What is Really Wrong with Government
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The Worsening Problem
The report goes on to conclude that this problem is getting worse. “Recent analysis indicates that the government has become less responsive than it was several decades ago and that it is [now] particularly attentive to the views of the affluent and business leaders.”6 Two developments over the past thirty years have increased political inequality and the disconnection between politicians and the average American. First, the financial disparities between individual Americans – which were large to begin with – have been increasing. The benefits of our growing economy have been accruing disproportionately to those who are already well-off. Not only has the gap between the rich and the poor been widening, but so has the gap between the rich and the traditional white-collar and blue-collar middle class. Here are some disturbing facts about the high level of economic inequality in America and how it is getting worse, not better.7
- Income is distributed highly unequally in this country. Over half of all income (50.3%) goes to the top fifth income class of families. The income going to the top 5% of richest families (21.7%) is twice the combined income of the bottom 40% –the 110 million Americans living on low and moderate incomes.
- Income inequality is getting worse. Between 1947 and 1979, the income for all classes of American grew at relatively the same rate. But more recently, between 1979 and 2009, the incomes for the richest 5% of families grew by a whopping 73%; and incomes for the richest 20% by an impressive 49%. But the increases for the bottom 60% of families have been pitiful in comparison – their gains were a meager 7%.
- In 1979, the average income for the top 5% was 11 times that of the lowest 20%. In 2006, that ratio had grown to 20 times – another indication of the growing mal-distribution of economic rewards.
- In 1965, CEOs made 24 times the wages of the typical worker. By 2007 that ratio had ballooned to 275 time the earnings of those workers.
- Meanwhile the value of the minimum wage continues to decline. In the late 1960s, the minimum wage was worth 50% of average worker’s hourly wage. By 2007, it was worth just 33.5% of the average worker’s wage.
- The inequality in wealth among Americans is even more extreme. In 2004, the top fifth richest families owned a staggering 84.7% of all the wealth of the country. The next 40% owned only 15.1% and the poorest 40% owned less than 1%. The last time the distribution of wealth in this country was this skewed was in the 1920s, right before the Great Depression.
- The top 20% of wealthy Americans own 90.7% of the stock. The bottom 80% owns a mere 9.4%. And 77% of the increased values of stocks between 1989 and 2004 went to a very few Americans – just the wealthiest 10% of households.
- Many believe that the increasing popularity of IRAs and mutual funds has given everyone in America of piece of the wealth pie – but that is wrong. The bottom half of Americans own less than 1% of the value of mutual funds, and a mere 3.3% of individual retirement accounts.
- Upward mobility, the ability to move up the economic ladder, is declining in America. Since the 1970s, fewer Americans have been able to move up and more of those at the top have stayed there.
- Not surprisingly, given all these figures, the U.S. has the highest level of economic inequality among developed countries. We are the worst in both income inequality and wealth inequality. To make matters worse, we also have the highest poverty rate and the most children in poverty.
These facts and figures graphically illustrate the growing economic divide among Americans. This situation is not simply disturbing for moral reasons, but also because of the corrosive impacts it is having on the operation of our democracy.
The second development in the private sector that is undermining political equality and democracy is the political mobilization of the corporate community. In the 1970s, the business community was reeling from legislative defeats from environmentalists, labor, and consumer protection groups. They were increasingly concerned about the costs of new regulations. Corporations that had previously been largely apolitical realized that they had to begin to devote more resources to their political efforts. And so corporate interests launched a very well-funded and well-planned campaign to increase their political power – pouring hundreds of millions of dollars into political campaigns, advocacy advertising, think-tanks, etc. This process has been well chronicled by Jacob Hacker and Paul Pierson in their insightful book, Winner-Take-All-Politics: How Washington Made the Rich Richer – and Turned Its Back on the Middle Class.8
The result has been that today business has become by far the most powerful organized interest in the United States – greatly outdistancing other large groups such environmentalists, the Christian Right, and the elderly. Labor used to be the traditional liberal counter-balance to business, but its membership has been in steady decline for decades and its political influence in Washington is now minimal. So when large multi-national businesses choose to mobilize their enormous economic resources to influence public policy, no other group in society is able to match those efforts. This doesn’t mean that business wins every political fight, but it does mean that business almost always has the political advantage.
So that is the basic problem: financial inequality is the rule in the private sector, and that has been creating more and more political inequality in the public sector. A coalition of the well-off – wealthy individuals and prosperous companies – now exerts an enormous and disproportionate amount of power in our governmental system. Let’s look at exactly how they manage to pull this off.