How “Winner-take-all Politics” created the great US inequality

The superrich have grabbed the bulk of the past three decades’ gains.

Still struggling in the wake of “the great recession,” average Americans are feeling frustrated, angry and betrayed. Their lives are not what they expected from the American economy. The continuing transfer of trillions (1,000,000,000,000′s) of dollars to the 1% of Americans who were  by far already the richest people living in the country, has left little reason to be optimistic about the future.

In their ground-breaking new book, “Winner-Take-All Politics – How Washington made the rich richer – and turned its back on the middle class,” authors Jacob S. Hacker and Paul Pierson identify the culprits behind this great economic crime of our time— the yawning, and still growing, income inequality gap between the vast majority of Americans and the richest of the rich.

What they find is that runaway inequality and the present economic crisis reflect what government has done to aid the rich and what it has not done to safeguard the interests of the middle class. The winner-take-all economy is primarily a result of winner-take-all politics. Their investigation shows how a political system that traditionally has been responsive to the interests of the middle class has been hijacked by the super rich.

Hacker and Pierson trace the rise of the winner-take-all economy back to the late 1970s when, under a Democratic president and a Democratic Congress, a major transformation of American politics occurred. With big business and conservative ideologues organizing themselves to undo the regulations and progressive tax policies that had helped ensure a fair distribution of economic rewards, deregulation got under way, taxes were cut for the wealthiest, and business decisively defeated labor in Washington. And this transformation continued under Reagan and the Bushes as well as under Clinton, with both parties catering to the interests of those at the very top.

What to do

Hacker and Pierson cite research that shows Americans are “conservative egalitarians.” That is, they are skeptical of government but are concerned about inequality of income, wealth and opportunity, and are supportive of programs to address them.

Unfortunately, although Americans know inequality is there and that it’s been growing, they seriously underestimate its magnitude, especially the earnings of the people at the top.

Add to this the fact that Americans are uninformed about politics. They find it hard to link their broad economic concerns to specific policies, primarily because they have no organizations that follow the tortuous trail of policy development and interpret it to them so they can vote accordingly.

Newspapers, especially community newspapers, and unions used to fill these functions. Now, with the decline of unions, newspapers have to carry the full load. But with media splintering into ever smaller audience slices plus the tendency of people to choose entertainment over hard news – coupled with the loss of advertising revenue – newspapers have closed and/or withdrawn support for quality news.

In the past Unions have helped people in the community turn out the vote – this is where elections are won and lost. Unions have effectively followed the policy-making process and helped interpret the twists and turns and guided people in casting their vote. Now, with the union’s loss of power, how can American’s begin to counteract the effects of the winner-take-all politics? That will be the subject of future posts.

How Rich Are the Superrich?

A huge share of the nation’s economic growth over the past 30 years has gone to the top one-hundredth of one percent, who now make an average of $27 million per household. The average income for the bottom 90 percent of us? $31,244.

Note: The 2007 data (the most current) doesn’t reflect the impact of the housing market crash. In 2007, the bottom 60% of Americans had 65% of their net worth tied up in their homes. The top 1%, in contrast, had just 10%. The housing crisis has no doubt further swelled the share of total net worth held by the superrich.

Winners Take All

The superrich have grabbed the bulk of the past three decades’ gains.

Out of Balance

A Harvard business prof and a behavioral economist recently asked more than 5,000 Americans how they thought wealth is distributed in the United States. Most thought that it’s more balanced than it actually is. Asked to choose their ideal distribution of wealth, 92% picked one that was even more equitable.

Capitol Gain

Why Washington is closer to Wall Street than Main Street.

member max. est. net worth
Rep. Darrell Issa (R-Calif.) $451.1 million
Rep. Jane Harman (D-Calif.) $435.4 million
Rep. Vern Buchanan (R-Fla.) $366.2 million
Sen. John Kerry (D-Mass.) $294.9 million
Rep. Jared Polis (D-Colo.) $285.1 million
Sen. Mark Warner (D-Va.) $283.1 million
Sen. Herb Kohl (D-Wisc.) $231.2 million
Rep. Michael McCaul (R-Texas) $201.5 million
Sen. Jay Rockefeller (D-W.Va.) $136.2 million
Sen. Dianne Feinstein (D-Calif.) $108.1 million
combined net worth: $2.8 billion

Congressional data from 2009. Family net worth data from 2007. Sources: Center for Responsive Politics; US Census; Edward Wolff, Bard College.

Who’s Winning?

For a healthy few, it’s getting better all the time.


Sources

Income distribution: Emmanuel Saez (PDF)

Net worth: Edward Wolff(PDF)

Household income/income share: Congressional Budget Office

Real vs. desired distribution of wealth:
Michael I. Norton and Dan Ariely (PDF)

Net worth of Americans vs. Congress: Federal Reserve (average); Center for Responsive Politics (Congress)

Your chances of being a millionaire: Calculation based on data from Wolff (PDF); US Census (household and population data)

Member of Congress’ chances:
Center for Responsive Politics

Wealthiest members of Congress:
Center for Responsive Politics

Tax cut votes:
New York Times (Senate; House)

Wall street profits, 2007-2009:
New York State Comptroller (PDF)

Unemployment rate, 2007-2009:
Bureau of Labor Statistics

Home equity, 2007-2009: Federal Reserve, Flow of Funds data, 1995-2004 and 2005-2009 (PDFs)

CEO vs. worker pay: Economic Policy Institute

Historic tax rates: Calculations based on data from The Tax Foundation

Federal tax revenue: Joint Committee on Taxation (PDF)

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About Freedom to...

Consultant helping people and employers in health care, education and government to see and understand how their organization works and how to change them to improve performance.
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2 Responses to How “Winner-take-all Politics” created the great US inequality

  1. Pingback: MORE, and MORE, and MORE, and MORE INEQUALITY | Now we're talking!

  2. Pingback: A Perfectly Designed System | Now we're talking!

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