I wrote this paper two years ago in college, so please excuse the shoddy writing and sloppy form. And though some of my opinions expressed within have evolved, I still stand by many of the views expressed within. But more importantly, I think that this should provide some of the answer as to what the 99% stands for. They are protesting government policy which erodes the middle class and favors the rich. I'm not talking about socialism here, but how about a return to the tax and labor structures of the 50's and 60's. A time when we had higher taxes, more unions and the most virulent defiance to socialism in our country's history. We also had a booming middle class and greater buying power than we've seen in decades. I hope this paper makes you dig a little bit deeper....
Legislating
Inequality:
How Government
Policy Has Contributed to Inequality
by: Joseph D.
Pometto
Globalization, free market forces,
and changing demographics are all powerful forces in America and are often used
to explain economic inequality in America (Bartels 2). Many of these issues are complex, and
difficult to tackle, but what about public policy and governmental legislation? Does policy have a profound effect on
inequality in America, and if so, what policies have contributed to the U.S. continued
growth in economic inequality (Bartels 13)?
How have we come to this point while living in a democratic society
where every citizen is guaranteed a vote, and therefore some influence over
legislation? A detailed look at
legislative actions which have impacted inequality, the political elites who supported
these acts, and the reasons why these politicians enjoy popular support, will
bring us closer to answering and understanding many of these questions.
In recent political history
legislation which has favored corporate interests, lassez-faire capitalism and
lower taxes have been a dominant trend in America. Several policies can be identified which fit
this criteria.
A recent trend is the shift
from taxes on wealth, to taxes on income.
Since 1980 the payroll tax rate has been cut 25% while tax rates on
investment income fell 31% and taxes on large inheritances fell 79% (Reader 31). These tax changes clearly disadvantage the
poor far more than the wealthy. Many
working-class families rely on each and every paycheck in order to make ends
meet and most do not receive a single penny of their income from financial
investments or inheritances. Wealthy
families oftentimes receive a significant portion of their monetary resources
from investment returns. These tax
changes help inequality proliferate by benefitting the already-rich and hurting
those who rely solely on income to get by.
Hand-in-hand with tax policy that reduces
the burden on investment capital was the recent trend in Washington that
deregulated our financial system. The
most prominent and profound deregulation was the repeal of the Glass-Steagall
Act in 1999. This act prevented mergers
between banks, trading firms and insurance corporations. It was enacted following the Great Depression
to help prevent a recurrence of the historical disaster, serve to prevent
conflicts of interest and guard against corporate abuses. This act was replaced with the Financial
Modernization Act which allowed these entities to merge again into financial
holding corporations. With a lack of
regulation the financial world soon resorted to the type of insider deal-making
which once scattered the landscape of American business allowing these
corporations to reap massive profits (Reader 34). This deregulation occurred in several
legislative occurrences and can at least be partly blamed for the current
“Great Recession” which our country has recently experienced and increasing
uneven distributions of wealth.
Another critical element of
government policy which has worsened inequality is the rash of laws which have
discouraged and reduced labor union participation in America. The 1935 National Labor Elections Act made it
necessary for workers to complete a long and drawn out election process before
they could unionize (Reader 32). Couple the 1935 law with Right-to-Work Laws
and the 1947 Taft-Hartley Act which granted the president the power to break up
strikes while making the organization of strikes even more difficult and is it
any wonder that union participation had fallen 16% between 1970 and 2000
(Hansen 2 and Reader 32). This erosion
of labor union participation has greatly damaged the ability of low-income workers
to negotiate greater wages. While worker
efficiency increases, worker’s wages stagnate, and the owners of capital
accumulate wealth, feeding the cycle of inequality in America.
With little doubt that severe
inequalities exist in America it brings to mind the question of how this has
occurred in a democracy where each individual is guaranteed a vote and the vast
majority of the population is on the poorer end of the inequality spectrum. According
to Larry Bartels much of this can be explained by the political actions of the
Republican Party in America and its ability to consistently win elections (99). The motivations of self-interest in the
Republic Party to maintain the status quo can easily be seen in the party’s
makeup. Bartels states “middle- and
upper-income whites lean towards the Republicans and poorer whites and
African-Americans are predominantly Democratic (98).” This gives Republicans a
clear incentive to maintain the status quo and or provide further benefits to
their already well-off constituents.
The electoral success of the
Republican Party can be linked to the myopic tendencies of voters and the
party’s ability to take advantage of this phenomenon (Bartels 99). According to research done by Bartels the
presidential incumbent party that is in office, and experiences real income
growth, during an election year will see a significant jump in votes (Bartels
94). Because voters have rather
short-term outlooks, and tend to possess a “what have you done for me lately”
approach to voting, the economic consequences of an election year are far more
powerful than non-election years (Bartels 99-100). Bartels suggests that because of this myopic
effect, and whether through chance or manipulation, the Republican Party has
benefitted greatly from election year income growth helping them in 12 of the
last 14 elections (Bartels 110).
Concrete explanations aside, it pays for a political party to raise
income growth during election years, regardless of past economic performance.
Following this stream of thought,
Bartels expounds on his theory by finding that voters are especially sensitive
to the election year income growth of affluent families, and more specifically because of the income growth of affluent
families. These wealthy citizens are
able to turn their newfound wealth into campaign contributions which find their
way into the war chests of Republican Party candidates (Bartels 112-15). Money can translate directly into votes in
this manner. Inequality therefore cycles
itself in this way: Republican presidential administrations experience high
income growth during election years which, coupled with myopic tendencies of
voters, leads to affluent families donating more money to Republican campaigns
which therefore leads to more votes. Once in power these Republicans are able to
freely pursue policies which feed inequality, yet benefit their constituency
and increase their chances of re-election.
None of this evidence tends to
suggest any change in legislative practices as long as the Republican Party can
continue to take advantage of this cycle.
In fact, a new Supreme Court ruling may fan the flames in favor of this machine,
making it even more difficult to break this cyrcle. On January 21st of this year, in a
5-4 ruling, the U.S. Supreme Court ruled that corporations, labor unions and
other entities are granted certain protections under the First Amendment right
to free speech, t (Richey). This ruling may
allow these entities to exert much greater amounts of money and influence over
political elections and campaigns that they had not previously experienced (Richey). If these corporations can go to
work supporting the Republican Party in a pattern similar to that of affluent
families, this ruling provides a fresh example of public policy aiding and
abetting growing economic disparity within our country.
The power of legislation to
influence unequal realities in America is profound. From the low minimum wage, to the taxation of
income over wealth, to the rules which govern campaign finance, the long arm of
our government has its fingerprints all over the mark of inequality. Though there are many forces at work such as
globalization and social demographic changes, legislative activity must claim a
portion of the responsibility. The logic
of self-interested parties and close examination of the political workings in America only provides further evidence that much of the problem is
purposefully engineered. Through the
research of scholars such as Larry Bartels a greater understanding of these
realities can be had and perhaps assist the American people in either
correcting, or coming to terms with, the machinated unequal divide which
separates American society.
Works Cited
Richey,
Warren and Linda Feldman. “Supreme
Court's Campaign Finance Ruling: Just the Facts.” CSMonitor. 2 Feb. 2010.
Christian Science Monitor. 17 Feb. 2010. 
