Read Who Stole the American Dream? Online
Authors: Hedrick Smith
Who Stole the American Dream? (60 page)
2012—
The United States struggles with what economists call “a jobless recovery,” where the numbers show the economy growing but where unemployment remains stubbornly high. This is the third instance of a jobless recovery in recent decades, after declines in the early 1990s and again in 2000–2002. Corporations sit on $1.9 trillion in cash, spending more money on buying back stock than hiring workers, undermining the dynamics of “the virtuous circle.”
2011–2012—
Some corporate leaders call for a “domestic Marshall Plan” and revisions in U.S. tax laws to generate more job growth, revitalize America’s global competitiveness, and to enable more of the middle class to reclaim the American Dream. Former Intel CEO Andy Grove and GE CEO Jeffrey Immelt, among others, advocate a renaissance in U.S. manufacturing. Other business leaders and economists call for our current leaders to do what past presidents from Washington to Lincoln and Eisenhower have done—take government action to rebuild America’s aging roads, ports, and airports; to recoup America’s lost lead in technology and innovation; and to educate America’s next generation and retrain America’s current generation to compete better against global rivals.
EPIGRAPH
1
“We must make our choice”
Raymond Lonergan, “A Steadfast Friend of Labor,” in Irving Dilliard, ed.,
Mr. Justice Brandeis, Great American
(St. Louis: Modern View Press, 1941), 42.
1
“We are treading”
John W. Gardner, remarks, “The American Experiment,” Council for Excellence in Government, April 1, 1998,
http://www.pbs.org
.
2
“Thus, it is manifest”
Aristotle,
Politics
, in
The Basic Works of Aristotle
(New York: Random House, 1941), 1221.
3
Its response to the challenges
Arnold J. Toynbee, chap. 5, “Challenge and Response,” in
A Study of History
, abridged vols. 1–6, ed. D. C. Somervell (London: Oxford University Press, 1947), 60–79.
4
“Schism in the body social”
Toynbee,
Study of History
, chap. 18, “Schism in the Body Social,” 371–428; chap. 19, “Schism in the Soul,” 429–532; also see part 2, The Geneses of Civilizations, and part 4, The Breakdowns of Civilizations; “A Study of History,”
Life
, February 23, 1948.
5
“A house divided”
Abraham Lincoln, “A House Divided,” speech delivered in Springfield, Illinois, June 16, 1858, in vol. 2 of
The Collected Works of Abraham Lincoln
, ed. Roy P. Basler (New Brunswick, NJ: Rutgers University Press, 1953), 461–69,
http://quod.lib.umich.edu/l/lincoln/lincoln2/1:508?rgn=div1;view=fulltext
.
6
We have gone off track
Naftali Bendavid, “Country Is Headed in Wrong Direction, 74% Say,”
The Wall Street Journal
, October 13, 2011; “Just 1 in 5 Americans Happy with Direction of Country,” CBS News poll, October 3, 2011,
http://www.cbsnews.com
.
7
One such hidden beginning
Lewis F. Powell, Jr., memorandum, “Attack on American Free Enterprise System,” August 23, 1971,
http://law.wlu.edu/deptimages/Powell%20Archives/PowellMemorandumTypescript.pdf
.
8
“America is coming apart at the seams”
Charles Murray,
Coming Apart: The State of White America, 1960–2010
(New York: Crown Forum, 2012), 11, 12.
9
“Mind-boggling” in its magnitude
Alan Krueger, “The Rise and Consequences of Inequality in the United States,” remarks, Center for American Progress, January 12, 2012,
http://www.americanprogress.org/events/2012/01/pdf/krueger.pdf
. For a “chasm” reference, see Ron Haskins and Isabel V. Sawhill,
Creating an Opportunity Society
(Washington, DC: Brookings Institution Press, 2009), 33.
10
The top 1 percent … reaped two-thirds
Emmanuel Saez, “Striking It Richer: The Evolution of Top Incomes in the United States (Updated with 2008 Estimates).” working paper (Berkeley: Institute for Research on Labor and Employment, University of California at Berkeley, July 17, 2010).
11
The top 1 percent captured
93 percent Emmanuel Saez, “Striking It Richer: The Evolution of Top Incomes in the United States (Updated with 2009 and 2010 Estimates),” March 2, 2012,
elsa.berkeley.edu/~saez/saez-UStopincomes-2010.pdf
.
12
A solid majority
“Most in Poll See Growing Wealth Gap,”
The Washington Post
, November 9, 2011; “Polls Find Voters Are Deeply Divided,”
The Wall Street Journal
, November 8, 2011; also see Andrew Kohut, “Don’t Mind the Gap,”
The New York Times
, January 26, 2012.
13
Drag on today’s economy
William H. Gates, Sr., and Chuck Collins,
Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes
(Boston: Beacon Press, 2002), 21; Philippe Aghion, Eve Caroli, and Cecilia García-Peñalosa, “Inequality and Economic Growth: The Perspective of the New Growth Theories,”
Journal of Economic Literature
37, no. 4 (December 1999): 1615–60.
14
“Impressively unambiguous”
Aghion, Caroli, and García-Peñalosa, “Inequality and Economic Growth,” 1616–17.
15
Income inequality can be “destructive”
Andrew G. Berg and Jonathan D. Ostry, “Inequality and Unsustainable Growth: Two Sides of the Same Coin?” IMF Staff Discussion Note, International Monetary Fund, April 8, 2011,
http://www.imf.org
.
16
Losing our title as “the land of opportunity”
Isabel V. Sawhill, “Trends in Intergenerational Mobility,” in Julia B. Isaacs, Isabel V. Sawhill, and Ron Haskins,
Getting Ahead or Losing Ground: Economic Mobility in America
(Washington, DC: Brookings Institution, 2008), 8–9; see also Isaacs, “International Comparisons of Economic Mobility,” in Isaacs, Sawhill, and Haskins,
Getting Ahead
, 37–44,
http://www.economicmobility.org
.
17
“Middle class is the key”
Rush Limbaugh, “Democrats and the Middle Class,”
The Rush Limbaugh Show
, October 25, 2011,
http://www.rushlimbaugh.com
.
18
“Middle class that made America great”
Richard Trumka, “Your Money,” CNN, September 4, 2011,
http://transcripts.cnn.com
; and Trumka, remarks, Brookings Institution, September 30, 2011,
http://www.brookings.edu
.
19
Unequal Democracy
The title of Princeton University professor Larry M. Bartels’s excellent book on modern U.S. politics and economics: Bartels,
Unequal Democracy: The Political Economy of the New Gilded Age
(New York: Russell Sage Foundation; Princeton, NJ: Princeton University Press, 2008).
20
“Powerlessness also corrupts”
William Greider,
Who Will Tell the People? The Betrayal of American Democracy
(New York: Simon & Schuster, 1992), 20.
21
“An elaborate influence-peddling scheme”
John McCain, CNN AllPolitics, June 30, 1999.
22
Business has employed thirty times as many
“Lobbying Database,” Center for Responsive Politics, based on data from the Senate Office of Public Records, January 31, 2011,
http://www.opensecrets.org/.lobby/index.php
; Lee Jared Drutman,
The Business of America Is Lobbying
, online doctoral thesis (Berkeley: University of California at Berkeley, Fall 2010), 5, 140–141,
http://www.leedrutman.com
.
23
From 1998 through 2010
“Lobbying Database”: With this database, the Center for Responsive Politics covers lobbying expenditures from 1998 through 2011 for thirteen sectors—Labor; “Ideology,” or single-issue lobbying; “Other”; and ten business-related categories (listed in descending order of their lobbying expenditures): Health; Miscellaneous Business; Finance/Insurance/Real Estate; Communications/Electronics; Energy/Natural Resources; Transportation; Agribusiness; Defense; Construction; and Lawyers& Lobbyists. That database shows business lobbying expenditures from 1998 through 2010 of $28,562,488,910, compared with $492,244,499 for labor. In all, business groups accounted for 85.71 percent of the total lobbying expenditures and labor for 1.48 percent for those twelve years.
24
No countervailing power matches
Drutman, thesis, 117.
25
Share of world trade shrank
William H. Branson, Herbert Giersch, and Peter G. Peterson, “Trends in United States International Trade and Investment Since World War II,” in
The American Economy in Transition
, ed. Martin Feldstein (Chicago: University of Chicago Press, 1980), 183–84.
26
“Empire of consumption”
Charles S. Maier,
Among Empires: American Ascendancy and Its Predecessors
(Cambridge, MA: Harvard University Press, 2006), 255.
27
Germany took a different fork
David Leonhardt, “The German Example,”
The New York Times
, June 8, 2011; Steven Rattner, “The Secrets of Germany’s Economic Success: What Europe’s Manufacturing Powerhouse Can Teach America,”
Foreign Affairs
90, no. 4 (July–August 2011); Leslie H. Gelb, “What Germany’s Economy Can Teach Us,”
Daily Beast
, June 5, 2011,
http://www.thedailybeast.com
; Kevin Phillips,
Wealth and Democracy: A Political History of the American Rich
(New York: Broadway Books, 2003), 163.
28
Multitrillion-dollar trade deficits
The U.S. trade deficits totaled $6 trillion from 2000 through 2010. Germany’s trade surplus totaled $2 trillion. “U.S. Trade in Goods and Services, Balance of Payment Basis, 1960–2011,” U.S. Census Bureau, Foreign Trade Division, March 9, 2012,
http://www.census.gov/foreign-trade/statistics/historical/gands.pdf
; German Office of Federal Statistics, “Foreign Trade Data: Overall Development in Foreign
Trade Since 1950,” Statistisches Bundesamt, Deutschland, February 21, 2012,
http://www.destatis.deDocument2
.
29
Pay of middle-class workers in Germany
Leonhardt, “German Example”; Robert B. Reich, “The Limping Middle Class,”
The New York Times
, Sunday Review, September 4, 2011.
30
Today, 21 percent of Germans work
In U.S. nonfarm payroll of 131.6 million, the Bureau of Labor Statistics listed 11.8 million in manufacturing in September 2011: “The Employment Situation, September 2011,” October 7, 2011,
http://www.bls.gov
. For German figures, see U.S. Bureau of Labor Statistics,
International Comparisons of Annual Labor Force Statistics: Adjusted to U.S. Concepts, 10 Countries 1970–2010
, table 2–8, “Percentage of Employment in Manufacturing,” March 30, 2011, 23,
http://www.bls.gov/fls/flscomparelf/lfcompendium.pdf
.
31
The difference is not in technology
Marcus Walker, “Is Germany Turning into the Strong Silent Type?”
The Wall Street Journal
, July 27, 2011; Gelb, “What Germany’s Economy Can Teach Obama.”
32
Middle class was left behind
Neither ordinary Americans nor experts agree on what constitutes the U.S. middle class. In opinion polls, close to half of Americans, from people who make $45,000 a year to those who make $200,000, call themselves middle class. The U.S. Census Bureau reports the median household income—right in the middle—was $49,445 in 2010 and that 80 percent of all U.S. families had household incomes below $100,065. Typically, economists divide the current U.S. population of 312 million into income quintiles, or fifths. In its income analysis, the Congressional Budget Office uses four groupings: the bottom fifth; the three middle fifths; the top fifth, and the top 1 percent—corresponding to lower-income, middle-income, and upper-income groupings, plus the super-rich. At the high end, income analysts such as Emmanuel Saez of the University of California at Berkeley separate the top 10 percent from the lower 90 percent and then differentiate among the top 1 percent (the super-rich, with annual incomes above $352,000) and the next 9 percent (upper middle class and wealthy). I have followed the CBO groupings with the exception that I have moved the middle class up by ten percentiles. Since the U.S. Census Bureau tops out household income for the lowest quintile at $20,000 (below the official poverty level of $22,811 for a family of four), it seems mistaken to include that level in the middle class. Accordingly, like some other analysts, I group as poor and low income the bottom 30 percent (90 million people with incomes below $28,636). The middle class comprises the thirtieth through the eightieth percentiles, 150 million people with household incomes from just below $30,000 to $100,065; the upper middle class from the eightieth to the ninety-fifth percentiles (45 million making $100,065 to $150,000, using Census Bureau and Saez figures); the wealthy as the top 5 percent (15 million people earning above $150,000), topped by the super-rich 1 percent (3 million people with household incomes topping $352,000). For income and poverty level figures, see U.S. Census Bureau, “Income, Poverty, and Health
Insurance Coverage in the United States: 2010,” issued September 2011, 14–16, table A-3, which shows quintile levels and the mean level for the second quintile at $28,636; for total U.S. population, see Census Bureau, “Monthly Population Estimates for the United States, April 1, 2010 to March 1, 2012,”
http://www.census.gov/popest/data/state/totals/2011/tables/NA-EST2011–01.xls
; CBO “Trends in the Distribution of Household Income Between 1979 and 2007,” October 2011,
http://cbo.gov/sites/default/files/cbofiles/attachments/10-25-HouseholdIncome.pdf
; Emmanuel Saez, “Striking It Richer,” updated to 2010, March 7, 2012,
elsa.berkeley.edu/~saez/saez-UStopincomes-2010.pdf
; Lawrence Mishel, director, Economic Policy Institute, email, March 29, 2012; Haskins and Sawhill,
Creating an Opportunity Society
, 48–50.
33
Getting nowhere
Ibid.; Conor Dougherty, “Income Slides to 1996 Levels,”
The Wall Street Journal
, September 14, 2011.
34
“More productive, more profitable, flush with cash”
Scott Thurm, “U.S. Firms Emerge Stronger,”
The Wall Street Journal
, April 9, 2012.
35
Two-thirds of Americans
“Rising Share of Americans See Conflict Between Rich and Poor,” Pew Research Center, January 11, 2012,
http://www.pewresearch.org
.
36
“Virtuous circle of growth”
Thomas I. Palley, “America’s Exhausted Paradigm: Macroeconomic Causes of the Financial Crisis and Great Recession,”
New American Contract
(Washington, DC: New America Foundation, June 2009),
http://www.newamerica.net
.
37
Dynamic thrust of “the virtuous circle”
Ibid.
38
What we need now
Jeffrey R. Immelt, “An American Renewal,” Detroit Economic Club, June 26, 2009,
http://www.econclub.org
.