Squeezed, Part II: Coalitions and Cookies

cookies wealthy tea party union guy

(By NCrissie B)

This week’s series explores the causes and consequences as working Americans are increasingly squeezed by stagnant wages and rising costs of living. Yesterday we saw how workers have largely stopped sharing the benefits of increased productivity. Today we explore the social and political consequences if working Americans continue to be squeezed out. Tomorrow we’ll conclude with some social and policy solutions to relieve the squeeze on workers.

A fragile coalition?

Count Forbes contributor Joel Kotkin among those who believe the 2012 progressive coalition cannot long endure. Or at least the coalition as he imagines it:

Of the now triumphant urban gentry have their townhouses and high-rise lofts, but the service workers who do their dirty work have to log their way by bus or car from the vast American banlieues, either in peripheral parts of the city (think of Brooklyn’s impoverished fringes) or the poorer close-in suburbs. This progressive economy works for the well-placed academics, the trustfunders and hedge funders, but produces little opportunity for a better life for the vast majority of the middle and working class.

Yet while most academics do trend progressive, the same cannot be said for the “urban gentry” of “trustfunders and hedge funders.” Exit polls show Mitt Romney won by 10 points among Americans with incomes over $50,000. Writing as if “wealthy cultural elites” are part of a doomed-to-fracture progressive coalition simply ignores the fact that most of them already vote Republican.

Still, the New York Times‘ Thomas Edsall cited Kotkin among others in an article this week titled Now What, Liberalism?, exploring Walter Russell Mead’s forecast of a looming fracture between the working poor and government employees, two key pillars of today’s progressive coalition:

There are several ugly truths that the country (and especially those states whose governments are bigger and bluer than the rest) must soon face. One concerns taxes. The debate today at the elite level is about whether the rich should pay more. Given the historic lows of marginal and capital gains tax rates, this is a debate of consequence for reasons having to do with fairness. But it distracts attention from a more fundamental political reality: Voters simply will not be taxed to cover the costs of blue government, and in most cases they will vote out of office anyone who suggests otherwise. That, at base, is what the Tea Party movement is all about. Voters with insecure job tenure and, at best, defined-contribution rather than defined-benefit pensions simply refuse to pay higher taxes so that bureaucrats can enjoy lifetime tenure and secure pensions.

Second, voters will not accept the shoddy services that blue government provides. Government must respond to growing consumer demand for more user-friendly, customer-oriented approaches. The arrogant lifetime bureaucrat at the Department of Motor Vehicles is going to have to turn into the Starbucks barista offering service, and options, with a smile.

A plate of cookies

I first read the Parable of the Cookies in a comment to an article about the 2011 Wisconsin union protests. The parable goes like this:

A rich guy and a working poor white guy are sitting in a bakery. A waitress brings them a plate with a dozen cookies. The rich guy takes eleven cookies, then leans toward the working poor white guy and points around the room. “Better watch out for that woman, that black guy, that Hispanic, that government union worker,” the rich guy says. “They want your cookie.”

The never-quite-stated subtext of Mead’s article is that the U.S. economy is not as effective an engine as it was in the decades after World War II. He cites the usual causes: the growth of industrial economies overseas, expanded trade, increasingly globalized competition for capital, and the like. In the terms of our parable, Mead proposes that the U.S. economy no longer makes enough cookies for everyone.

Yet as we saw yesterday, the U.S. economy has remained a stable engine with growing productivity. Indeed you have to look very close to see even the Great Recession in the red line of this graph:

We’re making more cookies than ever, and the growth of cookie production hasn’t changed much at all since the late 1940s. But since the 1970s, the wealthy have taken more and more cookies for themselves … while setting the rest of us against each other.

Redistributing wealth … upward

Some of that shift in wealth does owe to global competition, automation, and other spinoffs of the information age. Yet the premise that better education is the key to a share of increased cookie productivity falls apart if you look at this graph:

Look at the yellow-orange lines: real wage growth since 1979 among the richest 5% (excluding the richest 1%) and among the next 5%. Almost all of that ‘next 9%’ have college degrees, and many have graduate degrees. And yes, they did better than 90% of Americans. But not even the ‘next 9%’ wages kept pace with productivity growth over the past three decades. Only the richest 1% managed that, and indeed they more than kept pace with productivity growth. As Americans worked to bake more and more cookies, the richest 1% snapped up almost all of the increase.

Part of that, Reuters‘ Deborah Nelson and Himanshu Ojha wrote last month, has been caused by privatization and outsourcing. Jobs that used to pay a living wage – such as clerical work for the U.S. House – now pay far less. The result is ‘entrepreneurial’ contractors joining the richest 1%, while more working Americans live near poverty, under the rubric of “smaller government.”

But it’s not really “smaller government.” As the New York Times‘ Nate Silver reveals, if you factor out the growth of health care costs you’ll find that total government spending – federal, state, and local – has been fairly constant since the late 1940s as measured in percentage of GDP:

But the number of government employees has been falling since the late 1980s. Most of the work that government employees were doing in the 1980s is still being done, by private contractors. That’s not “smaller government.” It’s “for-profit government” … and the profiteers leave less for the workers.

“For-profit government” is not the only answer to why our economy has redistributed wealth upward over the past 30 years. As Paul Pierson and Jacob Hacker wrote in Winner Take All Politics, both active policy changes and “policy drift” – not updating rules to catch new ways of gaming the system – allowed the wealthy to snap up more and more of the cookies the rest of us have been baking.

Conservatives love to gloat about the inevitable fracture of the contemporary progressive coalition. But that fracture is only inevitable if we let them convince us to fight over that one remaining cookie … instead of talking about better ways to distribute the other eleven cookies the rich are keeping for themselves.

(Crossposted from Blogistan Polytechnic Institute (BPICampus.com))

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