The latest edition of the Economic Policy Institute’s “State of Working America” report, out today, documents in sharp detail what has been for the middle-class economy a “lost decade” in which working people have fallen behind. But what’s more disheartening is its prediction that without radical change “nearly two decades likely will pass before American incomes regain lost ground and return to their 2000 levels.”
The report makes clear what has been robbed from low- and middle-income people as a result of conservative policies that have their roots in the early 1980s, as the country turned from balanced growth policies in which labor and capital profited more or less in tandem to government policies that advantaged corporations and the wealthy at the expense of workers.
As a result of these policies, the report notes, “the business cycle preceding the recession [of 2008-2009] was already shaping up as a lost decade for American
incomes,” with median household incomes falling 6 percent during that period. But when the Great Recession hit, median income of working-age families fell another 7.1 percent between 2007 and 2010.
“This is an underappreciated economic calamity,” the report says.
These key slides from the report help tell the story:
The report notes that this calamity is not caused by a lack of overall economic growth. National income, the report notes, has grown enough to substantially improve the fortunes for all. As the data reveal, however, it is the top 5 percent, the top 1 percent, and fractions of the top 1 percent that have received almost all the benefits of the economy’s growth.
“Incomes for the middle fifth of American households—the heart of the middle class—would have been an average of $19,000 higher per year by 2007 if the share of growth claimed by the richest households had not grown so much over the past 30 years. Likewise, wealth for the typical American family would have been $62,000 higher in 2010 had the growth in wealth over these same years not been overwhelmingly claimed by families at the very top,” according to the report.
This is not the result of forces beyond the control of policy makers. “Policy decisions made over the last several decades have caused this explosive rise in inequality. These decisions include: lowering individual and corporate tax rates; deregulating industries; failing to maintain the value of the minimum wage; failing to protect the right of workers to obtain collective bargaining; and failing to prevent asset bubbles.”
This lays the blame at the feet of conservative ideology that has not only guided Republican administrations but has limited, and sometimes influenced, the actions of Democratic administrations. It is no surprise that during this presidential election campaign conservatives are blaming the Obama administration for failing to reverse these trends.
It was president Ronald Reagan and the conservatives who placed him in the vanguard of their movement who laid the foundation of the middle-class lost decade, and George W. Bush who embellished the modern structure built on that foundation with tax cuts, deregulation and an attack on unions. Their policies have been an unmitigated disaster for working people, and the conservative response to this failure, as Paul Krugman so eloquently pointed out Monday, has been, “First, obstruct any and all efforts to strengthen the economy, then exploit the economy’s weakness for political gain. If this strategy sounds cynical, that’s because it is. Yet it’s the G.O.P.’s best chance for victory in November.”
Breaking the back of that strategy with hard facts and and a solid critique of what has really happened to the middle-class economy the past 30 years is critical, and that is why this year’s release of “The State of Working America” is so important.