Wealth & Income Disparity

The Challenge:

Since the 1970s, real wages have declined for the average American. This has happened while both worker productivity and management compensation have skyrocketed.  Although workers have become better at what they do, the benefits have accrued 100% to management and investors. Hence the ratio of CEO pay compared to average worker pay, at 28:1 in the early 1970s, now stands at between 185:1 to 325:1.

One of the key reasons for this is the drastic shift in power that has taken place from workers to management. The ability of manufacturers to shift production facilities abroad to cheaper locations, which really took off with the collapse of the Bretton Woods Agreement in 1971, has meant that management has an overwhelming amount of leverage over workers. Management has been able to ensure that it can keep remuneration for workers stagnant and funnel the benefits of enhanced worker performance solely to themselves and to shareholders.

This has entailed a ballooning of consumer debt, quintupling from 1995-2005, due to the inability of Americans to fund their lifestyles with declining incomes. This has in turn fuelled asset bubbles, such as the housing and stock market bubbles, which have proved so destructive to both the U.S. and the global economies. It has also weakened our ability to grow our way out of the current economic crisis – the main problem being the lack of aggregate demand, which can be traced to an anemic consumer base. Only by strengthening the overwhelming majority of American employees in relation to corporate management can we improve the lot of the American consumer and ensure a more robust economy that will be beneficial for all.

The Record of the Democratic and Republican Parties:

That the Republican Party is the party of big business barely needs any elaboration. It is openly in favor of unregulated, “free” markets (i.e. markets that favor the largest incumbent rather than fostering healthy competition), while simultaneously handing out subsidies and protectionist favors to their largest campaign donors.  It vigorously supports corporate interference in un-democratic elections (such as the previously illegal contributions found to be protected under the Constitution by a bare majority of an activist Supreme Court in Citizens United v. FEC).  It opposes measures that place concerns about human and environmental welfare above pursuit of profits, thereby driving the country and the planet into ecological distress.

The Republicans, however, are simply the more extreme wing of the Big Business Party, with the Democrats being the other wing. Both parties are reliant on huge, corrupting corporate donations to ensure they remain in office.  Thus the positions of both parties reflect big business – not the American people – as their key constituency.

President Obama has illustrated this very clearly. As President, he has surrounded himself with members of the “1%” – i.e. people who would ensure that the interests of major corporations and Wall Street banks are going to be safeguarded. Senior positions for figures such as Larry Summers, Michael Froman and William Daley were merely a recognition of where his financing was coming from, and thus who his policies were going to favor. Three out of his top seven campaign contributors in 2008 were investment banks (Goldman Sachs, JP Morgan Chase, and Citigroup).  Sadly for the American people, he staffed his administration with people who represented their interests.[1] While campaigning for President in 2008, he repeatedly made the point that one can’t expect different results with the same people.  He himself has fallen afoul of this, surrounding himself with many of the architects of the financial crisis as he was supposed to be fixing it.

No meaningful action has been taken to restrain the runaway disparity between management compensation and workers’ pay. There have been no substantive measures taken to restrain CEO compensation, no measures taken to restrict outrageous financial sector bonuses – one of the key reasons for the credit crunch – and nothing done to strengthen the bargaining position of working people.  President Obama’s rhetoric has been tough on the 1%, but when it comes down to actual policy, his words have proved meaningless. He stated in his book The Audacity of Hope his support for the notion that “In America, money is how we keep score.” Though wealth is not necessarily to be vilified, regarding the wealthy as your primary constituents when the poor are suffering the most is morally reprehensible, and reflective of a President who has the interests of the very rich, rather than the middle class and the poor, at heart.

In “The Audacity of Hope”, Obama also refers to the “intoxicating danger in the idea of equality.” His lack of regard for equality and social mobility has been reflected in his policies – and lack of policies – regarding wealth inequality.

Rocky Anderson’s Approach Toward Solutions

Resolving such a huge issue involves combining numerous elements of policy. However it is the underlying principle of Rocky’s campaign that the country needs to be run for all Americans, not just the wealthy elites.  The reduction in income and wealth disparity will be the outcome of his broad policy platform. Some of the key issues for which President Anderson would advocate, are as follows:

1. Strengthening labor laws. American workers need to have more power so they can get a fair shake in the workplace. A major assault on unions is taking place in parts of the country, as well as a decline in unionization rates, especially in the private sector. Laws such as Right To Work weaken union bargaining power.  Union organization procedures need to be enhanced and simplified, not weakened and complicated. An Anderson administration would provide strong leadership to ensure that collective bargaining rights, such as those under attack recently in Wisconsin, are fully protected and improved. Further, the federal minimum wage, which has declined by 30% in real terms since the late 1960s, needs to be increased. These will be key mechanisms in ensuring that the benefits of increased employee productivity accrue to the people responsible for them – the employees – and not just the management and investors. This will stop and reverse the decline in real wages experienced by working people since the 1970s.
2. Tax incentives for local manufacturers. The US cannot remain an economy dominated by the financial sector if it wishes to reduce income inequality. We need as much as possible to bring manufacturing, and the jobs that come with it, back home. The U.S. is the world’s largest market, and has the most skilled labor force. When this is combined with the world leadership of the U.S. high-tech sector, it is clear that we need to enact policies that stimulate high-tech manufacturing in this country. To facilitate this, the Anderson administration will push to offer tax incentives for companies that keep their manufacturing facilities in the US; it will provide subsidies for high-tech start-ups to support the private sector in bearing risk; and it will prioritize financial assistance for university students looking to pursue postgraduate degrees in engineering, physics, computer science, and related fields.
3. Progressive taxation. During what is generally referred to as “The Golden Age of Capitalism” in this country for the two decades after World War II, the top incremental tax rate hovered between 70 and 90%.  Now, because of the impact of corrupting money in our government, the thought of bringing the top marginal tax rate up to the 40% mark spooks policy makers. An Anderson administration will recognize that since money has a diminishing marginal utility, and since the wealthy are more capable of investing more in the country that has afforded them extraordinary opportunities, higher tax rates on people earning more money is fair and moral. This includes the capital gains tax. The gap between capital gains and ordinary income tax rates is one key factor in perpetuating income inequality because the overwhelming majority of capital gains accrue to the wealthy. Eliminating such disparities in taxation would be a key focus of Rocky’s administration.
4. Promoting fair trade. Our responsibilities for equality and human rights don’t stop at our borders. By being lenient in the conditions that we attach to trade agreements with other countries, we ensure lives of misery for millions of workers who make the products we use every day. Such leniency also creates an unequal playing field, to the detriment of U.S. workers and those who employ them.  An Anderson administration would press for enhanced stringency in worker rights and environmental protections with any country that wishes to sell its products to us, including minimum wage requirements, a decent limit on working hours, and reduced carbon emissions. In this way we can ensure fairness and equality for American and foreign workers, as well as protecting the planet at the same time.