The story currently being peddled by the folks at Bloomberg [ht: ja] is that the American middle-class is currently suffering, as the enormous wealth they managed to accumulate during the past few years is now dwindling. And that crisis—the end of their “once-in-a-generation wealth boom”—is what they will take into the midterm elections.
There is a kernel of truth in that story but it is overshadowed by all that it leaves out.
The small sliver of truth?
Yes, as we can see in this chart, the average real wealth (in July 2022 dollars) of the middle 40 percent of Americans did in fact increase from January 2017 (when Donald Trump first took office) until March of 2022; now it has begun to fall and is projected to continue declining (according to data provided by Realtime Inequality).*
That should come as no surprise. It is the result of years of cheap money, which has fueled increases in the value of the two major components of middle-class wealth: house prices and the stock market. Now, while the price of real estate continues to rise (as anyone knows who has attempted to purchase a house in recent months), the stock market has taken a tumble (with the Fed policy of increasing interest-rates, on top of disruptions in global supply chains and the war in Ukraine).
So, yes, middle-class wealth is falling. But that’s only part of the what is going on out there, beyond Bloomberg’s narrow lens.
Another important part of the story, which I discussed on Wednesday, is the plight of the bottom 50 percent of American workers. Yes, their average wealth also increased during the same period but not by much more than a rounding error: a total of $13.8 thousand for each person. Their average wealth at the most recent peak reached $12 thousand, and not it too is beginning to fall.
What else is left out of the Bloomberg story? Well, it only refers to the absolute level of middle-class wealth.
As is clear from the chart above, the average wealth of the middle-class (the blue line) is much closer to that of the bottom 50 percent (the green line) than it is to the wealth of the top 1 percent (the brown line): $366.5 thousand compared to $11.9 thousand and $17.5 million, respectively. That doesn’t look like much of a bonanza to me, certainly not in relative terms.
Indeed, the third major part of the missing story has to do with the changes over time in the shares of wealth owned by each of the the classes.
The fact is, the middle-class share of total wealth has been steadily declining since the mid-1980s (falling from 35.7 percent to 28.9 percent), while that of the entire bottom 50 percent has also decreased (from a minuscule 2 percent to a barely perceptible 1.2 percent). Meanwhile, the share of wealth owned by the top 1 percent has soared dramatically (from 21.8 percent to 34.6 percent).
If we add those three elements to Bloomberg’s story, we end up with a very different narrative about the U.S. economy. American workers—both poor and middle-class—have been losing out to those at the top for decades now.
Yes, along the way, there have been minor peaks and troughs in their accumulation of wealth (just as has been the case for those at the top) but the long-term trajectory is clear: a growing gulf between those at the top and everyone else. Under both Democratic and Republican administrations.
It’s a problem that will not be solved in this midterm election, not with the candidates and campaigns we’re seeing from both political parties.
It’s a fundamental problem with American capitalism. But that, alas, does not fit into the Bloomberg story either.
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*The middle 40 percent is the population whose wealth falls between the 50th and 90th percentiles.
Three and a half weeks ago, Bernie Sanders became the last challenger to drop out of the race, thus clearing the way for Joe Biden to become the Democratic nominee on the November presidential ballot.
Since then, the novel coronavirus has engulfed the country (and, of course, the world), the U.S. economy has mostly come to a standstill, and tens of million American workers have joined the ranks of the unemployed, while “essential” workers are forced to commute to and labor in perilous conditions and jobless families have found it necessary to walk or take to their cars to wait in line by the thousands outside food banks.
Biden therefore has to find a way of presenting a progressive alternative to Trump by articulating some clear ideas, and perhaps eventually a detailed plan, to confront the most dramatic economic and social crises to face the United States since the first Great Depression.
Given the fact that Biden was the first choice of the conservative Democratic establishment, which breathed a sigh of relief when he and not Sanders (or, for that matter, Elizabeth Warren) became the presumptive nominee, he was quickly warned that he needed to pay attention to and incorporate ideas from progressive movements inside and outside the party.
Just hours after Sanders ended his campaign, seven groups made up of young left-wing activists—the Alliance for Youth Action, Justice Democrats, the March for Our Lives Action Fund, NextGen America, Student Action, the Sunrise Movement, and United We Dream Action—sent an open letter to Biden with a set of demands spanning policy and personnel to earn their support in the general election against Donald Trump.
Messaging around a “return to normalcy” does not and has not earned the support and trust of voters from our generation. For so many young people, going back to the way things were “before Trump” isn’t a motivating enough reason to cast a ballot in November. And now, the coronavirus pandemic has exposed not only the failure of Trump, but how decades of policymaking has failed to create a robust social safety net for the vast majority of Americans.
And then, a few weeks later, Bloomberg revealed that one of Biden’s economic advisers was none other than. . .Larry Summers.
As it turns out, Summers was the first name on the “Biden Do Not Reappoint” (or, alternatively, Do Not Resuscitate) list published last month by Robert Kuttner, who wrote that Summers in 2009 “not only lowballed the necessary economic stimulus and ended it prematurely, but he successfully fought for rescuing the biggest banks rather than taking them into temporary receivership.”
The response to Bloomberg’s scoop was quick and equally categorical. In a joint statement, two of the organizations that signed the open letter—Justice Democrats and the Sunrise Movement—announced they were launching a petition asking Biden to disavow Summers, whom the groups noted has a long history of advocating for harmful economic policies and a record of bigoted statements. And David Sirota, senior adviser and speechwriter on the Sanders campaign, tweeted that Biden “has chosen as his economic adviser the main Democratic proponent of the China PNTR deal and Wall Street deregulation. Apparently, Biden may really have meant it when he said ‘nothing will fundamentally change’.”
What is it about Summers that provokes such ire from progressive individuals and movements?
Perhaps the best place to begin is the piece that Michael Hirsh published in the National Journal back in 2013, when Barack Obama was considering Summers as the replacement for Federal Reserve Board Chairman Ben Bernanke. Hirsh noted that while “on paper, Summers is a superb candidate to succeed Bernanke in a post that the brilliant 58-year-old Harvard professor has pined for since his earliest days in Washington, he was “a very risky choice for chairman.”*
Why? Hirsh presented two main reasons: First, Summers often used his power and intellectual arrogance “to bully opponents into silence, even when they have been proved right.” Second, he had committed “a lot of errors in the past 20 years”—from his moves to deregulate Wall Street in the administration of Bill Clinton to the too-tepid response to the Second Great Depression under Obama—and “yet in no instance has Summers ever been known to publicly acknowledge a mistake.”**
Hirsh’s article played an important role—in addition to opposition from four Democrats on the Senate Banking Committee—in forcing Summers to withdraw his name from consideration for the post.***
As regular readers know, I have had my own running battle with Summers and his economic views on this blog. For example, I challenged him on the idea that inequality is necessary consequence of entrepreneurship; that capitalism has no inherent flaws and the problems of unemployment, inequality, and so on “can be addressed with proper fiscal and monetary policies”; that Summers, unlike most academics, has been very well paid to play on behalf of those who have a big stake in what’s being debated inside and outside the academy; that his “belated, poorly thought-out, population-driven ‘discovery’ of the possibility of secular stagnation” received undeserved accolades from other mainstream economists; that the cure for secular stagnation does not reveal a flaw in capitalism but instead has an easy fix, an increase in government-financed infrastructure spending; and finally that workers’ compensation depends on productivity growth and therefore it’s not necessary—and perhaps even counter-productive—to shift attention from growth to solving the problem of inequality.
More recently, Summers joined fellow Harvard economist Gregory Mankiw in criticizing the kind of wealth taxes that were proposed by Sanders and Warren (as scored by Emmanuel Saez and Gabriel Zucman)—because, among other things, wealthy people can avail themselves of many ways to avoid such taxes (thus reducing the projected revenues) and because closing loopholes would “involve placing limits on the ability to be charitable or to establish trusts for the benefits of grandchildren.”****
The fact is, Summers continues to represent, from his perch at Harvard, both the theoretical blinders and bullying stance of mainstream economics as well as the rush to return to “business as usual” within the Democratic Party.
If Biden wants to signal to wealthy donors and large corporations and banks that, if he somehow manages to defeat Trump in November, “nothing will fundamentally change,” then he really can’t do better than to stick with Summers.
*Back in 2013, my own choice, for what it’s worth, was Federal Reserve Governor Sarah Raskin.
**As I wrote in 2009, those characteristics (which Cornel West described as “a braininess that lacks wisdom and vision” and “a smartness that lacks a sensitivity to the poor and the marginal”) are a good description of most mainstream economists I have come across over the years.
***Kuttner, in a more recent piece, wrote that “After Summers personally complained to David Bradley, then the publisher of Atlantic Media, which owned National Journal, Hirsh was advised to seek other work—he ended up moving to Politico and then to Foreign Policy, though no errors were ever found in the Summers piece and no correction was ever issued.”
****If readers want to follow the debate, here is a link to the rejoinder by Saez and Zucman (pdf) and a follow-up response by Summers and his coauthor Natasha Sarin.
We can’t stay this way forever—with physical distancing (now that all 50 states have finally issued some kind of Stay at Home order), schools closed (and operating with a semblance of education through online teaching), businesses shuttered (even while the stock market soars).
The question that seems to be on everyone’s lips is, when are things going to go back to normal?
But who wants to return to normalcy? The novel coronavirus pandemic has revealed, if nothing else, just how dysfunctional the situation was in the United States even before COVID-19 started to cut its deadly path across the country. Tens of millions of workers have been furloughed and laid off and there’s still relief for them in sight. Instead, they’re being forced to have the freedom to drive to food banks to obtain groceries and other household supplies. All the while, their fellow employees, who labor in activities that have been deemed essential, are told to endure dangerous commutes on public transportation and to continue to work under perilous conditions, with little regard for their personal safety. Workers didn’t have any say before in the decisions concerning their jobs, let alone in the other policies adopted by their corporate employers—and they certainly don’t now.*
The pandemic has also demonstrated just how unequal life is in the United States, both geographically and socially. New York City is a perfect example of the obscene inequalities that have characterized economic and social life throughout the country, both before and now during the current crisis. As I showed the other day, if one compares the map of where frontline workers live within New York with the map of the confirmed cases in the city, the two are virtually identical. And those areas, the poorer neighborhoods that make up the outer boroughs of the city, are heavily black, Latino, or mixed race. Before they were hit by COVID-19, they had less wealth, lower incomes, substandard healthcare, and inadequate schools—and now (as reports come in, from Chicago, Detroit, New Orleans, and elsewhere) they’re suffering disproportionately from both the dreaded disease and the uneven and unequal response to it.
I could go on. My only point is, a return to normalcy means going back to those same conditions—in which workers, blacks, Latinos, and others who make up the bottom of the economic and social pyramid are assaulted by and fundamentally excluded from the major decisions that govern their lives. Who would want that?
If voters needed any more reason to be dismayed by the choice of Joe Biden as the presumptive Democratic nominee for president, all they need to do is look at his “plan to safely reopen America.” It’s a plan to get back to normal—and only back to normal. Nothing is supposed to change.
Sure, as Biden explains, there will have to be lots of work before getting there. His plan is basically the existing common sense (at least outside the gang of hacks and grifters who currently occupy the White House): physical distancing, testing, and adequate equipment for healthcare workers and hospitals.
And after that? Biden proposes the United States “reopen more businesses and put more people back to work”—in consultation with “top experts from the private sector, industry by industry, to come up with new ideas on how to operate more safely.” And labor unions and other employee groups? Well, they’re encouraged to work with OSHA “to figure out what protections workers need on the job during this period.”
But that’s it. In Biden’s plan, they play no role in the corporations that have been bailed out thus far, and will no doubt receive more loans and grants as stimulus plans are devised further on down the line. There’s no room for workers to obtain seats on corporate boards, no stimulus for organizing more unions to represent workers in the post-pandemic economy.
As for the obscene racial inequalities that plague the U.S. economy, which preceded the pandemic and have only been magnified in recent months, all Biden promises is to “focus like a laser” on “the racial disparities in Covid-19 cases”—as if those disparities are themselves not caused by the racial disparities that are the result of the way the American economy is currently organized.
That’s as far as Biden is willing to go. He makes absolutely no attempt to begin to imagine, let alone devise a plan for, fixing the U.S. economy and the healthcare system. No new role for workers in the places where they work. No redress for the grotesque inequalities we see around us. No renewal of the local public healthcare system, let alone Medicare for All.
There’s nothing in Biden’s plan to help or inspire anyone—except the small group at the top who want to keep things as they are and just get back to normal.
*Unless, of course, they threaten to withhold their labor or go on strike, which more and more groups of American workers have begun to do.
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