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This Lies Behind Our Economic Boom and Political Bust

by Brian T. Lynch, MSW

Last year the wealthiest nation in the history of the world generated $8.7 trillion in new wealth, more than the next 10 countries combined. That works out to over $65,000 per household. How much of that worker generated new wealth did you receive in your pay raise last year? If your family income was $60,000 last year, and if you were rewarded with just 5% of the new wealth that you helped create, plus a cost of living adjustment to keep up with inflation, your family income today should be over $63,500? Is that true for most of you? Probably not, because that second bar graph on right suggests personal household income is not growing much.

Some people looking at this will say:
“Yea, rich people will get richer, but low unemployment and new manufacturing jobs will add a lot of wealth where there was none before. Right”?
That hasn’t been the case overall for the past 40 years. The great wealth creation last year isn’t a one-off event. It happens nearly every year. And every year since the mid-1970s workers do not receive any (or very little) share in the rising hourly GDP (New Wealth).

Prior to 1974, we all receive productivity raises nearly every year on top of any cost of living adjustments (a COLA, as it was called). Since then we stopped receiving productivity raises and lost public sector health coverage, pension plans, and other benefits. We have received cost of living raises since then, but productivity raises have been minimal. Therefore, while our wages keep up with inflation, they aren’t keeping up with new personal wealth. Put another way, our collective wages are a smaller and smaller percentage of our National GDP.

If wages continued keeping up with hourly GDP since 1974, the median household income today (fam of 4) would be over $115,000/year instead of nearly half that. The national GDP is nearly three times greater today than it was in 1974, yet inflation-adjusted have barely risen. These are uncontested facts. Chronic wage suppression (and I do believe this is deliberate) accounts for most of our economic ills today.

Imagine how much easier it would be to raise money for our schools and local services if everyone in town had twice the income they make now. How much money would we save on government aid to the working poor (daycare, housing, medical care, etc.) if everyone had twice the income and didn’t need financial subsidies? Imagine how the economy would be buzzing if everyone had lots more discretionary income to buy things, thus boosting the demand for production. The only downside is that the wealth of the richest 1% wouldn’t be growing quite as fast. The decline of the middle-class, the lack of good paying jobs, the increase in public assistance, the rise in taxes and decline of other government services are all symptoms of income inequality. The cycle of wealth accumulation followed by catastrophic wars and social collapse is a very old story with a many-centuries-old history.

Are you still with me, because this next part is important.

There has not been a big partisan difference on the issues of a fair distribution of wages or wealth. Both political parties remained silent on the subject for decades, until the 2014 election. Both parties talked about job growth, but not wage growth. Both talked about growing the economy but not about our shrinking pensions and benefits packages and stagnant wages. They talked about bolstering the middle-class but didn’t mention our growing poverty class for almost three decades.

Republican legislators (not most rank and file members) have been far more pro-corporate in pursuing the interests of the wealthy elite over time. Republican party elites also shamelessly pandered to value voters and the far-right fringe to win elections but never delivered on their promises. Main Street Republicans were used and abuse to the elite of their party could pursue the corporate donor interests.

On the other side of the aisle, Democratic Party leadership (not every legislator) also pandered to big corporations, to the rich and to their more liberal base while being complicit in their silence on income inequality and many other matters important to their voters. No one in government was addressing the shrinking middle-class or their shrinking wages relative to the size of the ever-growing US economy. No one was listening to any of us!

Hence, we had a political revolt in both parties during the 2014 elections. Rank and file members of both parties weren’t listening to each other either as powerful special interest, foreign and domestic, made sure we didn’t get together to compare notes. Donald Trump rose up among conservatives to shake things up in the GOP. Bernie Sanders rose up among liberals to shake up the Democratic establishment.

So here we are today, like opposing armies glaring at each other across the battlefield in a war we never wanted. Both sides have been ignored by our leaders. Both sides have been told the other side is the cause of our decline. Both sides have been given false reasons for our growing dissatisfaction. And yet the real reasons for this sluggish Main Street economy, which is slowly squeezing us into poverty, are reasons that we all share in common.

It is the failure of our politics to address the unfair distribution of wages and wealth. It is hundreds of policies that favor the profitability of big businesses over the best interests of our people. It is the corruption of special interests representing the ultra-wealthy and buying elections. We would all do far better if we could just lower our guard, put our less consequential differences aside for now and join in common cause to take charge of our economic well-being.
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