Economic Inequality and US Politics

Over the last twenty-five years, economic inequality in the US grew. As the gap between haves and have-nots worsened, social injustices and tensions increased. As usual, politicians in power have devised projects and campaigns designed to distract attention from these realities. Opposition politicians wonder whether they dare attack growing inequality and champion programs for less economic inequality. But before we do the politics, let’s do the numbers.

The data on Americans’ income inequality are stark. According to the US Census Bureau, comparing data for 1967 and 2001, the share of total income flowing to the bottom 60 per cent of US households fell from 32 to 27 per cent. The share of total income flowing to the top 5 per cent rose from under 18 to over 22 per cent. The share of income to the “middle” barely changed. In short, the high income receivers got big raises, while the majority low-income earners got even less than before. The middle struggled not to follow the poor downward even as it watched the rich rise ever further out of reach.

Wealth in the US — what Americans own rather than what they earn — is even more unequally distributed than income. Thus, in 2001, the top 5 per cent of Americans owned 57.7 per cent of the total wealth (assets minus liabilities). The bottom 50 percent owned a stunning 2.8 per cent of the total. Wealth inequality, like income inequality, got significantly worse over the last twenty-five years.

The growing inequality between the rich, on the one hand, and the middle and poor, on the other, helps to explain many important features of recent US history. Since real hourly wages (money wages adjusted for price changes) fell across most of the last quarter century, working-class families sent more members out to work and also worked more hours. When that was not enough to maintain, let alone improve, living standards, those families took on massive new debts (via credit cards and home loans). Work exhaustion aggravated by debt anxieties worsened the stress levels across US households.

Meanwhile, the richest 10-20 percent minority can afford expenditures for “lifestyles” that the majority can barely imagine with a mix of envy and resentment. The Bush regime secures its chief financial base by delivering huge rewards to that minority (via tax cuts, deregulation, military spending, subsidies, and so on). The Bush Republicans secure the needed mass base by effectively mobilizing the majority’s resentment and envy into hostility against the urban, bi-coastal rich labeled as “liberals” and Democrats (accused of taxing the middle to subsidize the lazy poor). Thus, Republicans paint Democrats as people who sneer at the struggling working class, denigrate its religious commitments, and ridicule its desperate efforts to reverse the disintegration of its households (read: its support of “family values”). The liberals and Democrats get pictured as anti-religion, elitist, gay-friendly, and sexually licentious. Anti-sexism is attacked as anti-family. Anti-racism is equated with government programs discriminating against the middle-income and poor whites. The anti-Iraq war movement is transformed into disrespect and non-support for working-class soldiers “defending their country.”

The economic difficulties besetting the US working class turn many of its members away from politics and even from merely voting. Others respond to the Republicans’ claims. In these two ways, enough workers abandon their formerly Democratic party affiliations to enable Republicans to win elections, expand state power, and use it to serve their economic and political bases. Meanwhile, Democratic leaders fear to lose financial support from the rich — their financial base, too, in a system of money-dependent political campaigns. Thus the spectacle of how little they do to blunt, let alone stop, the Republican successes. Democratic leaders refuse to make the workers’ deteriorating economic conditions the basis for a campaign to redistribute wealth and income back to them. Democratic politicians thus mostly lose; and, when they win, they do so by aping the Republicans.

Yet, pushing this political game too far risks backfiring. Some signs suggest that this may be happening. Shrinking polls show that Bush’s mass base is increasingly reduced to Christian fundamentalists, gun-control opponents, anti-environmentalists, and gung-ho militarists. They are fewer but harsher, more extreme. The problem is that they dislike and are, in turn, scorned by the rich and traditionally conservative backers of the Republican party, its main financial base. The latter wants first and foremost to limit state power. Big business mostly wants to keep the private sector that it dominates unthreatened by a strong state that might fall into the hands of opponents of that domination, leftist or rightist. With no left to fear in the US today, the Republicans’ moneyed financial base increasingly distrusts a Bush regime that keeps expanding state power chiefly to secure its own political survival by pandering to its shrinking mass base. As that base draws back, the Bush regime must offer ever shadier deals to ever shadier lobbyists and their clients: exchanging government support for campaign contributions, quid pro quo.

Conservative Republicans are thus backing away from Bush. So far, they are attacking mostly his regime’s increasing shady dealings: “Republican power in the service of lobbyists who, in their K Street habitat, are in the service of rent seekers — interests eager to bend public power for their private advantage” (George Will, “On K Street Conservatism,” Newsweek, 17 October 2005, p. 78). Such conservatives will become increasingly interested in those centrist Democrats who promise to reduce state power. If this continues, the Bush era’s days are indeed numbered. Power may then shift to Democrats who will limit the state and protect the private sector’s status quo. Those Democrats will get considerable financial backing formerly provided to the Republicans. That — plus the traditional Democratic mass base, i.e., stressed workers looking for any change that might relieve the pressures they face — might then win enough elections to prevail as the next phase of American politics. If so, the Republican mass base will feel rejected and abused once again, thereby providing opportunities for the next generation of right-wing revivalist politicians.

Whatever the benefits of a defeat for Bush Republicanism, the deeper problems will remain. Democrats will not likely dare to jeopardize their return to power by any significant redistribution of wealth and power. If so, they will thereby invite another erosion of their mass base as workers turn their frustration and anger over economic inequality against the Democrats in power. That is, after all, how Reagan and the Bushes came to power. The big question remains: will the mass of Americans continue to tolerate these oscillations as the nature and limits of the nation’s politics?

Rick Wolff Rick Wolff is Professor of Economics at University of Massachusetts at Amherst. He is the author of many books and articles, including (with Stephen Resnick) Class Theory and History: Capitalism and Communism in the U.S.S.R. (Routledge, 2002).