Biden is trying to rebuild the American middle class. Our skewed economy needs it | Heather Cox Richardson


With the recent US Supreme Court rulings eroding federal civil rights enforcement and corporate regulations, and the public hearings of the selected House committee investigating the Capitol attack, economic news is at the center of public discussion. pushed. That is unfortunate for two reasons.

First, Joe Biden seems to be focusing his presidency on the idea of ​​rebuilding the middle class through public investment in ordinary Americans. This is a major shift — a reversal — from the past 40 years of Republican policy that says the economy would prosper if only the government cut taxes and regulations, and left more money and power in the hands of corporate executives, those ‘makers’ who would invest in new industries and create more jobs. Looking at the effect of his policies is a window into what works and what doesn’t.

Second, Republicans are counting on anger over inflation, deficits and gas prices to win control of the House of Representatives and Senate in the fall election. It’s worth paying attention to what’s really going on with these problems, as well as what policies the Democrats and Republicans are putting on the table to address them.

On the first point: Biden has focused on rebuilding the American middle class that has been eroded so horribly over the past 40 years. Although he seems to be driven by his belief in the dignity of all Americans and their right to make ends meet with a decent job, historians will tell you that in the US, racial and gender tensions are significantly lower when income and wealth is more evenly distributed than if a few people at the top of the economic ladder control most of the country’s capital. The rise of lynchings in the US in the late 1880s, just as trusts began to monopolize the economy, was no accident.

The Republican economic promise since Reagan has been that cutting regulation and taxes would create a healthy economy in which anyone willing to work can thrive. But political commentator Thom Hartmann gathered the stats a week ago in a crystal-clear Twitter thread, revealing how badly that argument has failed.

Hartmann noted that after World War II, “the nation had been humming for 40 years with a top tax bracket of 91% and a corporate tax rate of about 50%.” Business grew faster than ever before, and businessmen stayed out of politics. The country had large public schools, research labs, trade schools, airports, highways, and small businesses, as well as unions protecting American workers.

The election of Ronald Reagan meant radical tax cuts (from the highest marginal rate of 74% in 1980 to the 27% it is today), deregulation of business and the erosion of social safety nets. Forty-two years later, Hartmann notes, more than $50 trillion has been transferred from the bottom 90% to the top 1%. In 1980 60% of us belonged to the middle class; now less than half of us are. Republicans promised that allowing business concentration would lead to innovation and opportunity; instead, we’ve seen an end to competition, along with price pushes and profit-seeking from the giant corporations that are suffocating small businesses. Share buybacks would mean senior executives would care more about the future of their company, but instead they have become a means for them to pocket money.

Since the beginning of his tenure, Biden has sought to take on the concentration of wealth and power among a few elites. Biden’s investment in the US economy through the American Rescue Plan and the Bipartisan Infrastructure Act has yielded significant results. On Friday, the Bureau of Labor Statistics released nonfarm job numbers for June, showing that employment continues to rise. The economy added 372,000 jobs in June, mostly in “professional and business services, leisure and hospitality, and health care.” We have still lost 524,000 jobs compared to February 2020, before the pandemic. Unemployment remains at 3.6%, with about 5.9 million people unemployed.

There were some interesting trends in the data. There are 880,000 more jobs in business, computer design, administration and research than in February 2020. There are now 260,000 more jobs in ambulatory healthcare than in February 2020, but hospitals have lost 57,000 workers and nursing and care have lost 379,000. Leisure and hospitality – restaurants, for example – have lost 1.3 million jobs, or 7.8% of their employees, since February 2020 (although the sector is growing again).

But look at this: Transportation and warehousing have grown rapidly, adding 759,000 jobs than in February 2020. Manufacturing is back to where it was in February 2020, suggesting Biden’s focus on repairing supply chains is paying off.

And over the past year, wages have increased by 5.1%. That, along with increased pressure for unionization, suggests workers have more power than before the pandemic.

This data suggests that people are moving away from work in restaurants, leisure and nursing – all professions have been hit terribly hard during the pandemic – and towards transportation and office work. The rise in wages reflects the greater bargaining power of workers. None of this is rocket science, I know, but it does suggest that the economy has at least temporarily been reorganizing itself into new forms since the pandemic.

This is interesting because we are trying to figure out what is going on with inflation, which is currently affecting not only the US but the rest of the world as well. That story says something about the success of the Republican program that Hartmann identified.

One of the reasons for inflation is the concentration of corporate power since the 1980s. A June report by three economists for the Federal Reserve Bank of Boston noted that “[t]The US economy today is at least 50% more concentrated than it was in 2005,” and that concentration is amplifying the extent to which companies pass on price increases to consumers as firms overcompensate for rising production costs. In the oil industry, the report notes, companies have made staggering gains as prices have risen.

The price of gasoline has fallen from its insane high in the past 25 days. Over the past two weeks, the average price of gas has fallen by 19 cents a gallon, and as the price of crude oil continues to fall, consumers can expect prices to continue to fall, although they fall more slowly than they rise in a phenomenon researchers’ say. rocket and feathers’. That term refers to the fact that gas prices rocket with the cost of crude oil, but fall more slowly as the cost of crude oil falls, in part because consumers are so happy to see some relief at the pump that they don’t shop. around to lower prices.

One of the reasons for the crazy highs is speculation by largely unregulated energy traders causing massive volatility in prices. Lack of regulation was also in the news in another industry on Monday, as journalists from media organizations including the Guardian, the International Consortium of Investigative Journalists and the Washington Post revealed how Uber evaded regulators by using a “kill switch” that shut down. regulators’ access to the files they needed to monitor the company.

A confrontation is coming between the Democrats’ approach to the economy and the old Republican approach. Biden and Democrats are seeking to pass a $52 billion U.S. Innovation and Competition Act (USICA) that would invest in U.S. science and technology to boost U.S. industry, support research and fund semiconductor chip manufacturing to help the U.S. liberate the reliance on Chinese products. But Republican Senate minority leader Mitch McConnell has vowed to quash the measure unless Democrats withdraw from a budget package that would fund Medicare by imposing a 3.8% tax on income transfers made by individuals who earn more than $ 400,000 a year and would allow Medicare to negotiate drug prices, significantly reducing costs to consumers. It’s a confrontation worth paying attention to.

  • Heather Cox Richardson is an American historian and professor of history at Boston College. She is the author of Letters from an American, a daily newsletter about American politics and history. This article originally appeared in her newsletter

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