A decades-long decline in the American middle class requires serious, long-lasting measures, former Democratic strategist James Carville told CNBC on Friday.
“This is a long-term problem. Middle-class decline has been going on for 30 years. We tend to think that the world stopped and started with the financial crisis,” he said on “The Kudlow Report.” “To them, as I say in the book, it’s like someone with pneumonia getting hit by a truck. And it’s a long way back for these people.”
Carville, a political author who previously served as an advisor to President Clinton, recently co-authored with Stanley Greenberg an op-ed piece in the Wall Street Journal, titled, “The Middle Class Needs a Lifeline.”
In it, they write, “Today, high school graduates' first jobs pay less than they did in 1973. We are looking back on three decades with fewer and fewer jobs offering health-care or retirement benefits, with people working longer hours and taking on more debt. College costs take a higher proportion of income, even as it becomes harder for the non-college-educated to get their kids to college and social mobility declines. The working-class family is collapsing and only the college-educated are seeing real gains in life expectancy.
“So, if the middle class faces a humanitarian crisis, why haven't we moved to address it? Where is the presidential commission on this? Or the Congressional Select Committee on the Expansion and Restoration of the Middle Class?”
Carville and Greenberg, who also recently published a book, “It’s the Middle Class, Stupid,” argue that polling shows that a majority of “voters want to raise taxes on top earners, senior corporate executives and companies that outsource jobs.”
Fixing the middle-class malaise would require bold action, the article argued.
“The actual solution to our economic situation is straightforward: increased government spending, well in excess of what the 2009 Recovery Act contemplated and what a tea party-dominated Congress would now allow,” they wrote.
Carville told host Larry Kudlow that he was “a thousand percent” in favor of private sector — as the recipient of government spending.
“If you build something, the private sector builds it,” he said. “If you build the bomb, the government doesn’t build the bomb. The bomb company builds the bomb.”
With the United States needing infrastructure investment, Carville said it was the perfect time for the government to spend the money to make the improvements and put people back to work. Those jobs, he argued, would put money in the hands of people who would spend it.
“The problem with our economy today is not that we don’t have enough supply,” he said. “It’s that we don’t have enough demand.”
Carville and Greenberg are absolutely right, there is a crisis and it all has to do with the weakening of the middle class and how our society exalts banksters, hedge fund/ private equity titans and corporate cronies making obscene compensation as hundred of millions struggle with unemployment or under-employment.
Nobel-prize winning economist Joe Stiglitz has sounded the alarm in his new book, The Price of Inequality, but politicians from all parties, including President Obama who recently signed a bill allowing companies to contribute billions of dollars less to their workers' pension funds, don't get it. Either that or more likely, they are all pandering to their corporate campaign donors.
Luckily, things are changing somewhat and it has to do with the precipitous drop in natural gas prices, the global game changer which should bring about a renaissance in American manufacturing. I am very bullish on America over the next decade and think banks and other sectors are a steal at these levels.
In an illuminating comment, The Distant Sound of Tumbrils, John Michael Greer of The Archdruid Report discusses the fallout from the great divide (h/t, Tom Naylor):
I’ve commented more than once in these essays about the echoing gap between the fantasies of elite omnipotence so common in contemporary America, and the awkward realities of a nation where power has become so diffuse that constructive action is all but impossible. The diffusion of power over time is a commonplace in the history of nations; an earlier post in this series has already discussed the concept of anacyclosis, the ancient Greek historian Polybius’ analysis of the way the diffusion works; still, there’s another dimension to it as well.I hope Greer's apocalyptic view never materializes but before you dismiss it, think about the current trajectory we're on. And we are all on it, not just America.
That dimension? The cluelessness that so often afflicts ruling classes in the last years of their power.
There’s no shortage of poster children for that in the present case, but I want to call on one of the less blatant examples here, precisely because he’s a very smart man. The person I have in mind is Robert D. Kaplan, who burst onto the current-affairs scene in a big way in 1994 with a harrowing and crisply written article titled "The Coming Anarchy." He’s one of the brightest of the tame intellectuals who provide American politicians with things to talk about, and like many of those tame intellectuals, he clawed his way up from a middle-class background to his present status as an adviser to Pentagon brass and a regular speaker at high-end conferences.
Thus it’s revealing to go back to one of his books from the 1990s, the lively but inconclusive An Empire Wilderness: Travels into America’s Future (1998), and read his account of his one brief collision with the country he thinks he’s exploring. Most of the book chronicles Kaplan’s encounters with his peers—that is to say, other tame intellectuals and the politicians and businessmen whose largesse keeps them employed—in their natural habitat, a landscape of airports, office parks, urban condominiums, and other fashionable venues. Once, though, his years as a foreign correspondent in some of the world’s rough places broke through, and he climbed aboard a Greyhound bus for a trip through the American Southwest to see the country and the people first hand.
The scene is really one of the best examples of unintentional comedy in modern letters. Kaplan briefly succeeded in extracting himself from the bubble in which tame intellectuals of his caliber normally live, and the world outside the bubble shocked him right down to the soles of his Bruno Magli shoes. His fellow passengers were, like, fat, and even the thin ones didn’t seem to be trying to fit any definition of pretty and stylish he’d ever encountered; they wore cheap ill-fitting clothes in garish colors, and some of them had their belongings in plastic garbage bags rather than, say, Gucci suitcases. You could practically hear the "Ewww, icky!" escape his lips.
Now it so happens that I’ve done a certain amount of travel by Greyhound bus through various corners of the country, and shared space on a moving bus with the same kind of Americans that left him gaping in horror. (If I’d been on that bus with him, no doubt he’d have been appalled by the guy with the scruffy beard and ponytail two seats up, wearing baggy clothes that had seen many better days—hint: you don’t wear nice clothes on a long bus trip—and reading some dog-eared fantasy novel from the 1970s instead of whatever piece of highbrow trash the New York Review of Books was touting that week.) I’ve seen the garish polyester tank tops and the T-shirts that look like they’ve been used to clean auto parts, the women on their way to visit boyfriends who are doing five to ten for one thing or another, the college students who don’t have fancy scholarships, the middle-aged couple with bottom-level jobs on their way to visit some uncle they haven’t seen in ten years and who’s dying of cancer, and all the rest of it. All this is familiar enough to most Americans, but to Kaplan, it came as a shock.
Mind you, he had the courage to get in line along with his unfashionably plump, unfashionably dressed, unfashionably accessorized fellow passengers, and board that bus. I suspect that most of his peers have never done anything of the kind, and would never think of doing so. In today’s America, if you want to avoid seeing how most people live, nothing could be easier; America’s geography is so thoroughly carved up by income level that it takes a deliberate effort to fall out of the comfortable orbits inhabited by the middle and upper classes and plunge back down to Earth.
This is quite common in aristocratic societies at certain points in their history. When Marie Antoinette responded to reports that the Parisian poor had no bread by saying, "Then let them eat cake," she was being clueless, not catty; a life in the rarefied circles at the zenith of ancien régime France had given her precisely no exposure to the fact that it was the price of bread, not some unexpected shortage of it, that was making the lives of the underclass wretched. Her husband probably had a slightly clearer grasp of the situation, at least in the abstract, but he—along with a great many other aristocrats who would share his fate—had no more useful an understanding of the powderkeg on which the vast and tottering structure of the ancien régime was so unsteadily perched.
The irony here is that the ancestors of these same aristocrats had been as hard-bitten a collection of ruthless pragmatists as history has on display. The medieval barons whose progeny were on their way to an appointment with Madame Guillotine not long after 1789 resembled nothing so much as old-fashioned Sicilian mafiosi, complete with the Mafia’s devotion to the Catholic church, its code of honor, and its readiness to slaughter people en masse whenever the situation seemed to warrant it. Like every other feudal elite in history, the old French aristocracy emerged in a time of chaos, when the last scraps of central government had gone missing in action, and local landowners smart and strong enough to gather a band of armed followers and lead them into battle could impose their own rough justice on as large a domain as they could seize and hold.
Such times do not favor cluelessness. Even after the feudal system formalized itself, the heir to a barony who was too detached from the hard realities of the time could count on being removed from his position by the business end of a battle-axe. It was only after warfare became a monopoly of the French king, and aristocrats no longer had to risk their lives regularly leading their vassals on the battlefield, that it was possible for the French upper classes to isolate themselves in a bubble of their own creation and start drifting toward their wretched destiny.
It’s of interest to note that this process took a great deal longer in two other European nations, Britain and Prussia—those of my readers who got an American public school education, and so know nothing about history, will probably need to be told that Prussia was the nucleus of the German Empire, and what’s left of it is now part of Germany. In Britain until after the Napoleonic Wars, and in Prussia right up through the Second World War, it was common for the sons of aristocrats to join the military. Since Britain and Prussia both spent most of the 18th century at war, clueless young aristocrats tended to be removed from the gene pool via the helpful Darwinian selection pressures of early modern warfare. It’s worth noting also that British noble families drifted out of the habit in the 19th century, and the stereotype of the blithering aristocratic idiot entered British popular culture not long thereafter.
America’s aristocracy—yes, I can hear the screams of outrage evoked by the use of that latter phrase. Let us please get real; we have one, or a close equivalent to one. In every community of social primates, there’s an inner circle of members who have more influence, and more access to whatever wealth happens to be available, than the other members. In every community of social primates, your odds of getting into that inner circle depend partly on whether your parents belonged to it, and partly on your own ability to defeat rivals and bluff or bully or fight your way into it. Any group of social primates that claims not to have an aristocracy—as far as I know, this affectation is limited to human beings, though I wouldn’t be surprised to learn that bonobos have gotten into it as well—has simply found it convenient to rely on a covert hierarchy instead of an overtly recognized one. In today’s America, as in every other human society, the single most important predictor for your place in the income distribution curve is your parents’ place in the same curve. Some people do move up from below—Kaplan, as already mentioned, is an example—but they do so by adopting the values and attitudes of members of the social strata above them, who by and large control who is and isn’t allowed to make that ascent, and who make that choice on the basis of who fits in.
America’s aristocracy, as I was saying, has never had the tradition of sending its sons into the military. The great wars of America’s history—the Civil War and the two World Wars—have seen members of every class show up at recruiting stations; the little wars have been fought by professionals or, in a few cases, by whoever happened to enlist when the drums started pounding and the press yelled for war. Most other potential sources of Darwinian selection have been kept away from America’s privileged classes with equal solicitude. The one exception is economic struggle, and even there the transfer of wealth from individual financiers and industrialists to trusts and holding companies has done much to guarantee that even the most feckless child of wealth and privilege will continue to enjoy wealth and privilege until the guy with the scythe makes the whole point moot.
John Kenneth Galbraith, whose prescient writings pointed to so many of the pitfalls into which today’s America is busily flinging itself, sketched out the consequences with his usual urbane wit in his 1992 book The Culture of Contentment. Galbraith seems to have taken a good deal of pleasure in making himself unpopular in the corridors of power and privilege, and the book just noted must have contributed heartily to that end; I’m thinking here particularly of his discussion of the unmentionable fact that the more money an American makes, the less actual work he or she has to do to earn it. Still, the core of the book is a precise and mordant comparison between the privileged class of contemporary America and an example I’ve already cited, the French nobility on the eve of the Revolution.
That comparison has an exactness that very few people notice these days. Louis XIV, the Franklin Roosevelt of his day, took a great deal of wealth and privilege from the French aristocracy and imposed a flurry of restrictions they found burdensome. After his time, it became a central goal of the nobility to restore their position at the king’s expense. Their strategy is one with which modern Americans ought to be familiar: they insisted on a massive military buildup and an aggressive foreign policy that landed France in expensive wars, while at the same time demanding tax cuts. The goal was simply to bankrupt the French government, so that—no, not so that they could drown it in a bathtub; instead, they wanted to force the king to call the États-Général—roughly, the equivalent of a US constitutional convention—which alone could create entirely new tax structures. Once that happened, they hoped to bully the king into restoring their former privileges as the price of acquiescing in a new tax regime.
The result was a high-stakes game of chicken between the party of the aristocracy, and the party of the civil servants, bureaucrats and officials whose authority and wealth was guaranteed by the power of the king. (If you want to describe these two parties as "Republicans" and "Democrats," I’m not going to argue.) What neither side noticed was that their struggles imposed severe burdens on the rest of the population, the peasants, laborers, and small-scale businesspeople on whose passive acquiescence the entire structure of power and prestige ultimately rested. As the struggle went on, the aristocracy did their best to delegitimize the king and the central government, while the civil service and its supporters did their best to delegitimize the aristocracy; both sides succeeded beyond their wildest dreams, and managed to strip the last traces of popular legitimacy from the French political system as a whole.
So when the aristocrats finally got their way and the États-Général were summoned, all it took was a few speeches by radicals and a bit of violence on the part of the Paris mob, and the entire structure of the ancien régime disintegrated in a matter of weeks. The aristocrats, who were chiefly to blame for the mess, were also the last to figure out what had happened. It’s tempting to imagine one of them, stepping aboard the tumbril that will take him to the guillotine, saying to another, "So, Henri, how’s that political strategy working for you?"—but there’s no evidence that any of them managed that degree of insight even when the consequences of their failure were staring them in the face.
I sometimes wonder whether the members of America’s privileged classes will show any more insight into the forces behind whatever messy fate waits for them. Certainly they’re making all the same mistakes as their French equivalents. The power, wealth, and influence of the privileged classes in today’s America is a function of their ability to manipulate an elaborate structure in which government and what we jokingly call "private" industry are inextricably tangled. Most members of those classes have no skills worth mentioning other than those needed to manipulate that structure. They’re very good at manipulating the structure, and extracting wealth from it—that’s why they have the status and the influence they do—but they have forgotten, as most aristocracies forget when they reach senility, their own dependence on the structure.
Like the aristocrats of France before the Revolution, indeed, they’re busy undermining the structure that supports them—the culture of executive kleptocracy that pervades the upper end of American business these days is hard to describe in any other terms—and they’re equally busy trashing the last scraps of legitimacy the American political and economic system still has in the eyes of the people, for the sake of short term political advantage. It has in all probability never occurred to any of the people engaged in these activities that there could be negative consequences, or that the people in ugly clothes who bear the brunt of all this brinksmanship may eventually withdraw the support on which the entire structure depends. None of this can possibly end well: not for them, and probably not for the rest of us, either. I would remind those of my readers who think they would cheer the collapse of America’s ancien régime that what followed on the heels of 1789 was not the Utopia of reason promised by the radicals of that age, but the Terror, followed by the Napoleonic Wars.
In a way he didn’t intend, a core metaphor from Kaplan’s famous article "The Coming Anarchy" makes a perfect image for the mess ahead. He imagines the people of the world’s rich industrial countries as passengers in a limousine rolling through the dark and potholed streets of some Third World city, rife with poverty and violence. It’s interesting to note that he never asks what will happen when the limo runs out of gas. (I don’t happen to know his current views, but in earlier books he rejected the concept of peak oil.) Nor does he discuss what happens when the driver tries to dodge a pothole without braking and slams the limo into a brick wall—that’s more or less what’s happening to the economy of the industrial world just now—and let’s not even talk about the possibility that the people of the city might throw up some barricades, or lob a couple of Molotov cocktails in the limo’s direction.
When one of those things happens—and I’m all but certain that it will—I hope Kaplan has enough of his wits about him to put on a greasy T-shirt and a pair of torn blue jeans, and mingle with the crowd.
Below, James Carville, Democratic strategist and author of "It's the Middle Class, Stupid!" weighs in on why President Obama can't tackle some issues the way Bill Clinton did (Clinton made his share of mistakes, including repealing Glass-Steagall).
Carville also discusses the latest fight between between Obama and Romney and states flat out: "Do away with corporate income tax, and tax dividends and capital gains at the same rate as everything else".
Finally, Joe Weisenthal, Editor at Business Insider, interviewed Paul Krugman, Nobel Laureate and New York Times blogger. Krugman blasts Alan Simpson and talks how about "very serious people" would flunk an Econ 101 course considering the policies they are promoting to fix the sorry state of the US, European and global economy.