From the Economic Justice Task Force:
How Did the Rich Get Richer and Middle Class Get Left Behind? (July 2013 CUCC Newsletter)
In a blog on June 17th, Stephen Strauss, an adjunct lecturer of public policy at the Harvard Kennedy School, asked, “Why Let a Bank Write U. S. Financial Reform Legislation?” Congress has opened the way for one of the big banks that was bailed-out despite its acts of fraud and mismanagement to draft new reform legislation. The only reason, Strauss posits, was because this big bank had “experience.” Here then is another case-in point of how politics and the financial sector have come together in “organized combat” that has resulted in an endangered middle-class. At the same time it has made the rich richer.
This “Thirty-year War” is the subject of an enlightening work: Winner-Take-All Politics: How Washington Made the Rich Richer-And Turned its Back on the Middle-Class. Published in 2010 by Jacob Hacker and Paul Pierson, professors of Political Science at Yale and UCLA Berkeley respectively, we commend it to you for consideration. Their research covers the thirty-year period prior to the economic collapse in 2007-2008 and highlights the reasons for the widening gap between the rich/poor and the ‘have and havenots.’ They point to the sharp increase in wealth inequality in recent years. They note the current discussion about recovery which continues among economists who are divided between a more liberal, Keynesian notion of spending during downturns and more conservative economists who advocate tax cuts for the wealthy that would result in a trickle-down effect in bad times. However, the authors focus instead on the impact of the relationship of the political realm and Wall Street and the financial sector. We have become aware of the now-familiar 99% and the upper 1%. But how did that happen? Was it just better education or new technology? These latter elements may have contributed to the problem. But the major cause was that politicians in both parties rewrote the rules that created a winner-take-all economy that favors the 1%, granting tax cuts and fewer and looser regulations on financial markets. But in so doing, the middle-class (thought at one time to be the backbone of our economy) lost jobs, wages and salaries stagnated, mortgage defaults increased, and many lives were severely interrupted. Money became more important to political campaigns. Citizen’s United opened the floodgate of funds going to candidates.
And, as we started this note, at least one big bank and Congress are coming together to draft new financial reform legislation. (That’s a little bit akin to putting the fox in to guard the henhouse!) The authors note briefly, “The banks are organized; its customers are not.” They refer to this process as “engineered inequality” in which we now have a small number of financial elite and (perhaps) only a remnant of a middle-class. Their conclusion is that a broken political system got us into this position, but the political system will of necessity get us out. But that will not be overnight.
(For a discussion with the authors, see the Bill Moyers, Moyers and Company program, January 17, 2012.)
Submitted by Don Birt (EJTF)