree it won’t.) And now that it’s tax day, this is the first time Americans are seeing how the tax cuts played out for themselves, individually. Though the bill did cut taxes for most Americans, it disproportionately benefits corporations and the wealthy. The juice it was supposed to inject in the economy will likely soon run out, just in time for the presidential election year. The fiscal stimulus of the tax bill will likely continue this year, but once 2020 arrives, many economists say the short-term growth effects will probably run out. “It’s not done now,” Adam Looney, a senior fellow at the Brookings Institution and former Treasury Department staffer, told me. “But its effect will fade out relatively quickly.”
Goldman Sachs analysts said late last year in a note to clients that they expect the “positive growth effect” of a boost in federal spending and tax cuts under President Donald Trump’s administration would peak in the second half of 2018 and decline to “roughly neutral” by the end of 2019. The short-run effect of tax cuts is generally easy to spot — it means additional dollars in people’s and corporations’ pockets, increased economic activity, and more aggregate demand. It makes sense that these effects run out quickly: If you have an additional $100 this year and you go out and spend it, your spending changes from one year to the next. If you spend that same $100 again the next year, but it’s not new, then your spending hasn’t changed. The Congressional Budget Office estimated that GDP growth, spurred by fiscal stimulus including the tax cuts and increased government spending, would be 3.1 percent in 2018. (According to the Bureau of Economic Analysis, it wound up at 2.9 percent.) The CBO then projects that GDP growth decline to 2.3 percent in 2019 as business investment and government purchases slow. It then projects that GDP growth will slow further to average 1.7 percent each year from 2020 through 2023 and 1.8 percent annually from 2024 to 2029. “Generally, we think of stimulus as sort of a rate of change concept relative to last year,” Joe Rosenberg, a senior research associate at the Urban-Brookings Tax Policy Center, told me. “You can think of the tax cut as a sort of one-time boost to people’s disposable incomes.”
The argument for the tax bill’s long-term effects is that over time, as businesses and consumers have more money to spend, that will gradually lead to a better economy. Those who buy into such supply-side economic arguments, sometimes called trickle-down economics, say the tax cuts, especially at the top, will eventually make their way down. “The story from the tax cut advocates for this bill and many prior bills has generally been one about the so-called supply-side effect of the tax cuts so that the tax cuts will encourage people to save and business to invest, and that will grow the economy over time,” Rosenberg said. But historically, there’s not a ton of evidence that that’s worked — take, for example, the Bush tax cuts, which increased the deficit and debt and contributed to increased income inequality. And then came the Great Recession. As Bruce Bartlett, a domestic policy adviser to President Ronald Reagan, explained in the Washington Post in 2017, the tax cuts in the early 1980s did have a positive effect on the economy, but aggregate real GDP growth was higher in the 1970s than in that decade, and falling interest rates and defense and highway construction projects contributed to the ’80s growth as well. When taxes went up under the Clinton administration in the 1990s, growth went up, and after the Bush tax cuts, it went down.
Corporate tax revenues for the government are down one-third from last year, due in large part to the tax bill, which reduced the corporate tax rate to 21 percent from 35 percent. For the tax bill to spur major economic growth, corporations would have to pass on the savings to workers and make big increases in their investments. But that’s not really what’s happening, at least not yet. As Jim Tankersley and Matt Phillips outlined for the New York Times, it’s not yet clear what exactly companies are doing with all their newfound cash. Capital spending picked up early this year, but business investment has been lukewarm. Stock buybacks that benefit investors and corporate executives are on the rise, and there have been a number of one-time bonus announcements, but wage growth hasn’t really picked up. “Over the next couple of years, investment in wage growth and overall output will be ever so slightly higher than it otherwise would have been as the economy adjusts to the new tax law,” Kyle Pomerleau, an economist at the center-right Tax Foundation, said. But that probably isn’t going to translate to the 3 to 4 percent sustained economic growth rate the Trump administration keeps promising. Nor does it mean, as some Republicans have contended, that the deficit-increasing tax cuts will pay for themselves. “Economists all know the answer to that already, and the answer is no,” Looney said.
The way the Trump tax cuts were set up are totally absurd. Some of the wealthiest companies in the world are avoiding paying taxes, as seen in this article from nytimes.com/2019/04/15/
Amazon. Delta Air Lines. Chevron. IBM. General Motors. Molson Coors. Eli Lilly. What do these companies have in common? They paid no federal taxes last year. Thanks to President Trump’s 2017 tax law, the number of Fortune 500 companies that pay no federal taxes roughly doubled last year, to 60, according to an analysis by the Institute on Taxation and Economic Policy, a research group. Some of them effectively paid negative taxes, because they received a refund. The number of companies paying no taxes has risen for two main reasons. First, the Trump tax law expanded some corporate tax breaks, such as the one for the purchase of machinery and vehicles. Second, the law reduced the top-line corporate tax rate, which means that some companies now have a low enough tax bill that they can wipe it out entirely with tax breaks. Altogether, the law led to a 31 percent decline in corporate-tax revenue last year. That decline has helped cause an increase in the deficit. As the law professors Rebecca Kysar and Linda Sugin have written, the Trump tax cut is financed “on the backs of future generations.”
I think some decline in the top-line corporate-tax rate — which was higher than in most other countries — was justified. But the Trump tax cut didn’t go about it in the right way. It cut the rate too steeply and kept, or expanded, too many tax breaks. A better bill would have paired a more gentle decline in the rate with a tougher approach to tax breaks, essentially trying to level the playing field among companies. Even before the law change, American companies weren’t actually paying very much in taxes. “At a time when the public’s confidence in our elected officials and our institutions is especially low, the specter of big corporations avoiding all income taxes on billions in profits sends a strong and corrosive signal to Americans: that the tax system is stacked against them, in favor of corporations and the wealthiest Americans,” writes Matthew Gardner, the lead author of the Institute on Taxation report.
The trend line of human progress is unequivocally to the good, yet we still face serious challenges and deep divisions. People are disconnected from economic growth, and inequality has increased. For the first time in generations, life expectancy in the US has reversed course, fueled by the opioid crisis and rising suicide rates. These indicators should set alarm bells ringing not just in the halls of government and neighborhood meeting spots. They should be ringing in corporate boardrooms as well. Business cannot succeed in the face of challenges in our communities. On the contrary, long-term business success depends on community success. When everyone has a fair shot at participating in and sharing in the rewards of growth, the economy will be stronger and society more cohesive. Making this happen requires business leaders to buck short-termism that too often drives the markets. Instead, we must take the long view.
At a time when hard work isn’t paying off for too many Americans, apprenticeship partnerships are the kinds of innovative programs we need to show students all the available career options, and help put them on a path toward good-paying jobs. Apprenticeships allow workers to get real world experience, figure out where their talents lie, and take advantage of opportunities in manufacturing and the trades. That’s why I introduced bipartisan legislation to make it easier for unions, businesses, and education organizations to start more of these programs around the country, and get more resources to the existing programs that we know are successful. My bill, the Apprenticeship Hubs Across America Act, would create new Apprenticeship Hubs, that will work with employers to develop apprenticeship programs, promote apprenticeships to young people, and provide guidance and mentorship to apprentices during their programs. It would also create a national network of these hubs through the Department of Labor, to share ideas and best-practices, and provide resources to the most successful programs.
Many employers lack familiarity with the process of setting up and managing registered apprenticeship programs. My bill would help fix that by providing grants to workforce intermediaries, that will become Apprenticeship Hubs. It would also create a national network of these hubs through the Department of Labor, to share ideas and best-practices, and provide resources to the most successful programs. Right now, too many students don’t realize that apprenticeships can be a way to get their foot in the door, and train for good jobs where they can build careers – particularly if they have a union card. According to the Department of Labor (DOL), the average wage for a capable worker who completes an apprenticeship is $50,000 a year, and apprentices who complete their program earn approximately $300,000 more over the course of their career than non-apprenticeship workers. Apprenticeship hubs will make it easier for high schoolers to take the next step toward securing a good-paying, skilled job, playing an important role in building and maintaining our economy and our middle class.
And here’s part of a letter from a local U.S. representative running for president:
I’ve heard the same thing over and over again: Americans are sick and tired. Sick because they don’t have access to affordable health care, prescription drugs or healthy food. Tired of the stress and anxiety that comes with not being able to make ends meet. The truth is that most Americans are living one paycheck or one health crisis away from disaster. That’s unacceptable.