Neither Party Dealing with More-Rigid Class Structure

President Obama’s most-recent pivot toward the issue of “inequality” and saving the middle class might be seen as something of an attempt to change the subject after the health care reform disaster. As the Washington Post’s reliably liberal Greg Sargent explains, this latest bit of foot work back to the “old standby” issues provides “a template for the upcoming elections, one that allows Dems to shift from the grinding war of attrition over Obamacare that Republicans want to the bigger economic themes Dems believe give them the upper hand.”

True, there’s something mildly risible about appeals to populism offered by a president whose economic record looks more like Herbert Hoover than Franklin Roosevelt. Some 95 percent of the income gains during President Obama’s first term flowed to barely 1 percent of the population, while incomes have declined for 93 percent of Americans. As one writer at the left-leaning Huffington Post put it, “[T]he rising tide has lifted fewer boats during the Obama years – and the ones it’s lifted have been mostly yachts.”

Diminished prospects – what some describe as the “new normal” – now confront a vast proportion of the population, with wages falling not only for noncollege graduates but also for those with four-year degrees. Overall, median incomes for Americans fell 7 percent in the decade following 2000 and are not expected to recover, according to some economic models, until 2021.

This decline has infected the national mood. Today, more middle- and working-class Americans predict that their children will not do better than they have done.Overall, almost one-third of the public, according to Pew, consider themselves “lower” class, as opposed the middle class, up from barely one-quarter who thought so in 2008.

It’s not surprising, then, that the vast majority of Americans believe the president’s economic policy has been a dismal failure, at least for the middle and working classes. Federal Reserve monetary policy, in particular, appeared to favor the interests of the wealthy over those of the middle, yeoman class. “Quantitative easing,” notes one former high-level official, essentially constituted a “too big to fail” windfall for the largest Wall Street firms, and did little for anyone else. Faith in the economy, despite the soaring stock market and increased price of assets, has remained weak. Americans by a 2-1 margin rate the economy negatively.

These realities helped spark both the Tea Party and the Occupy movements and underpin the support for such disparate figures as Sarah Palin and Elizabeth Warren. At the same time, outrage at our current economy has undermined public esteem for almost every institution of power – from government and large corporations to banks and Wall Street – to the lowest point ever recorded.

Money goes to money

This repudiation reflects the fact that neither major political party seems ready to address the emergence, over time, of a class structure more rigid, and arguably less-penetrable, than in the past. Increasingly, wealth adheres to those who are best-positioned, by hereditary wealth and education, to take advantage in the evolving economy. In contrast, those born with fewer resources, even if they work hard, find moving up in society increasingly difficult.

To be fair, this problem well predates Barack Obama or the current Congress. Middle-class incomes have been declining, particularly compared with those of the wealthy, since the 1970s, with the decline persisting even in the relatively prosperous 1990s, with young workers starting out at incomes one-fourth lower than those of their parents.

Yet, solutions proposed to date by Obama and his fellow Democrats have done little to reverse this trend, in fact, worsening it. Whatever suffering they ameliorate, a growing reliance on food stamps and extended unemployment insurance, as Walter Mead points out, often ends up creating an unhealthy dependence on the state and fails to address the cultural issues associated with long-term poverty.

Some Obama proposals, like increasingly affirmative action, seem more like a nod to favored party constituencies than an elixir for the economy. Others, such as an increased minimum wage, promise benefits for some, but could also dry up sources of employment, particularly for part-time and new market entrants, particularly young workers.

Overall, “blue” policies, as currently constituted, have not been notably effective in reducing poverty or increasing upward mobility. Locales with the nation’s greatest levels of inequality, and the most rapid decline of the middle classes, are generally found in progressive bastions,such as New York and California.

Capitalism undercut

But let’s be clear: There is not much here that the Right should be giddy about. The inability of market capitalism to provide more people with a higher standard of living, and increased opportunity, undermines the fundamental promise of free markets. The spread of prosperity from 1950-2000, bolstered conservative, even libertarian, perspectives as the middle class and property ownership expanded. Now, with homeownership in decline and middle-class incomes stagnating, the appeal of “democratic capitalism” marketed by the Right has been somewhat diminished.

To address this challenge, conservatives need to acknowledge that economic inequality and rising class divisions stand as our nation’s existential political issue. Yet for the most part, their response has been largely to cut benefits to the poor amid hard times. Perhaps since they do not acknowledge the emerging credibility crisis facing capitalism, they feel little reason to address it.