From New Deal to Raw Deal: Elizabeth Warren on the American middle class

Posted at 3:23 PM, Jan 09, 2015
and last updated 2015-01-09 17:30:59-05

Senator Elizabeth Warren, the Democrat of Massachusetts who often has the word “populist” near her name, gave aspeech Wednesday that was billed as a Major Address.

It was an interesting speech, but I am not sure why since it chimed all her usual bells: the gap between rich and poor is widening, the middle class is getting shafted and the system is stacked to ensure that nothing changes.

I suspect that what made the speech newsworthy is that at a time when many liberal Democrats want Warren to run against Hillary Clinton, Warren kind of blamed both parties for selling out the 99 per cent. 

When I say “kind of”, I'm referring to this offending passage where Warren discusses the “trickle down policies” that began in the 1980s and primarily helped the wealthy: “Pretty much the whole Republican Party - and, if we're going to be honest, too many Democrats - talked about the evils of 'big government’ and called for deregulation.”

For those of you following at home, Bill Clinton is especially associated with the deregulation of financial institutions so this was seen as a tricky swipe at Hillary.

In my book, the part of Warren’s speech that might qualify it as "Major" was her account of the economic fate, since 1980, of middle class Americans. It wasn’t vaguely original or fresh, but for an elected pol, it was systematic and analytic. Here is the money section:

Coming out of the Great Depression, America built a middle class unlike anything seen on earth. From the 1930s to the late 1970s, as GDP went up, wages went up pretty much across the board.  In fact, 90% of all workers-everyone outside the top 10%-got about 70% of all the new income growth.  Sure, the richest 10% gobbled up more than their share-they got 30%. But overall, as the economic pie got bigger, pretty much everyone was getting a little more.  In other words, as our country got richer, our families got richer. And as our families got richer, our country got richer. That was how this country built a great middle class.

But then things changed.

By 1980, wages had flattened out, while expenses kept going up. The squeeze was terrible. In the early 2000s, families were spending twice as much, adjusted for inflation, on mortgages as they had a generation earlier. They spent more on health insurance, and more to send their kids to college.  Mom and Dad both went to work, but that meant new expenses like childcare, higher taxes, and the costs of a second car. All over the country, people tightened their belts where they could, but it still hasn't been enough to save them. Families have gone deep into debt to pay for college, to cover serious medical problems, or just to stay afloat a while longer.(vi)  And today's young adults may be the first generation in American history to end up, as a group, with less than their parents.

Remember how up until 1980, 90% of all people-middle class, working people, poor people-got about 70% of all the new income that was created in the economy and the top 10% took the rest? Since 1980, guess how much of the growth in income the 90% got? Nothing. None. Zero. In fact, it's worse than that. The average family not in the top 10% makes less money than a generation ago.  So who got the increase in income over the last 32 years? 100% of it went to the top ten percent. All of the new money earned in this economy over the past generation-all that growth in the GDP-went to the top. All of it.

That is a huge structural change. 

Now, all politicians talk about helping the middle class. They have to – the facts are the facts. But few politicians admit that it is a major structural shift in the American economy built over decades. Democrats see it a fleeting unfairness caused by Republican lust for tax cuts. Republicans see it as an anomaly caused by the Democrats promiscuous behavior toward big government. Together, they form a silent conspiracy to do nothing about this historic shift.

But shouldn’t politicians, who are born to pander, try to address the real problem if only to curry votes and favor?

An interesting new report out this week from the Pew Research Center helps understand why it doesn’t work this way: The most financially insecure Americans are the least likely to vote and participate in politics at all.

Pew says it is striking the extent that “the financially insecure opt out of the political system altogether.” 

“For example, in 2014, almost all of the most financially secure Americans (94%) said they were registered to vote, while only about half (54%) of the least financially secure were registered,” according to the report.

This isn’t exactly trailblazing. Of course, the rich vote more than the poor, are more active and are solicited more. But there are plenty of people who are not poor but are insecure; they may be earning but may have debt or no savings. These worried people are opting out of politics too.

Still, don’t the financially insecure lean Democrat to such an extent that the party represents them well? Nope.

“Financial insecurity is associated with a lack of support for the Republican Party, but it does not translate into correspondingly greater levels of allegiance for the Democrats,” according to Pew.

On top of all this, of course, is the simple fact that both political parties are financed by wealthy individuals, large corporations and, to a lesser degree, labor unions. 

So it is no wonder that the historically high level of economic inequality in America was a non-issue in 2014 campaign. And it is no wonder that the shafting of the middle class is a neglected topic.

Some Democrats want Elizabeth Warren to run in 2016 for just those reasons. She says she won’t.

[Also by Dick Meyer: Is it time for the middle class to turn its back on politicians?]

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