Like a fairy tale: A more equal America?

September 23, 2018

Ralph Maughan

Once upon a time in the land of America, when the economy grew almost everyone from rich to poor became wealthier. Each new surplus from America’s economic growth was divided up, not equally but fairly. Economic growth really did lift all the ships in the harbor.

I wrote this like a fairy tale — “once upon a time.” That’s because in 2018 it might seem like a tale to most of us. Perhaps it is more like a rumor or myth. No! That’s the way it was from the end of World War II in 1946 until 1980.

Unfortunately, the average real wage hasn’t increased since 1980. That is 38 years.

The economy as a whole has grown, but the growth has been sucked up by those of wealth. The increase in average wages and salaries ended and fell back in 1980 because a recession set in. After the end of this recession, they began to grow once more, but “real hourly wages” have never made it back to the level of 1979. I am writing, of course, of wages adjusted to constant 2017 dollars. It has come close this year, but the tiny increase seems eaten up by inflation.

Except for several more recessions, the average “household” income has increased over the last 34 years, but household income is a broader category than wage income. Average (median) household income in 2017 dollars was $50,511 in 1984 and $60,372 in 2017.

Notice that much of the increase in real household income came from more people in the household working. Those already working now often have second or even third jobs. Growth from 50 to 60 thousand dollars is not that much when more and more of those in a household have to work, or work more jobs or longer hours.

The possibility of one person supporting a family is becoming like a fairy tale too.

While the median household income (50th percentile) is now about $60,000, for the top 1 percent it is about $430,000. Since 1980, the top 1 percent income has grown more than three times as fast as the middle 50 percent (the median income).

The common economic statistics used by the news to report on the health of the economy are ones like average income, consumer price index (inflation), unemployment rate, profits, gross domestic product (GDP) and stock values. Trump really likes and talks about the last one, but a record stock market seems to be unrelated to how the average person is coping.

As a result of news coverage most people focus on these particular statistics when they think about how well off is the country, and it is important to note that their conclusions affect how they vote. If they think the economy as a whole is doing well, regardless of how they themselves are doing, they tend to vote on the economy as a whole.

Despite conventional wisdom, I am saying most voters do not vote their pocketbook. This is the surprising conclusion from a number of studies. Therefore, in elections, candidates usually talk about whether the economy is good or bad rather than asking people, “how are you doing?”

Many today do not just think about the standard economic statistics. Growing numbers believe that growing wealth disparity over the last 38 years should be as important an issue as if the economy is merely growing. Still, the trend in how widely our increasing wealth is shared is rarely reported about except sometimes at the bottom of the news. Depletion of our environmental capital (whether we are screwing up nature) is even more important. There are other overlooked statistics too, and even though people feel these conditions, often strongly, they very often do not vote on that basis.

The great runup in wealth inequality began with recovery from the 1980-82 recession. It corresponds exactly with the Ronald Reagan tax cut, a cut that is notable for being much larger than the Trump/Republican cut this year.

This Reagan “supply side” tax cut of 1981 was the beginning of “trickle down” or “supply side” tax cuts where the result of the tax rate reduction went to the rich. The cuts were sold to the American people under the idea that cutting taxes for the rich stimulated the rich to work harder and so create or expand business, thus putting the rest of us to work and raising our wages and salaries. That tax cuts cause the rich to do more is something I’d like to argue about, but that is another column.

The actual phrase “trickle down” came from opponents of the cuts. Opponents of trickle down have been the Democrats for a long time, dating to before the Great Depression of 1929-38. One of the longest standing Republican/Democrat conflicts has been over who is responsible for economic growth. Republicans say it’s the rich, although they rarely say it that plainly because that doesn’t sound very good. Instead it might be said, “we’re going to cut taxes for those with the means to invest because they will put the money to work, investing and creating jobs and growing business, but the average person won’t. They will just squander it.”

Tax cuts for the rich are portrayed as something that benefits everyone. Democrats call them “cuts for the rich; chump change for the rest.” Republicans say it is tax cuts for the job creators, and they are usually careful to emphasize the (small) cuts the middle incomes might receive.

The “rich” is an imprecise category, but almost by definition there are not a lot of rich people compared to the rest. But a very common way of defending this minority of people is to make and keep the much larger majority divided. In the past and now too, this often means splitting the majority by sowing divisions and discord along non-economic lines. The following groups have been blamed for many of our ills at one time or another. Some of these examples might sound out of date, but then they have been used for a long time. Consider too that almost all stereotypes have some basis in fact.

First, they try to divide the majority along racial lines, such as calling Black folks “people who don’t know their place.” Other races and ethnicities are often called “job-stealing” immigrants. These people have long been accused of being criminals too, especially the kind of “bad hombre” likely to knife you or carry drugs over the border.

Women. I had thought this one had disappeared, but no. We are still urged to worry about working women. Women, it is said, according to God, should stay at home and out of the work force. It is interesting that compulsory pregnancy due to anti-birth control and anti-abortion will take women out of the work force.

Another technique of causing division within the non-rich has been promotion of the belief that poor people hobble the economy with their laziness. It’s often claimed that most of the poor are actually living the good life by using welfare and other government “giveaways.” While it is not usually said in public, in the minds of many, “the poor,” especially those who get food stamps, are usually Black people. They are especially likely to be women too. They have lots of illegitimate children, yet these women, nonetheless, have Cadillacs they drive to the welfare office to pick up their checks.

The poor, however, are not just left to be regarded as mostly Black or Hispanic. Since well before the Civil War, White people have been divided into white trash, or poor whites, versus those who are “just good people” or “normal people.” They say, what the poor whites should do is copy normal people. Then they will get ahead.

Meanwhile, and for 150 years, lower class Whites have been encouraged to look down on people of color, especially in the South, and particularly with the idea that “while we might be poor, we’re far better than them.” As a result, black and white coalitions of the lower class are hard to form. I believe more than anything else that idea that government program economic aide programs are mostly for brown and black people explains the political opposition to them. The result is that American government is less generous than just about any other advanced country.

There are many other kinds of division in America, but here I am only trying to write about those stirred up divisions that serve to maintain and increase our very unequal wealth.

Today the effects of inequality are dragging down the positive aspects of what is often called “the booming economy,” or something like “Trump’s great economic success.” He has doubled down exploiting traditional divisions in America and even helped forge new ones. In his case it is not ideological, but just a way of winning power, although Trump probably benefited greatly from his recent tax cut.

He has gathered around him what political scientists have called “a minimum winning coalition” of groups (his base). This kind of majority has been rare in the United States, in part because most politicians will not take the chance that their minimum coalition is really one that will win. One effect of his catering to his base is that many independents and weak Republicans, and even people who are well off but offended by him, might vote Democratic, perhaps even strongly.

Meanwhile, inequality will continue to grow. So will political and social division. Growing prosperity for most of us will continue to be like a fairy tale. If there is an economic downturn, it is not hard to predict which economic class will bear most of its harm.

Dr. Ralph Maughan of Pocatello is a professor emeritus of political science at Idaho State University. He retired after teaching there for 36 years, specializing in voting, public opinion and natural resource politics. He has written three outdoor guides, including “Hiking Idaho” with his wife Jackie Johnson Maughan. He is currently president of the Western Watersheds Project.

Update hourly