Who Stole the American Dream? A Q&A with Hedrick Smith

09/13/2012; Tula Connell


Pulitzer Prize-winning journalist and author Hedrick Smith joined us here today to discuss his new book, Who Stole the American Dream? Can We Get It Back? at an event sponsored by the AFL-CIO and the Economic Policy Institute (EPI).

In Who Stole the American Dream? Smith deploys his formidable investigative skills to trace how we got to a point where U.S. economic policy overwhelmingly favors the rich—and looks at whether it’s possible to undo the damage done to our working and middle class. Smith, known for his investigative journalism, is author of the national bestseller, The Power Game: How Washington Works. In 1971, as chief diplomatic correspondent for the New York Times, he was a member of the Pulitzer Prize-winning team that produced the Pentagon Papers series. We asked Smith a few questions about what he found in researching his new book.

Question: Many pundits and analysts recently have been noting the decline of the American dream. Most focus on the economic shifts caused by federal policy decisions, such as the role of corporations in pushing for tax law changes that benefit Big Business at the expense of working people. What sets your analysis apart?

Smith: There’s no question that the power shift in Washington, starting in the late 1970s that made corporate America the dominant influence with Congress, brought changes in the tax system and rolled back regulations to the advantage of corporate America, Wall Street and capital investors. What needs to be added, as I do, is that the middle class has been severely hurt by the change in the business ethos from a vision of stakeholder capitalism in the 1950s, 1960s and 1970s that saw it as the duty of CEOs to balance the interests of investors, workers, management and local communities to the New Economy ethos of “wedge economics” of the 1980s, 1990s and 2000s, which cut many average Americans out of their fair share of America’s growth and prosperity. Under “wedge economics,” corporate profits continued to rise along with the productivity of the American workforce, but average wages and salaries remained stagnant. Productivity rose roughly 80 percent from 1973 to 2011, but the hourly wages of the typical worker rose only 4 percent and, even adding in benefits, the increase was only 10 percent. What my analysis does is to focus on the shifting in business thinking and strategies as well as on the power shift in Washington and its policy impact.

Q.: You argue that unlike the 1960s and 1970s, Americans today feel politically powerless. What the reasons for this shift? How does the Occupy Wall Street movement fit into this analysis?

Smith: We had strong, powerful citizens’ movements in the 1960s and 1970s with real impact on policymakers in Washington—the civil rights movement, environmental movement, women’s movement, labor movement, consumer movement and the peace movement. But after the mid-1970s, those movements lost momentum. In part, some of those movements ran out of steam because they had been so successful in pushing Washington to adopt civil rights laws, environmental laws and consumer protection laws and to end the Vietnam War. But they also lost power and influence because business interests became so well organized and special interest lobbyists became so dominant in Washington that ordinary Americans lost faith in their ability to have a voice with policymakers. The Occupy movement was an attempt to reverse this trend and give voice to ordinary people. It succeeded in changing the national dialogue so that today, when people talk about the 1% and the 99%, everyone understands that this refers to the unfair and dangerous hyper-concentration of wealth and power in America today. But unlike those earlier movements, Occupy did not have a short list of clearly defined goals that could attract wider support and have an impact on Congress and the White House.

Q.:  What will it take to politically mobilize working- and middle-class Americans?

Smith:  It will take an effective organized people power, a broad-based movement built on a change in the public’s mindset—a sense that the current lopsided split in the nation’s economic gains is unfair to most Americans and that this is no longer tolerable. Plus, a willingness of ordinary people to literally put themselves on the line, to go out and protest in marches and sit-ins and talkathons in the same way that the civil rights, environmental and anti-war protests of the 1960s and 1970s brought people together to act for the common good. It will take organized people to offset the dominant power of organized money.

New Census Bureau Report: Working People Can’t Get Ahead

09/12/2012; Mike Hall

 Right-wing economic policies have failed working people.

Right-wing economic policies have failed working families. New U.S. Census Bureau figures show the share of income going to middle- and lower-middle-income households fell, while the share of income going to the top 5 percent went up 4.9 percent. The census report confirms the trend that the Economic Policy Institute shows in The State of Working America, 2012falling incomes and growing inequality. Instead of coddling the richest 1%, America needs to return to the principles of “prosperity economics” that have historically enabled economic security for all and a growing middle class.

AFL-CIO President Richard Trumka says:

A generation after Reagan and more than a decade after the Bush tax cuts to the wealthiest among us, the middle class is less and less secure. Median family household income fell again last year and remains 8.9 percent lower than its peak in 1999. The share of income going to middle- and lower-middle-income households continued its fall, while the share of income going to households in the top 5 percent continued to rise. The top 20 percent now get a record high 51.1 percent of America’s income, leaving less for the bottom 80 percent.

The one silver lining in the data, increasing health insurance coverage, would be endangered greatly by a Mitt Romney–Paul Ryan White House, Trumka added. The number of uninsured people fell because of the expansion of Medicare and especially Medicaid, a program that the Romney–Ryan budget targets for immediate and draconian cuts. The Romney–Ryan plan to repeal the Affordable Care Act would mean the immediate end of the provision enabling young adults to benefit from their parents’ coverage.

The number of Americans without health insurance decreased to 48.6 million last year from 50 million in 2010, and the rate of uninsured dropped to 15.7 percent from 16.3 percent during the same period, according to figures released this morning from the U.S. Census Bureau. It was the first time in the past 10 years that the rate of private health insurance did not decrease, census officials said.

Young adults—who, under the provisions of the Affordable care Act (that Mitt Romney wants to repeal), can now be included on their parents’ health insurance plans until 26—accounted for the largest drop in the uninsured population, dropping 2.2 percentage points.

The new figures show, “clear and unmistakable evidence of the current benefits of Obamacare and the need to move forward with the full implementation of the law in 2014,” said Families USA.

But the figures also show the lingering effects of the slow recovery from the great recession, with 25 million more people relying on public insurance, (Medicaid, the [State] Children’s Health Insurance  Plan, Medicare, etc.) while the number of people with employer-sponsored health insurance dropped by 14.2 million.

The census figures also looked at poverty in the United States and found that while the increase in the poverty leveled off in 2011 after three years of increases, 46.2 million people—including 16.1 million children—live in poverty, about 15 percent of the population.

A family of four with two children under the age of 18 would fall below the poverty line with a household income of less than $22,811, according to the Census Bureau.

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Union membership down, income inequality up

Union membership down, income inequality up

By August 30, 2012: 9:22 AM ET

The decline of union membership has been a key driver of income inequality in recent decades, a new report found.

The drop in unionization accounts for roughly a third of the growth in wage inequality among men and a fifth among women between 1973 and 2007, according to the left-leaning Economic Policy Institute.

The share of the workforce represented by unions declined from 26.7% in 1973 to 13.1% in 2011. This contributed to the increase in inequality by lowering wages for middle class workers, according to EPI.

A non-partisan Congressional Budget Office report last year showed that the average household income for the nation’s top 1% more than tripled, while middle-class incomes grew by less than 40% between 1979 to 2007.

The pullback in unionization has also been a primary cause of the growing wage gap between white- and blue-collar men, as well as between college-educated and high school-educated men.

“Unions reduce wage inequalities because they raise wages more at the bottom and in the middle of the wage scale than at the top,” said Lawrence Mishel, EPI’s president.

Declining unionization has hurt men more than women because men were more likely to have been in unions in their heyday.

Union workers are paid a premium of 13.6% thanks to their collective bargaining contracts, according to EPI.

Blacks and Hispanics enjoy premiums of 17.3% and 23.1%, respectively, while whites have a 10.9% bump. Men see a 17.3% premium and women 9.1%.

This advantage is calculated by comparing hourly wages between union and non-union workers who are otherwise comparable in terms of experience, education, industry and other factors.

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