This Is What The 99% Are Angry About

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 21^st 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.            csmonitor.com /USA/Justice/2010/0202/Supreme-Court-s-campaign-finance-ruling-just-     the-facts>.