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by Brian T. Lynch, MSW
The first time I saw a version of the graph below, depicting how worker compensation suddenly diverged from national wealth, I was horrified. My statistical training caused me to see right away that something took place in the mid-1970’s to stifle the rise of worker compensation. And the gap between wages and wealth keeps growing every years. I have written several articles about it since, but the implications have still not penetrated our public awareness.
The most recent appearance of this graph was from a report by the Economic Policy Institute confirming some earlier findings of the huge disconnect between worker productivity and worker compensation. I wrote an article summarizing their findings and received a lengthy comment that read, in part:
“Although I agree that the average wage is trending lower than productivity growth, I do not attribute it all to the greed at the top… The question I have is that how much of the deviation from the past are due to changes in society, where the average person has less room to negotiate a better price?”
The commentator went on to suggest the following reasons to explain the growing wage-to-wealth gap:
1. The trend of the two paycheck family led to a weakness in the labor force’s ability or need to demand higher compensation.
2. Expanded social service programs and income eligibility caps aid to the working poor created incentives for workers to keep their compensation low so they qualify for government assistance.
3. Employer fixed benefit packages reduced competition for the affordable healthcare, driving up insurance costs since individuals were not “shopping around” for competitive bargains.
Let’s begin with the last point; fixed healthcare benefits. If these were anti-competitive purchases by employers, the rise in employer costs for these programs would correspondingly raise, not lower, hourly worker benefits. The more an employer pays for employee health insurance, the higher the wage compensation is per worker.
Healthcare costs have risen faster than inflation. The reasons for this are many, but the topic is too broad to address here except to say that higher insurance costs led many employers to drop healthcare coverage for their employees. This is a factor contributing to the lower growth in wage compensation. Note, however, that the flood of individuals entering the private health insurance market corresponds with the period of high rising premiums, not lower rates. The collective bargaining leverage of large corporations for competitive health insurance bids was actually a constraining factor on policy costs.
1. The trend of the two paycheck family led to a weakness in the labor force’s ability or need to demand higher compensation.
To the main point, the impact of two paycheck families on wage compensation: Is there evidence that the gradual transition to two paycheck families contributed to lower hourly wage compensation? I believe the graph above provides the answer.
First, the wage/wealth graph above represents actual, verifiable economic data collected over a span of seven decades. It is not a trend graph, but you can easily imagine superimposed trend lines on it. The first would be a linear line rising steadily upward and to the right representing hourly Gross National Product (GDP). This is a measure of our nations’ wealth and it has been steadily growing.
The second trend line, representing hourly wage compensation, would rise perfectly in step with GDP from 1947 to 1973 (which is also the period of rapid expansion of the American middle class). Then it bends sharply (if somewhat erratically) over a seven year period before settling back into to a straight, but much shallower trend line.
Superimposing a trend line on worker compensation data reveals that there was a brief transition period from 1973 to 1980 during which the growth rate of worker compensation radically changed. The gap between new wealth and wage compensation has grows wider every year since.
What does this mean? It means the social forces that altered wage compensation began abruptly and remained active over a brief period of seven to eight years. The social forces created a persistent structural change in America’s hourly wage compensation that remains in effect today. It means that long term social trends don’t account for this structural change because they don’t fit the data.
Long-term trends present as long slow arches rather than sudden bends in a trend line. This means that the social actions that permanently altered the wage and productivity balance happened quickly and none of the major social trends happening before or since the transition period have had much impact on wage compensation.
The hypothesis that this change was the result of the rise of two paycheck families doesn’t fit this pattern. Woman entering the workforce would have had to started abruptly in 1973 and end by 1981. Of course we know that woman were entering the workforce much earlier and the trend wasn’t complete by 1981. It is also difficult to imagine how this phenomenon would actually cause a persistent structural change in worker compensation over the decades.
The relatively brief transition, represented in this graph, also rules out other long term trends that are often cited by economists as reasons for lower wage compensation. For example, it’s often said that globalization of our economy accounts for the wage/GDP disparity. It is true that globalization affects employment rates and puts downward pressure on American worker incomes, but the trend itself is also a longer, slower process that doesn’t fit the pattern. Even the process of shipping business operations overseas took place over a longer period of time. None of the explanations offered by most economists seem to fit the narrow window in which hourly GDP and hourly wage compensation diverged.
Seven years is a short period of time to bring about such a persistent structural change of this magnitude. Something big must have been happening at the time. What was it?
Consider what was happening in the 1970’s. This was a hyperactive period for Nixon era conservatives which gave rise to the new conservative movement, also known as the Neo Con’s. They laid the groundwork that swept Ronald Reagan into office in the 1980.
This was a time of rapid formation of organized business associations and industry trade groups. This was unprecedented in our history. It was the business answer to the growing influence of organized labor. These associations and trade groups pooled the considerable resources of big business to create the powerful business lobby we have today. They embarked on a massive anti-union marketing blitz to demonize unions and turn public sentiment against them. In 1973 the organized muscle of the newly formed corporate lobbyists got congress to pass legislation creating political action committees (PACs) which gave big business a means to funnel large sums of money into candidates political campaigns.
At the same time, the coordinated collision of big business, with a nod from business funded politicians, weakened the effectiveness of collective bargaining. Businesses everywhere were emboldened to end the practice of sharing their profits (wealth) with their employees.
In a span of less than a decade nearly all productivity raises ended for most Americans. All the new wealth (profits) generated since then have gone to top executives and wealthy business investors. The “raises” most employees received since this structural changes were merely cost of living adjustments.
Adjusted for inflation, most American families are making today what their parents family made decades ago, yet the nation’s wealth has more than doubled. The median income of a family of four today is around $51,000 per year. It would be over $100,000 per year if wage compensation had continued to rise proportionally with the wealth we produce.
2. Expanded social service programs and income eligibility caps aid to the working poor created incentives for workers to keep their compensation low so they qualify for government assistance.
Regarding the second point about (#2), expanded social services and income eligibility caps creating a disincentive to work: I have addressed this topic in previous articles. This disparaging of social supports for the economically disadvantaged echoes a frequent conservative talking point. It goes by many names, such as the “welfare state” or the “nanny state. ” It promotes the idea that there is a giant dependency on social welfare programs.
But this attack on working families distracts from the fact that a growing number of people require government aid to the working poor to maintain basic stability. Their plight is a direct result of lower worker compensation caused by premeditated structural changes in the 1970’s. It hides the fact that subsidized assistance to working families allows corporations to have lower labor costs and higher profits. (A government supported labor force is a hidden corporate subsidy.) It dismisses the power of higher wages as a motivation for people to work hard and inspire hope for a better life. It obscures the fact that many companies have found ways to exploit the poor to profit off taxpayer subsidies. Most disturbingly, it blames this suppressed wage compensation on its economic victims.
For a fuller explanation of lower wages on social services, please read “Making the Case for a Living Wage.” http://aseyeseesit.blogspot.com/2012/07/making-case-for-living-wage.html
by Brian T. Lynch, MSW
The growing gap between the economy on Main Street and Wall Street, a declining standard of living, the shrinking middle class, the rise in the need for government subsidized supplemental income and social services for so many, the sense that our children won’t be better off than we are today, all of this has a common origin. They are all connected! They are all the result of wage stagnation (or suppression as I see it.)
In the period of just a few short years, beginning in 1973, employers stopped giving workers productivity raises. Since then, almost all the raises workers have received were merely inflation adjustments, not rewards for their growing productivity. All those rewards suddenly went to those at the top. The effects of this on the economy are compounded over time. Forty years of this nonsense has brought us most of the economic ills we experience today.
The fact that “growing the economy” no longer results in rising worker compensation has been lost on politicians in both political parties. In fact, almost every policy initiative to “grow the economy” has made matters worse. It has often meant slashing taxes for the wealthy (trickle down theory), granting tax breaks for big businesses, and creating tax loopholes for the “job creators” so they can do their thing. Well, their thing is to get substantially wealthier. Almost all new wealth has gone to the top while the wealthy hide more and more of their assets in tax havens. State and local governments can hardly manage to patch up the potholes on our streets because of the combination of tax breaks for businesses and subsidies for the expanding numbers of working poor families.
The Economic Policy Institute has released yet another report on why most of us are not feeling the love from the Wall Street economy. I have take liberties with their findings to condense them a bit so their impact is clearer.
The Economic Policy Institute has released yet another report on why most of us are not feeling the love from the Wall Street economy. I have take liberties with their findings to condense them a bit so their impact is clearer. For the full report, go to:
Understanding the Historic Divergence Between Productivity and a Typical Worker’s PayWhy It Matters and Why It’s Real
Here is my summary of their summary of findings:
- From the end of World War II until the mid-70’s, inflation-adjusted hourly wages and benefits rose in step with increases in our growing hourly GDP, which measures our economy-wide productivity. This parity between wages and productivity created the middle class.
- Since around 1973, hourly compensation has not risen with productivity grown. In fact it almost stopped very abruptly. Net productivity grew 72% between 1973 and 2014 while inflation-adjusted hourly compensation for most of us rose just 8.7%.
- America’s Net productivity grew 1.33%annually between 1973 and 2014 while hourly worker compensation grew at just 0.20%. Since 2000, the gap between productivity and pay has risen even faster ( 21.6% from 2000 to 2014 vs. just 1.8 % rise in inflation-adjusted compensation).
- Since 2000, more than 80 % of the gap between a typical worker’s pay growth and overall net productivity growth has been driven by rising inequality. Between 1973 and 2014, rising inequality explains over two-thirds of the gap between productivity and worker compensation.
- If the hourly pay of typical American workers had kept pace with rising productivity since the 1970’s, there would have been no rise in income inequality during that period.
- Our rising productivity in recent decades provided the potential for substantial growth in wages for most American workers but this new wealth went instead to the riches segment of society.
- Policies to encourage wage growth must not only encourage productivity growth (the “we must grow our economy” argument) but also restore the link between economic growth wage compensation. Just growing the economy by itself doesn’t fix the economy for most working Americans.
Finally, economic evidence shows that the rising gap between productivity and pay is unrelated to the typical worker’s individual productivity, which has also been rising.
For the full report please go to: http://www.epi.org/publication/understanding-the-historic-divergence-between-productivity-and-a-typical-workers-pay-why-it-matters-and-why-its-real/?utm_source=Economic+Policy+Institute&utm_campaign=019280809d-EPI_News_09_04_159_4_2015&utm_medium=email&utm_term=0_e7c5826c50-019280809d-57319413#introduction-and-key-findings
by Brian T. Lynch, MSW
The impact on the economy of stagnant wages is ever slower consumption of goods and services over time. There isn’t as much money to buy things. This slower rate of consumption suppresses demand. Lower demand means fewer jobs and even lower wages for the rest of us. This is the cycle were we find ourselves today.
The consumption of goods produces the profits from with owners of capital collect returns on their investments. Lower demand due to suppressed wages would normally also lower returns on capital investments but for the factors that have kept consumption afloat. Now there are no hours left in a day, fewer household members available to work, no more capacity to borrow against future earnings. Now the impact of low wages has come home to roost and lower sales means less profit to be made.
Before the 1970’s this situation would right itself when owners shared a portion of their wealth by offering productivity raises to reward their workers. Productivity wages are based on growing productivity and are separate and above cost of living increases. Productivity raises, along with cost of living adjustments, allowed the labor/consumers to increase spending and boost demand. Increased demand would spur on manufacturing and stimulate the whole economy.
But today’s billionaires have found another way to profit without sharing their wealth with wage earning consumers. They spotted the growing ownership stake of many in the middle class and created an opportunity to take it all back. It is hard for most of us to see in our lifetime, but this is the first time in history of the world that the middle class (upper-middle mostly) has accumulated a significant stake in capital ownership. Many of us have retirement accounts, money market funds, etc. People in the upper-middle class, doctors, lawyers, middle-managers etc., have become mini-investment capitalists. Prior to the vast destruction of property caused by the world wars in the last century, wealth was concentrated at the top as is happening again today. Middle class gains in the 20th Century directly correspond to capital losses by the wealthiest owners during the two world wars.
Billionaire capitalists, the “true heirs” to wealth ownership, have responded to middle-class ownership of capital by creating a massive financial investment casino filled with elaborate new investment vehicles. The object is to entice new wealth owners to play in the billionaire’s casinos. Mortgage backed securities and swaps are just two small examples that nearly bankrupted the economy in 2008.
These new and incomprehensible investment products has spawned a whole new class of hucksters, like Bernie Madoff, who use these bewildering new instruments to create slick ponzi schemes. But the bulk of these new investment opportunities are just a big casino games in which the house (billionaire owners) always wins. Billionaires are quickly siphoning away middle class ownership stakes in capital through high finance games of chance. In this way they can boost returns on investments and entertain themselves without sharing their wealth through higher wages.
Because these billionaire owners, who make up less than .01% of the population, control the investment odds, they are sure to win back all the capital they lost in the war years of the last century. Middle class gains in the 20th Century correspond to capital losses by the wealthiest owners during the two world wars. This now explains why the stock market and investment economy seem to be booming while the economy on Main Street slumps. Billionaire capitalists don’t have to share wealth to make wealth like they use to. There are enough small investors with an ownership stake willing to gamble what little they have in this new investment casino to keep billionaire fortunes growing.
If you, the reader, are still with me at this point let me assure you that the geometrically rising gains by the wealthiest owners of capital are not an inevitability. There are difficult but concrete steps we can take to bring capitalism back into balance for everyone. A discussion of these solutions does require a much deeper understanding of problems that I can provide here. I firmly believe it is in our best interest to arm ourselves with a much better understanding of the forces creating our two economies; Forces that are threatening our democratic institutions. For a fuller understanding I recommend Thomas Piketty’s excellent book, Capitalism in the 21st Century. I encourage you to strike up conversations with others and share your thoughts and questions.
The cartoon below is from the great editorial cartoonist Stuart Carlson. It highlights with humor a very serious global economic condition, growing wealth inequality.
http://www.gocomics.com/stuartcarlson/2014/06/20#.U9Zns_ldXfJ (Go and enjoy his other cartoons.)
Allow me to breakdown the math for you. These figures work out to an average of $486 per poor person vs. $20 billion per rich person. This is not a measure of income but a measure of wealth, or capital.
Another important math fact from this illustration: If you have $20 billion in capital and earn an average return on investments of 4% a year, and if you lavishly spend $1 million per month on your lifestyle, at the end of 50 years you will still have $140 billion left for your children to inherit. That’s right, if you have seven children they would each get close to the 20 billion that you started out with.
This is the crisis of capital that we face. This fact is among the findings of economist Thomas Piketty in his recent book, Capital in the Twenty-First Century. Within just a few generations almost all the wealth on the planet will be handed down from parents to children. Almost no new fortunes will be made through the earnings of those who have to work for a living. We will effectively return to a feudal system even here in the United States and abroad. The phenomenon is global. The quicker national and global population stabilize or decline the faster wealth will concentrate among the wealthy.
All we have to do to return to a feudal society is… do nothing.
Someone on facebook asked me, “Is it really the zero-sum game that these breakdowns of wealth distribution always seem to imply?” Good question! Is it the case that the growing wealth of the wealthy must come at the expense of growing poverty Or, doesn’t the growth of capital lift all ships?
When you look at national and global income-to-capital averages you see what looks like fairly stable ratios. Growing capital wealth and growth in income seem to balance. But look a littler closer and you see that more of the population falls into poverty as the value of capital grows at compounded rates. So yes, there is more national income, but there is an ever larger percentage of income coming from capital investments and going to the wealthy. As capital becomes the main source of income, the real earnings of wage earners stretches and collapses at the lower end of the economic scale. For the middle class, it is like being caught between the gravitational fields of two black holes… one created by poverty and the other by capital wealth
by Brian T. Lynch, MSW
Decades of frozen wages relative to our expanding wealth is the root cause of many economic problems. More people falling into poverty, a shrinking middle class, declining retirement savings, increased welfare spending, higher unemployment, more aid to working families, declining government tax revenues, diminished funding for Social Security and Medicare, a sluggish economy (despite a record high stock market), slow job growth and heighten social tensions along the traditional fault lines of race, ethnicity and gender are among the many issues influenced by decades of wage stagnation.
Beginning in the late1970’s most American workers received only cost of living adjustments in their paychecks while their real earnings gradually diminished each year. Employers increased hourly wages to keep pace with inflation, but they suddenly stopped raising wages to reward workers for their productivity. Earned income has declined for most Americans as a percentage of our gross domestic product (GDP) This amounts to a dramatic and intentional redistribution of new wealth over the last 40 years. Nearly all this new wealth has gone to the rich and powerful.
The visual evidence of wage stagnation relative to hourly GDP is apparent in one powerful graph (below). You may have this it before.
The effects of wage stagnation on our economy have been gradual and cumulative. Its impacts don’t raise red flags from one year to the next, but the cumulative effects are obvious. The trending rise in income inequality, for example, was missed entirely for 25 years, and then it still took another decade for it to catch the public’s attention.
According to USDA data on the real historical GDP and growth rates[i], the U.S. economy grew by $368 trillion between 1976 and 2013. That is a 109.4% rise in national wealth, more than a doubling of the national economy. Almost none of that wealth was shared with wage earners. If hourly wages continued to grow in proportion to hourly GDP, as it had for decades prior to the mid-70’s, the current median family income today would be close to $100,000 a year instead of the current $51,017 per year.[ii]
Think about that for a moment, and about all the implications for wage based taxes and payroll deductions. For simplicity sake, let’s say wages would have double if the workforce received productivity raises. That would significantly reduce the number of families currently eligible for taxpayer subsidies such as SNAP (food stamps), housing assistance, daycare and the like. At the same time the workforce would be generating much more income tax revenue.
Consider next the impact wage stagnation has had on payroll deductions. Social Security and Medicare premiums have not financially benefited from the growing economy. Double current wages and you double current revenues for these programs as well. Moreover, the economy has grown at an annual rate of 2.9% since 1976. If Social Security and Medicare had benefited from this new annual wealth, the effect on current revenue projections would be profound. We would not be looking at a projected shortfall any time in the future.
The impact of wage stagnation on consumer spending is perhaps the most insidious problem. While worker wages have stagnated, the production of goods and services has grown. How is that possible? Some of this production is sold in foreign markets, but domestic markets are still primary. And it is here where economic theories have done a disservice.
A generation of economists and business leaders have treated consumers and workers as if they were not one and the same. This has fractured how we look at the economy and given rise to the notion that labor is just another business commodity. It disguises the fact that labors wages fuel consumer spending. Wages help drive the whole economy while wage stagnation reduces consumption over time.
To overcome this effect we have seen the need for mother’s to enter the workforce in mass, and for banks to invent credit cards to bolster consumer spending. These and other creative measures can no longer forestall the decline in worker spending. So while the financial markets ride the tide of America’s growing wealth, the fortunes of those who have been cut off from that new wealth continue to slip beneath the waves.
As for social tensions among different racial, ethnic and gender groups, the effect of stagnant wages relative to the nation’s growing wealth creates a lifeboat mentality and zero sum thinking. For the first time in many generations parents are worried that their children will have less in life than they had. When the whole pie is shrinking a bigger slice by one person means a smaller piece for others. This thinking exists because for over 95% of wage earners the economic pie hasn’t grown in 40 years.
You may not be ready to accept chronic wage stagnation as “the syndrome” underlying our economic woes, but it’s also true from my experience that having solutions (or “treatment options”) at hand often makes it easier to identifying the problems they resolve. With that in mind, I want to offer some solutions to America’s low wage conundrum.
One direct approach to raising worker wages is the one currently being discussed in the public dialogue, raising the minimum wage. This benefits the lowest paid workers and also puts pressure on employers to increase pay for other lower wage earners. The current target of $10.10 per hour would still leave many families at or below the poverty line. Workers making the new minimum wage would still be eligible for some public assistance for the working poor. While passing a minimum wage law is at least possible, this option is not a systemic solution to wage stagnation. Even index the minimum wage to inflation would not compensate for declining wages relative to GDP growth.
Another direct approach to ending wage stagnation is to pass a living wage law. This would set the minimum wage at a level that would allow everyone working full-time to be financial independent from government assistance, including subsidized health care. A living wage law could be indexed to the local cost of living where a person is employed. This is idea because it takes into account local economic conditions which are determined by market forces rather than government edict. But passing a living wage law in the current political climate is unlikely.
There are other ways of encouraging wage growth that don’t involve direct wage regulation. One idea would require the federal government to recoup, through business income tax rebates, the cost of taxpayer supported aid to working families from profitable businesses that pay employees less than a living wage. Employee wages are easily identified through individual tax returns. Eligibility for taxpayer supported subsidies are relatively easy to estimate as well, so recouping public funding to support a company’s workforce is a practical possibility. A portion of the recovered money could be paid into Social Security and Medicare to make up for lost revenue due to substandard wages.
A welfare cost recovery plan could gain popular support given the growing public resentment towards taxpayer funded social programs. At least 40% of all full-time employees in America currently require some form of taxpayer assistance to financially survive. More importantly, this plan places the burden of supporting the workforce back on profitable businesses where the responsibility lies.
Another solution has been suggested by former US Labor Secretary, Robert Reich, and others. They support proposed legislation, SB 1372, that sets corporate taxes according to the ratio of CEO pay to the pay of the company’s typical worker. Corporations with low pay ratios get a tax break. Those with high ratios get a tax increase. This would effectively index worker wages to CEO compensation in a carrot and stick approach to corporate taxes. The details and merits of this approach is outlined elsewhere.[iii]
Do U.S. businesses have the financial capacity to offer higher wages to their workers? I would like to answer that question with another graph that you may also have seen before.
Credit: Blue Point Trading http://www.blue-point-trading.com/blue-point-trading-market-view-june-07-2012
There is a clock ticking somewhere in the background on this issue. There is a point somewhere in the future where it will be too late to fix wage stagnation through the normal democratic processes. History has proven this to be true. We are not at that point now, but we are past the point treating wage stagnation earnestly.
[ii] As of 2013 the median family income of $51,017 x GDP growth of 109.4% = $104,796 per year
By Brian T. Lynch, MSW
How should sensible people respond to divisive attacks on the poor and vulnerable? Should we begin making similar distinctions between the worthy and unworthy rich? Should we affirm those who earned their great wealth and provide social benefit but rescind all advantages given to those who use their inherited wealth to squeeze the people and their government for still more?
It should be obvious that social polarity is not between Democrat and Republican, or between liberal and conservative, but rather where it has always derived, between rich and poor.
GOP Senate Candidate: Republicans Must Turn Poor against Each Other (Video)
Watch N.C. House Speaker Thom Tillis explain: .“What we have to do is find a way to divide and conquer the people who are on assistance,”
By Brian T. Lynch, MSW
Before I had a blog, before the Wall Street “privateers of equity” crashed the economy, and long before the Occupy movement occupied anything, there were seemingly crazy folks like me trying to sound the alarm on our economy. I wrote Letters to the Editor in local newspapers and sent copies to every newspapers across the country for which I had an email addresses. What disturbed me back then was that no one in the media, or even in academia, seemed to be paying much attention. Event have consequences, and the crash in 2008 caught us flat footed.
It is unknown how social problems that exist for years suddenly become public issues to be solved. No one knows what triggers these tipping points. Even when a single individual is clearly associated with a change or a movement or a discovery (Einstein, for example), that person is responding to what ever came before. Sometime it is the consequential event rather than any alarm bells that finally get our attention. The firmament that precedes public cognition before a disastrous event remains a mystery to me.
My wife just came across one of my old letters. What startled me is that I could have written this same letter today, except the statistics are far worse now.
Here below is my Daily Record Letter to the Editor published on Christmas Eve, 2006.
by Brian T. Lynch
Martin Gilens of Princeton University, and Benjamin I. Page of Northwestern University , conducted a multivariate analysis of 1,779 policy issues in the United States, the results of which confirmed that the United States is no longer a Majoritarian Electoral Democracy.
In other words, we have lost majority rule. The United States has become an oligarchy. Business interests and the interests of the wealthy elite have overwhelming dominance in influencing United States policy and laws. You can read their conclusions below and read this newly published study in full at this URL:
According to the authors, “Multivariate analysis indicates that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence. The results provide substantial support for theories of Economic Elite Domination and for theories of Biased Pluralism, but not for theories of Majoritarian Electoral Democracy or Majoritarian Pluralism.”
Of course, anyone paying attention to government policies versus the popular will of the electorate would already have drawn this conclusion. I recently posted a two part piece on this very subject a few months ago: http://j.mp/1bz7aO5
The Gilens and Page study opens by asking a critical question, who really rules? Are we, the people, the sovereigns of our nation, or have we become “largely powerless?” He begins to answer this by summarizing four different theoretical traditions recognized by scholars who study democratic governance.
The first of these theoretical traditions discussed is the Majoritarian Electoral Democracy, which is best “… encapsulated in Abraham Lincoln’s reference to government “of the people, by the people, for the people.” This tradition holds that laws and policies should reflect the views of the average voter, and that the positions of politicians seeking election should converge towards the center of the normal range of voter opinion. It is this view of democracy most often presented by major media outlets when covering our politics. More importantly, this is these are the outcomes most of us expect from our democracy.
The second tradition is the Economic Elite Domination tradition in which US policy making is dominated by those with high levels of wealth or income. Some scholars also include social status or position as part of this tradition. The economic elites often exercise their influence through foundations, think-tanks and “opinion shaping apparatus,” as well as to the lobbyists and politicians they finance.
Majoritarian pluralism is the third theoretical tradition that Gilens and Page discusse. This tradition analyzes politics through the lens of competing interest groups within the population. These groups may include political parties, organized interest groups, business firms or industry sector organizations. All things being equal, the struggle between diverse factions within the population should also produce policy outcomes that are at least compatible with civil majority opinions. But all things are not necessarily equal, leading to the fourth, related tradition called Biased Pluralism.
Biased pluralism entails policy outcomes that result from contending, but unrepresentative organized interest groups. These unrepresentative interest groups are generally made up of upper-class citizens with the power and influence to tilt policy towards the wishes of corporations, businesses and professional associations.So, after statistically comparing almost 2,000 policy outcomes against these four models of political influence in our democracy, what did the researchers find? In their own words:
“By directly pitting the predictions of ideal-type theories against each other within a single statistical model … we have been able to produce some striking findings. One is the nearly total failure of “median voter” and other Majoritarian Electoral Democracy theories. When the preferences of economic elites and the stands of organized interest groups are controlled for, the preferences of the average American appear to have only a minuscule, near-zero, statistically non-significant impact upon public policy.”
“Nor do organized interest groups substitute for direct citizen influence [snip]… Over-all, net interest group alignments are not significantly related to the preferences of average citizens.” The net alignments of the most influential, business oriented groups are negatively related to the average citizen’s wishes.”
“Furthermore, the preferences of economic elites… have far more independent impact upon policy change than the preferences of average citizens do.
What then has become of our democracy? It has been usurped by billionaires who directly fund candidates for public office, directly influence policy through lobbying and heavily fund public marketing campaigns to influence public opinion for their own advantage.
We have seen this before during the “Gilded Age” at the turn of the last Century. We found our voice a hundred years ago and we took back our democracy from the wealthy elite. Today they are smarter, richer and have more control over the media and government than they did back then, so the challenges we face to save civil democracy and regain majority rule won’t be easy. But history tells us that power is ultimately with the people. We must start by recognizing our situation and begin organizing ourselves to collectively act in our own best interest. We need to become, once again, a nation of citizens, not a nation of businesses and the rich.
We now know that the universe is filled with dark matter. This strange substance cannot be seen, heard, felt or touched, and doesn’t interact in any way with ordinary matter. Even so, its presence can be felt by its gravitational influence. It is the enormous amount of dark matter that causes galaxies to form and to spin as rapidly as they do.
While dark matter may ultimately be beneficial to the cosmos, “dark pools” in the financial markets doesn’t seem like a good idea. When large investors buy large blocks of stocks outside of public view, they do so to obtain a tactical advantage. The market effect of dark trading is that the real value of openly traded stocks is less certain. This is another example of how the playing field is tilted away from mom and pop investors and towards the rich and powerful.
WASHINGTON/NEW YORK (Reuters) – U.S. securities regulators are considering testing a proposed reform that could drive business to major…
Republican’s increase our public debt by lowering taxes on the wealthy, raising corporate welfare and starting wars. If you are surprised by this bar graph then you then you need to shop around for a more reliable news source.
Corporate Welfare Grows to $154 Billion even in Midst of Major Government Cuts
Editor’s Note: Even as the federal government executes major cutbacks, it’s giving huge subsidies in the form of tax breaks to industry, a fact legislators rarely acknowledge. The Boston Globe recently published a thorough and eye-popping report detailing the nature and extent of these breaks. We think it’s a must-read.
By Pete Marovich
First published in the Boston Globe
WASHINGTON — Lobbying for special tax treatment produced a spectacular return for Whirlpool Corp., courtesy of Congress and those who pay the bills, the American taxpayers.
By investing just $1.8 million over two years in payments for Washington lobbyists, Whirlpool secured the renewal of lucrative energy tax credits for making high-efficiency appliances that it estimates will be worth a combined $120 million for 2012 and 2013. Such breaks have helped the company keep its total tax expenses below zero in recent years.
The return on that lobbying investment: about 6,700 percent.
These are the sort of returns that have attracted growing swarms of corporate tax lobbyists to the Capitol over the last decade — the sorts of payoffs typically reserved for gamblers and gold miners. Even as Congress says it is digging for every penny of savings, lobbyists are anything but sequestered; they are ratcheting up their efforts to protect and even increase their clients’ tax breaks. [snip] http://reclaimdemocracy.org/corporate-welfare-tax-breaks-subsidies/
Here is how the rise of corporate welfare looks in my state of New Jersey, and note in particular how it has grown under Gov. Chris Christie: