Is it more similar to the top 1 percent or the working class?
Have upper-middle-class Americans been winners in the modern economy — or victims? That question has been the subject of a debate recently among economists, writers and others.
On one side are people who argue that the bourgeois professional class — essentially, households with incomes in the low-to-mid six figures but without major wealth — is not so different from the middle class and poor. All of these groups are grappling with slow-growing incomes, high medical costs, student debt and so on.
The only real winners in today’s economy are at the very top, according to this side of the debate. When Bernie Sanders talks about “the greed of billionaires” or Thomas Piketty writes about capital accumulation, they are making a version of this case.
.. “What do the upper middle class care most about in my district? They want a pluralistic America that is engaged with the world and embraces technology and future industries. What they don’t want is a backlash to diversity, a backlash to globalization, a backlash to technology.”
The upper middle class doesn’t deserve the blame for our economic problems. But it doesn’t deserve much government help, either.
Bush was so self-effacing that he hated to use the personal pronoun — “don’t be talking about yourself,” his mother instructed him. Trump, by contrast, hardly talks about anything other than himself.
.. The marriage of convenience between Bush and the right broke apart in 1990. The president was determined to reduce the growing deficits that he had inherited from Ronald Reagan — and that had grown larger still because of the need to bail out failing savings and loan associations. With the nation headed to war in Kuwait, he wanted to put America’s finances in order. The problem was that in 1988 he had foolishly promised, “Read my lips: No new taxes.” Bush knew he would pay a price for breaking his pledge, but he was determined to do so for the good of the country.
.. The No. 2 Republican in the House, Newt Gingrich of Georgia, initially appeared supportive of a spending deal that would have limited tax increases to levies on gasoline, alcohol and other products, avoiding income tax hikes. But when it came time to announce the agreement in the Rose Garden, Gingrich stalked out.
.. Bush went back to the table, agreeing to a small increase in the top income tax rate, from 28 percent to 31 percent. (It had been 50 percent as recently as 1986.) House Republicans still rejected the deal, but this time there were enough Democratic votes to pass the compromise.
.. From a fiscal conservative’s perspective, the 1990 deal was a raging success. As Bruce Bartlett notes, “The final deal cut spending by $324 billion over five years and raised revenues by $159 billion.” It also put into place stringent rules mandating that any future tax cuts or spending increases would have to be offset by spending cuts or revenue increases. Within eight years, a $376 billion deficit had become a $113 billion surplus. Yet conservatives never forgave Bush for his apostasy.
.. Gingrich’s opposition to the budget deal — and his general disdain for bipartisan compromise — helped him in 1994 to become the first Republican speaker of the House in 40 years.
.. Bush’s tax hike was also part of the rationale for Patrick J. Buchanan’s 1992 primary challenge, which proved more damaging than anyone had expected. The syndicated columnist won enough votes in New Hampshire (37.5 percent) to embarrass the incumbent and earn a prime-time slot at the Republican convention, where he gave his fiery “culture war” speech that repulsed moderates and independents.
.. As Jeff Greenfield has noted, many of the themes Buchanan hit in 1992 were similar to Trump’s in 2016:
- He denounced threats to U.S. sovereignty,
- railed against globalization and multiculturalism, and
- called for “a new patriotism, where Americans begin to put the needs of Americans first.”
.. George F. Will once remarked, after Reagan’s ascendancy, that Barry Goldwater won in 1964; “it just took 16 years to count the votes.” Likewise, Buchanan won in 1992; it just took 24 years to count the votes.
.. Jon Meacham quotes from Bush’s diary in 1988 after meeting a supporter of televangelist Pat Robertson who refused to shake his hand: “They’re scary. They’re there for spooky, extraordinary right-winged reasons. They don’t care about Party. They don’t care about anything. . . . They could be Nazis, they could be Communists, they could be whatever. . . . They will destroy this party if they’re permitted to take over.”
.. Well, now they have taken over, and it is impossible to imagine the Republican Party again nominating a man who put loyalty to country above loyalty to right-wing dogma.
The response to the 2008 economic crisis has relied far too much on monetary stimulus, in the form of quantitative easing and near-zero (or even negative) interest rates, and included far too little structural reform. This means that the next crisis could come soon – and pave the way for a large-scale military conflict.
BEIJING – The next economic crisis is closer than you think. But what you should really worry about is what comes after: in the current social, political, and technological landscape, a prolonged economic crisis, combined with rising income inequality, could well escalate into a major global military conflict.
The 2008-09 global financial crisis almost bankrupted governments and caused systemic collapse. Policymakers managed to pull the global economy back from the brink, using massive monetary stimulus, including quantitative easing and near-zero (or even negative) interest rates.
But monetary stimulus is like an adrenaline shot to jump-start an arrested heart; it can revive the patient, but it does nothing to cure the disease. Treating a sick economy requires structural reforms, which can cover everything from financial and labor markets to tax systems, fertility patterns, and education policies.1
Policymakers have utterly failed to pursue such reforms, despite promising to do so. Instead, they have remained preoccupied with politics. From Italy to Germany, forming and sustaining governments now seems to take more time than actual governing. And Greece, for example, has relied on money from international creditors to keep its head (barely) above water, rather than genuinely reforming its pension system or improving its business environment.
The lack of structural reform has meant that the unprecedented excess liquidity that central banks injected into their economies was not allocated to its most efficient uses. Instead, it raised global asset prices to levels even higher than those prevailing before 2008.
In the United States, housing prices are now 8% higher than they were at the peak of the property bubble in 2006, according to the property website Zillow. The price-to-earnings (CAPE) ratio, which measures whether stock-market prices are within a reasonable range, is now higher than it was both in 2008 and at the start of the Great Depression in 1929.
As monetary tightening reveals the vulnerabilities in the real economy, the collapse of asset-price bubbles will trigger another economic crisis – one that could be even more severe than the last, because we have built up a tolerance to our strongest macroeconomic medications. A decade of regular adrenaline shots, in the form of ultra-low interest rates and unconventional monetary policies, has severely depleted their power to stabilize and stimulate the economy.
If history is any guide, the consequences of this mistake could extend far beyond the economy. According to Harvard’s Benjamin Friedman, prolonged periods of economic distress have been characterized also by public antipathy toward minority groups or foreign countries – attitudes that can help to fuel unrest, terrorism, or even war.
For example, during the Great Depression, US President Herbert Hoover signed the 1930 Smoot-Hawley Tariff Act, intended to protect American workers and farmers from foreign competition. In the subsequent five years, global trade shrank by two-thirds. Within a decade, World War II had begun.
To be sure, WWII, like World War I, was caused by a multitude of factors; there is no standard path to war. But there is reason to believe that high levels of inequality can play a significant role in stoking conflict.
According to research by the economist Thomas Piketty, a spike in income inequality is often followed by a great crisis. Income inequality then declines for a while, before rising again, until a new peak – and a new disaster.
This is all the more worrying in view of the numerous other factors stoking social unrest and diplomatic tension, including
- technological disruption, a
- record-breaking migration crisis,
- anxiety over globalization,
- political polarization, and
- rising nationalism.
All are symptoms of failed policies that could turn out to be trigger points for a future crisis.
.. Voters have good reason to be frustrated, but the emotionally appealing populists to whom they are increasingly giving their support are offering ill-advised solutions that will only make matters worse. For example, despite the world’s unprecedented interconnectedness, multilateralism is increasingly being eschewed, as countries – most notably, Donald Trump’s US – pursue unilateral, isolationist policies. Meanwhile, proxy wars are raging in Syria and Yemen.
Against this background, we must take seriously the possibility that the next economic crisis could lead to a large-scale military confrontation. By the logicof the political scientist Samuel Huntington , considering such a scenario could help us avoid it, because it would force us to take action. In this case, the key will be for policymakers to pursue the structural reforms that they have long promised, while replacing finger-pointing and antagonism with a sensible and respectful global dialogue. The alternative may well be global conflagration.
They seek to restore access to a middle-class life by providing decent, well-paying jobs, reestablishing a sense of financial security, and ensuring access to quality education – without the chokehold of student debt that so many graduates currently face – and decent health care, regardless of pre-existing medical conditions. They call for affordable housing and a secure retirement in which the elderly are not preyed on by an avaricious financial sector. And they seek a more dynamic, competitive, and fair-market economy by curbing the excesses of market power, financialization, and globalization, and by strengthening workers’ bargaining power.
These perquisites of a middle-class life are attainable. They were affordable a half-century ago, when the country was substantially poorer than it is today; and they are affordable now. In fact, neither America’s economy nor its democracy can afford not to bolster the middle class. Government policies and programs – including public options for health insurance, supplementary retirement benefits, or mortgages – are crucial to realizing this vision.
.. In a normal democracy, these ideas would, I am confident, prevail. But US politics has been corrupted by money, gerrymandering and massive attempts at disenfranchisement. The 2017 tax bill was nothing short of a bribe to corporations and the wealthy to pour their financial resources into the 2018 election. Statistics show that money matters enormously in American politics.