Book Review: Will the American Working Class Rise Again?

Sleeping Giant by Tamara Draut

For too many people in this country, the American Dream is a distant memory, something their parents aspired to, but which is now beyond their reach. Today, if you are working man or woman, you often find yourself toiling long hours for low pay in near poverty.  Even the college educated are finding it increasingly difficult to make ends meet as they leave school and enter the work world with extremely high debt burdens and facing an anemic job market.

What do you do about it? In “Sleeping Giant: How the New Working Class Will Transform America” Tamara Draut provides some useful historical perspective.  Draut is Vice President for Policy and Research at Demos, a progressive “think tank” that advocates for political and economic equality.

Her book, published in the Spring of 2016, just as the presidential election was heating up, recounts a history in which big business launched a counter attack on the liberal activism of the late 1960’s and 1970’s by setting up think tanks and Super Pacs and flooding Washington, DC with high-paid lobbyists

The union movement was eviscerated starting in 1947 with the passage of the Taft-Hartley Act. The law banned Communists from union leadership positions; established the principle of “right to work;” allowed workers to “opt out” of paying dues; banned secondary boycotts and sympathy strikes, and gave employers the power to hold anti-union meetings in the workplace. In later years, deindustrialization combined with the rise of the service sector made it increasingly difficult for unions to organize.

Meanwhile, what labor protections remained on the books have (and continue to be) largely unenforced.  Draut recounts how big companies in the ever expanding service sector routinely exploit employees by hiring mostly part timers and not paying benefits. Other companies require “on demand” scheduling and encourage off-the- books work to meet unrealistic production quotas.

The decline of the unions was abetted, according to Draut, by a Democratic Party which, beginning in the late 1970’s and early 1980’s, began appealing more to college educated whites on high-brow issues such as environmental justice, largely turning its attention away from bread and butter economic concerns of working class voters.

For their part, Republicans cleverly exploited the division by appealing to racism and anti-immigrant prejudice, particularly in the South. The rift caused an historic realignment of the political parties with many working class whites and union members switching their allegiance to the Republican Party.

Draut’s book is well written and thoroughly researched. It contains many personal antidotes illustrating how misguided policies can affect the lives of ordinary Americans struggling to make ends meet. She also offers a number of familiar, common sense policy proposals including raising the minimum wage, revitalizing the nation’s infrastructure and reforming the electoral process.

At times, however, the book seems a little starry-eyed about the potential role of working class Americans and the resurgence of the unions to help turn things around and bring about change. The “Sleeping Giant” (i.e., the working class) awoke alright, but in doing so it seemingly reignited the politics of division and despair, scapegoating immigrants and people of color and electing Donald Trump.

To really bring about change in this country, Progressives must rally Americans of all classes and income groups who understand that an economy that rewards wealth and depresses wages for ordinary Americans is ultimately doomed to fail, and everyone loses, rich and poor alike.

Is the Democratic Party up to the task? Can it reform itself? Can it educate and motivate voters on the inherent dangers of economic injustice, broaden its appeal, transcend class and racial divisions and effect positive change?

Can we tear down the wall of big money donations, entitlement and privilege that so characterizes today’s Democratic Party? Bernie Sanders started to show us the way. He may not have succeeded this time, but he blazed a trail.

This was an election so profoundly negative in tone and substance that tears at the very fabric of American Democracy.  At its core, Draut’s book is a much needed antidote to the post -election blues. It reminds us that after more a half century of struggle, we are in this for the long haul, and that there’s hope for a better future.

Time to Reform a Tax System that Favors the Wealthy

donaldtrumptaxreturns3

It turns out Donald Trump has carried forward more than $900  million in business losses on his personal income taxes in 1995 and may not have paid taxes for up to 18 years, according to reporting by the New York Times.

What’s outrageous is not that Trump took advantage of existing tax law; it’s that a law allowing him to avoid hundreds of millions in taxes even exists to begin with.

Other provisions of our regressive tax code provide similar benefits to the wealthy and large corporations:

  • The owners of real estate can “depreciate” assets even if those assets are actually increasing in value;
  • Corporations can stash huge amounts of revenues overseas to avoid taxes, and
  • The incomes of hedge fund managers and other professional investors are taxed at lower “capital gains” rates than rates paid by hard working Americans on “ordinary” income.

These are just a few examples of a tax system riddled with loopholes that favor the rich.    But perhaps the most egregious provision of all is that dividend and capital gains rates top out at 20% whereas taxes on ordinary incomes go as high at 39.6%.

As a matter of basic fairness and common sense, the incentive (e.g. lower rates) should be on encouraging people to work hard, improve their lives and get ahead.

Instead, in today’s system, we discourage labor through high tax rates, but give huge breaks to people who invest in real estate or churn paper assets for a living.

In addition, since the Great Recession starting in 2008, an almost exclusive emphasis on monetary policy through the Federal Reserve Bank, including buying bonds and keeping interest rates low, has served primarily to inflate asset values while wages have stagnated for ordinary Americans.

These policies not only favor the wealthy.  They can lead to asset bubbles and put our entire economy at risk.

There is very little that comes out of “Lying Donald’s” mouth that remotely resembles the truth.  But Trump is “right on” in this respect –  the system is rigged and nowhere is that more evident than in our regressive tax system.

Democrats need to stand up and fight for tax fairness.  That starts not just with closing loopholes of the kind Donald Trump has used to avoid taxes.  It also means increasing the top rates on dividends and capital gains so the wealthy pay their fair share.

Has the Party of the People Become the Party of the Elite?

2016 Presidential Election Map

Once upon a time, the Democratic Party was the “Party of the People” and Republicans represented the well-to-do. Over time, that seems to have changed, probably starting with the election of Ronald Reagan in 1980 with the help of so-called “Reagan Democrats.”

2016electiontableToday, the shift in party alignments is evident in the polling numbers. As shown in the accompanying table, in states where Clinton is leading, the median household income is $64,634; in states where Trump is leading, median household incomes are significantly lower – $52,382.

Just as troubling for Democrats, perhaps, is that in “Toss Up” states, the demographics appear to favor Trump. Household incomes, the percentage of minority voters and educational attainment levels in Toss Up states more closely track to those states in which Trump, rather than Clinton, is ahead in the polls.

This is going to be a close election. The numbers suggest that to win Democrats are going to have to broaden their appeal to the very “People” the Party has left behind over decades of rightward drift.

A good place to start would be in the presidential debates beginning tonight. It would be nice to see Hillary Clinton step up to the podium and, instead of playing Trump’s game of negativity and fear mongering, reach out to people of all income levels and project of vision of how she is going to revive the economy so it works for everyone, not just a privileged elite.

An Appeal to Hillary Clinton – Lift Us Up; Don’t Tear Us Down

Hillary Clinton Deplorables

Dear Hillary:

As the debates approach, I am asking, no begging really, that you not attack ordinary people, group them into broad categories and call them names such as “deplorables”.

And yes, some of the so-called “deplorables” hold racist, misogynistic views.  But do we really need to go there? Must we attack our fellow Americans, many of whom, like the veteran pumping gas on the NJ Turnpike, are struggling to make ends meet in a faltering economy?

Instead, at the debates, please focus on telling people what you are going to do to stimulate the economy, generate jobs, and increase income for poor and working class Americans.

Tell us how you are going to constrain out-of-control military spending.

Tell us how you are going to end the tragedy of pervasive poverty across America.

Tell us how you are going to reign in Wall Street and limit the influence of big money in politics.

If “Stronger Together” is more than just a fancy campaign catch phrase, then please send a positive message of inclusiveness.

This is one of the most important elections in American history.  The outcome could profoundly alter the direction of this country for decades to come.

The real question is: Are we a country that pulls together to bring about positive change, or one that is divided into a million little subgroups each fighting for an smaller and smaller slice of an ever dwindling pie?

At the debates, please do not descend to Donald Trump’s level.  Please, no more talk of “deplorables”; no more pitting one group against another.

We can and must rise above petty name calling to lift people up, not tear them down.

Sincerely,

John Conlow, web facilitator

TheDemocraticView.com

Political Dysfunction at Root of U.S. Economic Malaise

U.S. Economy: Standing on the Brink

Lately, the economy is looking pretty good.  Unemployment is declining, wages are rising, consumer spending is up.  Things are going so well, the Federal Reserve Bank is poised to start raising interest rates.

What’s not to like?

Well, quite a bit, actually.  As was pointed out in a previous article in this series, the long term trend is ugly.  Economic growth since 2000 has averaged less than 2%, compared to growth rates of 3% to 4% in the 1950’s through the 1990’s.

Now, a 1% to 2% decline in economic growth may not sound like a lot, but it represents millions of jobs and the difference between rising standards of living and stagnant wages for millions of Americans.

There has been a lot of debate about the causes.  Bad trade deals; the decline of unions; failure to raise the minimum wage.  And yes, we can (and should) reject the Trans Pacific Partnership (TPP), fight back against efforts to eviscerate worker bargaining rights and raise the minimum wage to $15 an hour.

All are good and worthwhile initiatives. But they are a little like the well-meaning family doctor who treats the symptoms of a major disease, but doesn’t think to look for the root cause.  Meanwhile, the patient winds up clinging to life in a hospital bed.

A slight upward blip in employment and spending doesn’t alter the fundamental trend – the U.S. economy is seriously ill and we need to find a cure, not just treat the symptoms.

Enter the Federal Reserve.  The Fed pumps money into the economy and holds down interest rates, and the patient actually shows a slight improvement.  But that simply masks an underlying disease that continues to worsen.

Fed policies – aggressive bond buying coupled with low interest rates – probably saved the U.S. economy from falling off a cliff following the Great Recession of 2008.  But monetary policy has run its course.  Continued reliance on the Fed alone has only served to over-inflate asset values, drag down productivity and exacerbate income equality.

What’s lacking is “fiscal stimulus” – or, in other words, budget measures to spur economic growth and productivity.  Such policies might include increased Federal investment and tax incentives to stimulate investment at all levels of government and in the private sector.

Uh oh – that would require action by Congress!  The cold, hard truth is that Congress is so dysfunctional it can’t pass a budget on time, let alone come up with a coherent fiscal policy in the face of persistently slow economic growth.  And since the Fed is effectively out of ammunition, the next recession could be far worse, and last far longer, than the last one.

What can we do about it?

Well, for one thing, Democrats must be more aggressive in challenging Republican orthodoxy that tax cuts (mainly for the rich) actually stimulate economic growth, and all government spending and taxation are inherently evil.

In fact, spending on infrastructure is not spending at all in the traditional sense– it’s investment in future growth.  And It is almost unthinkable that with the economy sputtering, and interest rates near zero, that the government is not borrowing aggressively to rebuild this country’s crumbling infrastructure.  Such policies would create millions of good paying jobs, lift wages and reduce income inequality.

And while we are at it, let’s not forget we need to invest in people, to ensure the next generation is well educated, productive and poised for the jobs of the future in areas such as clean energy and technology.

Far too much money in this country is sitting on the sidelines, or being paid back to stockholders in the form of buybacks and dividends.  We need tax policies that actually spur investment to upgrade plant and equipment, not reward people who churn paper for a living or companies that stash their profits overseas to avoid taxes.

We also need a fairer and more progressive tax system.  Taxing capital gains at a much lower rate than wages and other earned income (21% top rate for capital gains v. 39.6% for earned income) is the very definition of a rigged system that favors the rich over the poor and middle classes.   Donald Trump should know; he is one of the main beneficiaries of that rigged system.

It is past time that capital gains tax rates were raised just to restore some measure of fairness into a system that has become heavily tilted in favor of wealthy (e.g. those who derive most of their income from assets) at the expense of working men and women.

These are reforms that won’t happen overnight.  Entrenched interests, in particular the financial services industry, are formidable opponents with deep pockets who exercise out-sized political influence behind the scenes.  Meaningful reforms will take time, and will require a level of effort and political will that has been absent in recent decades.

Bernie is right – it will take a political revolution.  But It’s a revolution that needs to come sooner rather than later before political dysfunction turns what amounts to an economic slowdown into another major recession.

This is the third article in a four-part series “Fix the Economy, Stupid.”

Hillary’s Economic Plan – Nickel and Diming the U.S. Economy and American Workers

Hillary's Economic Plan

This is the second article in a four-part series, “Fix the Economy, Stupid.”

Listening to Hillary Clinton’s speech on the US. Economy last Thursday (August 11), she sounded as if she was fighting hard for the little guy, the American worker, those who have been left behind by bad trade deals and companies moving production offshore to hold down labor costs.  But dig a little deeper and what you find is a plan that is woefully inadequate to meet the country’s investment needs and stimulate renewed economic growth.

As was pointed out in last week’s article, the U.S. economy is in serious trouble.  Growth in Gross Domestic Product (GDP) has averaged just about 2% since 2000, compared to average growth rates of 3% to more than 4% in prior decades since the 1950’s.

With the notable exception of Bernie Sanders, Democratic politicians have been slow to acknowledge the issue, in part because it’s seen as tarnishing President Obama’s legacy.    The reality is that under the circumstances, Obama has done about as well as could be expected given the Great Recession of 2008 and the Congressional gridlock that followed.

Enter Hillary Clinton.  She acknowledges the need for greater investment in U.S. infrastructure, and touts her plan as “the biggest investment in new, good-paying jobs since World War II”.

Well, not exactly.  She proposes to spend $275 billion over five years, or an average of $55 billion annually, less than 0.3% of GDP, and a mere 9% increase in current Federal investment – investment levels already far too low by orders of magnitude.

Some $25 billion of the $275 billion would be used to fund an “infrastructure bank” designed to attract an additional $225 billion non-Federal investment.  That’s not a bad idea for the long term, but it’s not going to stimulate growth or move the needle short term.  It seems like something designed to make the numbers sound bigger than they are, but not alienate her conservative supporters.

Bernie Sanders has proposed infrastructure spending of more than three times the amount recommended by Hillary – $1 trillion through 2020.  Meanwhile, the American Society of Civil Engineers estimates the cost even higher — at $1.4 trillion through 2025 to repair existing infrastructure, or bring it to a “state of good repair,” as they say in engineering parlance.

Quality public infrastructure is a key to the efficient functioning of modern economies.  Allowing it to deteriorate as it has in the U.S. is fiscally irresponsible.  Our highways, airports, ports, railways, water and sewer systems and electric power supply grids are all in need, not just of repairs, but major upgrades.

If you include upgrades in the estimates, the real cost is probably in the tens of trillions to modernize our infrastructure and bring it into the 21st century.  Just as one example, most advanced European and Asian countries already have high speed rail, with trains routinely operating at speeds of more than 200 mph.  In the U.S. our fastest train, Amtrak’s Acela, which runs between Boston and Washington, travels at an average speeds of just 65 mph.

The longer we put off much needed infrastructure investment, the higher the costs and the greater the disruption to our economy.  Now is the time to act.  The economy is faltering badly; interest rates are at historic lows.  Effectively, the cost of borrowing is next to zero.

Hillary Clinton’s economic plan is, in reality, no plan at all.  Her proposed spending levels are too meager to lift the economy, create significant numbers of new jobs, or make a real dent in our huge investment needs.  By pretending to offer a plan that falls so far short, Hillary Clinton is actually putting the future of the U.S. economy, and its workers, at risk.

Next week, in part 3 of our 4-part series “Fix the Economy, Stupid” we’ll examine why mainstream politicians continually underestimate investment needs; why that is a cause for worry; what we can do help remedy the situation, and possible sources of funding.

The Big Picture of U.S. Economy – It’s Ugly

Economic Growth Rates

This is the first of a four-part series, “Fix the Economy, Stupid.”

Last week, the unemployment report came out for July.  The U.S. added 255,000 jobs, more than economists had forecast, and suddenly the economy is doing great, everything is back on track, and the Federal Reserve is likely to raise interest rates later this year.

If you follow the economy through the daily media or the gyrations of the stock market, you are likely suffering from whiplash.  Up one day; down the next.  We’re in a recovery; no, we teetering on the brink on recession.  Ouch, my neck hurts.

Sometimes, it is useful to take a step back, look at the big picture.  But if you do that, be prepared.  You might wind up with more than just a crick in your neck; you are more likely to experience pain deep in your gut.

As shown in the accompanying graph, economic growth in the U.S. has averaged just about 2% in the last decade and a half.  That’s down from more than 3% in the 1970’s through the 1990’s and more than 4% in the 50’s and 60’s.  The latest figures for the first seven months of 2016 have the economy growing  just 1% year over year; optimistically, the very best we are likely to do is 1.5% to 2%  in 2016.

Many Democratic politicians, President Obama included, would have you believe everything is fine, even as they reluctantly acknowledge that perhaps wage stagnation for the vast majority of Americans is a problem.  Well … yea.

Republicans, meanwhile, continue to spew supply side propaganda while pretending it bears some relation to real economics.  Donald Trump touted his “economic plan” (sic), released earlier this week, as tax reductions for “middle income” taxpayers.  Not surprisingly, that statement is misleading at best.  Trump’s proposed tax cuts mirror those of House Republicans and are heavily skewed in favor of wealthy taxpayers, as TDV documented in the July 8 fact sheet, “Under Republican Tax Proposals, the Rich Get Richer.”

Why the long-term economic slowdown with wage stagnation as its core?  The answer is obviously complex.  Economists and talking heads debate whether the cause is increased international competition, bad trade deals, a decline in worker bargaining rights, loss of manufacturing, slackening consumer demand, automation of the workplace, or all of the above.

Well, all of those factors no doubt contribute to the economic malaise the U.S. finds itself in today.  But there may be an overarching cause that very few really talk about – political dysfunction.

That is not just something that happened in the past.  Now and in the future, political dysfunction and outright mismanagement of the economy continue to pose a threat to the security of all Americans.

Economic policy has two major components – fiscal and monetary.  Largely due to the dysfunction of the U.S. Congress, one of those, fiscal policy, is virtually non-existent.  It is not just that Congress can’t pass a budget.  Essentially there is no coherent fiscal policy; no guiding principles by which to foster growth and prosperity, and our economy as a result is at serious risk.

It’s a big problem. It not getting near enough attention.  It needs to be talked about more, and it needs to be fixed.

More about the faltering U.S. economy and what can be done to fix it, including monetary policy, in upcoming articles in TDV’s four-part series: “Fix the Economic Stupid.”

Next week, the second of four parts focusing on Hillary Clinton’s Economic Plan.

Some of Worst Poverty in America a Subway Ride Away from DNC

PhilaPovertyMap7

More than a half century after President Lyndon Johnson announced the War on Poverty, poverty rates in the U.S. average 15% of the population, or 47 million people, among the highest in the industrialized world. It’s a living tragedy and a national disgrace, and TDV has called for a “New War on Poverty.”

Sadly, tackling poverty in the U.S. does not seem to be high on the agenda of either major political party. The Republicans are busy whipping the country into a frenzy of fear and paranoia which helps divert attention from their real priority – more tax breaks for the wealthy.

Meanwhile, many of those attending the Democratic National Convention in Philadelphia this week seem strangely out of touch with what is going on in the real world, more adept at “sloganeering” than  tackling the major issues of concern to ordinary Americans – a lack of opportunity and decent paying jobs.

Perhaps delegates to the Democratic National Convention should spend less time attending fancy receptions and cocktail parties and more time out in the neighborhoods, getting to know the people who actually live in the City of Brotherly Love.

Like many urban areas, Philadelphia has enjoyed something of a renaissance in recent years.  Young millennials have flocked downtown and surrounding areas where they can easily walk to work, get around on public transportation and enjoy a vibrant nightlife of hip bars and eateries.

That’s the Philadelphia that many conventioneers are likely to see, with most events scheduled to take place in South Philadelphia or Center City where much of the “millennial renaissance” has occurred.

But just north of Center City, still in the shadow of the iconic statue of William Penn atop City Hall, are some of the most blighted neighborhoods in America. Philadelphia is the poorest of America’s large cities, with more than 25% of its residents living below the poverty line. In many areas of North and West Philadelphia, the rate is 50% of more – twice the city average (see above chart of poverty rates by zip code).

Here’s a suggestion for those attending the Democratic National Convention – as you leave the Wells Fargo Center where the convention is being held, walk about a block north on Broad Street to AT&T station. Take the subway – the fare is $2.25 – through Center City, past Temple University to Broad & Erie, about a 25 minute ride.

BueryBuildingThere you will find a vibrant – if dilapidated – commercial district. Look up and you will see the long vacant Beury Building, a graffiti covered Art Deco classic that has been sitting vacant for years. Walk a few blocks in any direction, and you’ll see trash strewn vacant lots and crumbling buildings everywhere. Visit any of the neighborhood schools and you’ll find children who haven’t had a decent meal all day and teachers paying for food and supplies out of their own pockets because the state has cut funding and diverted resources to privately run “charter” schools.

We must eliminate poverty in the US by attacking it where it lives, in the neighborhoods of Philadelphia and other cities and rural areas across the US. We must fix the crumbling infrastructure, provide a safe environment and quality education for all children, and decent jobs and job training for adults struggling to find work in a faltering economy.

When we do that America really will be “the Greatest Nation on Earth,” as Michelle Obama said in her speech Tuesday night. But with all due respect to the First Lady, who gave an otherwise great speech, as long as there are 47 million people living in poverty in the US, we have a long, long way to go to claim that mantle.

View / download the fact sheet

Hope Springs Eternal on the Mean Streets of Camden, NJ

In Camden, NJ,  one of the most dangerous and poverty stricken cities in America, a group of young people prove that ordinary folks, working together, can bring about positive change that profoundly alters the direction of people’s lives.

Filmmakers Steve Ercolani and Gabe Dinsmoor document the story of Camden’s Pyne Poynt Park.  Not long ago, the park was a drug strewn vacant lot.  Today it’s a thriving neighborhood playground where children can forget the desolation and despair of urban decay and feel the power of sports, of teamwork, of the sun shining on a beautiful Saturday afternoon, of hope and of optimism.

In Leaves of Grass, Walt Whitman, one of America’s great poets, referred to his hometown of Camden as the “Invincible City.”  Indeed, Camden, located across the Delaware River from Philadelphia, was once a thriving industrial center, the largest shipbuilding port in America, a major railway hub, and home to RCA Victor and Campbell’s Soup, among other big industries.  That is until the post-industrial crash when, starting after W.W.II, industry left en masse, and white flight, race riots and rampant political corruption decimated the city.

Today, Camden is still plagued by poverty, crime and urban decay, but it is slowly, surely coming back. As if responding, belatedly, to Walt Whitman’s call to be “Invincible”,  crime and poverty rates are down in Camden, police are getting out of their cars and interacting with the community, and redevelopment is occurring downtown.

Pyne Poynt is a beautifully told documentary, an inspiring version of the American Dream, in which hope springs eternal on the mean streets and vacant lots of Camden, New Jersey.  It is a story about those who have refused to be beaten down by poverty and crime and who  have fought against all odds to better their lives and give their children the opportunity to succeed.

The documentary, which originally premiered at the New York Independent Film Festival this Spring,  will be shown at WHYY Studios, 150 6th Street, Philadelphia, Monday, July 25, at 7pm, during the Democratic National Convention.

Tickets are available online.  This is a must see film.  We hope to see you there.