Posts Tagged ‘Obama’

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The working-class—at least the white working-class—has become the main theme of the post-election narrative in the United States. That’s not surprising since, as Jim Tankersley explained:

Whites without a college degree — men and women — made up a third of the 2016 electorate. Trump won them by 39 percentage points, according to exit polls, far surpassing 2012 Republican nominee Mitt Romney’s 25 percent margin. They were the foundation of his victories across the Rust Belt, including a blowout win in Ohio and stunning upsets in Pennsylvania and Wisconsin.

The last time around, these voters comprised more than one-third of the Americans who voted for Barack Obama—and Hilly Clinton failed to duplicate that success, especially in any state that mattered in the final electoral-college tally.

Clinton’s supporters want to blame their campaign debacle on racism (in addition to sexism and nativism) and, in recent days, have expressed their fear that responding to Trump’s victory by reaching out to the white working-class will lead to people of color being marginalized. It seems they’re returning to and rehashing the old, tired debate of class versus identity politics.

The first thing to keep in mind is that Bernie Sanders managed, however maladroitly, to put together a message of economic populism that challenged mainstream Democratic identity politics. He reiterated that view after the election:

Let’s rebuild our crumbling infrastructure and create millions of well-paying jobs. Let’s raise the minimum wage to a living wage, help students afford to go to college, provide paid family and medical leave and expand Social Security. Let’s reform an economic system that enables billionaires like Mr. Trump not to pay a nickel in federal income taxes. And most important, let’s end the ability of wealthy campaign contributors to buy elections.

In the coming days, I will also provide a series of reforms to reinvigorate the Democratic Party. I believe strongly that the party must break loose from its corporate establishment ties and, once again, become a grass-roots party of working people, the elderly and the poor. We must open the doors of the party to welcome in the idealism and energy of young people and all Americans who are fighting for economic, social, racial and environmental justice. We must have the courage to take on the greed and power of Wall Street, the drug companies, the insurance companies and the fossil fuel industry.

Second, as Ben Casselman has pointed out, it’s far from clear Donald Trump will be able to keep his promises to the white working-class.

Trump, if he sticks to his campaign pledges (a big “if”), will probably do little either to help the working class or to hurt the elites, at least economically. What’s more, this simple dichotomy completely leaves out the people who stand to lose the most, based on what little we know about Trump’s plans: poor and low-income families in urban and suburban areas.

Third, and perhaps most important, there’s no necessary contradiction between identity and class politics. The Democratic establishment and American liberals presume such a contradiction is hardwired into the U.S. polity and electoral politics. But, in order to move forward, we need some fresh thinking about the possibility of a real working-class politics.

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We need to keep in mind that, historically, political movements around identity were also informed by and infused with working-class politics. Consider, for example, International Women’s Day, which was originally called International Working Women’s Day—the earliest observance of which was held in 1909, organized by the Socialist Party of America, in remembrance of the 1908 strike of the International Ladies Garment Workers’ Union. Or the Civil Rights Movement, which in 1963 organized the March on Washington for Jobs and Freedom, one of the largest political rallies for human rights in U.S. history. One of the March’s key demands was “a massive federal program to train and place all unemployed workers—Negro and white—on meaningful and dignified jobs at decent wages.” In both cases, movements for new identity-related rights were based on working-class organizations and class-defined forms of grievance and redress.

We also need to understand, as Chris Dillow has pointed out, “the very notion of a ‘white’ working class plays the ruling class’s game of divide and rule.”

This isn’t just because it pits class politics against identity politics, but also because it imputes a racism to workers which is perhaps just as prevalent – and more damaging – among the boss class. It downgrades the many other genuine problems workers have, such as stagnant wages, insecurity and workplace tyranny. And it has the absurd implication that ethnic minorities aren’t part of the working class too.

The flip side is that the interests of the working-class are—or at least can be, with the appropriate discourses, identities, and forms of political organization—the interests of most people. As I argued in Sydney, the working-class can “challenge the pretensions of capital to become a universal class, by posing its own universal aspirations—not for everyone to become a laborer but to abolish the wages system itself.”

As Dillow succinctly put it,

the working class is not a problem in politics. It’s the solution.

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Yesterday, I questioned the case—presented by Jason Furman and the White House Council of Economic Advisers—that the Obama administration had made a “historic achievement in reducing inequality.”

James Kwak, as it turns out, had much the same reaction:

inequality is every bit the problem we’ve always thought it was. It’s not as bad today as it would be if John McCain had been elected eight years ago. But we’re no closer to addressing its fundamental causes.

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First, Kwak explains that the key chart behind the Obama administration claim (which I’ve reposted above) is not what it seems. It doesn’t show inequality has actually declined by the stipulated amounts. What it does show is that (a) in 2017 (and therefore a forecast for next year) and (b) in comparison to a world in which the Bush-era tax cuts didn’t expire and without the Affordable Care Act (and therefore a parallel universe of lower tax rates and pre-Obama health coverage rates) “our universe is a little less unequal than that parallel universe.”

In summary, the economic factors that produce higher pre-tax income inequality—stagnant middle-class wages, high corporate profits, and booming asset markets—are alive and well, and it doesn’t seem the Obama administration has done much about them. The administration did pass the Affordable Care Act and let the Bush tax cuts expire for the rich, both of which helped mitigate the pre-tax inequality produced by contemporary American capitalism. But even if Barack Obama called inequality the “defining challenge of our time,” he has done little to tackle its fundamental causes. Let’s hope the next president does better.

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Kwak then takes on the larger issue of whether inequality has actually been getting worse or better under the Obama administration. What he shows (much as I argued yesterday) is that, while tax-and-transfer policies have made the distribution of income less unequal than it otherwise would have been (thus, the red line is lower than either the green or blue lines), they’ve done nothing to change the “underlying economic factors that determine inequality of pre-tax income.”

What we’ve seen then is pre-tax inequality has continued to grow and, even though tax-and-transfer policies lower the degree of inequality (and, indeed, have widened the gap between pre-tax and post-tax inequality), overall inequality has continued to grow under the Obama administration.

And looking forward?

Yes, 2015 was a good year for middle-class families, but it didn’t come close to making up for several bad years during the current expansion. There’s no obvious reason why the pre-tax income share of the 1% will stop rising anytime soon—except for the next recession, after which it will most likely continue its long-term ascent.

That, in my view, is why “economic inequality will remain the ‘defining challenge of the next generation, too’.”

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Inequality may be the “defining challenge of our time.” But you wouldn’t know so from Monday evening’s presidential debate, in which neither candidate directly addressed the issue.

But the Obama administration seems to be in full gear—with an op-ed piece by chair of the White House Council of Economic Advisers Jason Furman and an extensive report by the Council of Economic Advisers (pdf)—celebrating its own “historic achievement in reducing inequality.”*

Tax changes enacted since 2009 have boosted the share of after-tax income received by the bottom 99 percent of families by more than the tax changes of any previous Administration since at least 1960. President Obama has also overseen the largest increase in Federal investment to reduce inequality since the Great Society, largely reflecting the coverage provisions of the Affordable Care Act (ACA) and expanded tax credits for working families.

And the results? Together, the changes in tax policy and the ACA provisions will increase the share of after-tax income received by the bottom quintile in 2017 by less than one percentage point and reduce the share received by the top 1 percent by all of 1.2 percentage points.

That’s something, it is true, but it does not reverse the spectacular growth in inequality the United States has witnessed in recent decades (when the share of income captured by the top 1 percent rose from 9 percent in 1971 to 22 percent in 2015), and it doesn’t even touch the even-more-dramatic inequality in the distribution of wealth (such that in 2013, the last year for which data are available, families in the top 10 percent of the wealth distribution held 76 percent of all family wealth, families in the 51st to the 90th percentiles held 23 percent, and those in the bottom half of the distribution held no more than 1 percent).

So, what’s the problem? We already know, thanks to a 2015 Brookings Study (pdf), that the effect of changes in top individual tax rates (including a redistribution of all new revenues to household in the bottom 20 percent of the income distribution) are “exceedingly modest.”** And, of course, changes in tax rates on income have little if any effect on the unequal distribution of wealth.

The fact that the current administration can cite its own policies as a “historic achievement” just confirms how little other administrations have done to moderate growing inequality in the United States over the course of the past three decades.

They also confirm the fact that, unless and until the United States decides to tackle the issue of wealth ownership and the resulting unequal market distribution of income— especially the ability of the tiny group at the top to capture and invest for their own sake the enormous surplus created by everyone else—it’s clear that economic inequality will remain the “defining challenge of the next generation, too.”

 

*The same issue has been taken up on the other side of the pond, about whether the last Labor government did anything to reverse “the rise of inequality seen under the previous Conservative administration.” According to the data cited by Simon Wren-Lewis, the best that can be said is Labor did not continue the previous rise in inequality, although it certainly didn’t reverse it.

**Here’s the authors’ conclusion:

In this analysis we have simulated the effects of increasing the top income tax rate under three possible reforms: (a) raise the top individual income tax rate from 39.6 to 45 percent; (2) raise the top individual income tax rate from 39.6 to 50 percent; and (3) raise the top individual income tax rate to 50 percent for income greater than $1 million for joint filers, $750,000 for single filers. We calculate the resulting change in income inequality under these scenarios assuming an explicit redistribution of all new revenue to households in the bottom 20 percent of the income distribution. The resulting effects on overall income inequality are exceedingly modest, with changes in the Gini coefficient of less than 0.01.

That such a sizable increase in the top personal income tax rate leads to a strikingly limited reduction in overall income inequality speaks to the limitations of this particular approach to addressing the broader challenge. It also reflects the fact that the high level of U.S. income inequality is characterized by a wide divergence in income between higher-income households and those at the middle and below.