Senate Democrats: Fighting Hard for Your Two Dollars

Wednesday, June 28, 2006

Senate Democrats have drawn a line in the sand and they're sounding like they mean it. After efforts to raise the minimum wage were stymied by those champions of the small businessman, Senate Republicans, Dems are talking like people who've had an infusion of spinal fluid. Harry Reid has vowed to block Congressional pay raises until a minimum wage increase is passed.

"We're going to do anything it takes to stop the congressional pay raise this year, and we're not going to settle for this year alone," Democratic Leader Harry Reid of Nevada said at a Capitol news conference.

Minimum wage workers haven't had a raise in 9 years. Our Congresspeople -- you know, the people that we pay with our tax dollars -- have had several. Their total "cost of living" increase works out to roughly $31,600 dollars. Having voted themselves increases that average out to about $15 per hour, granting minimum wage earners an increase of $2.10 over the next two years is the least they can do. Literally. In fact, as a remedy to the greater problem of poverty and wage disparity, it's fairly laughable. Tying together Congressional salaries and the minimum wage certainly makes for a great rhetorical hook, but it's also very safe political territory.

In contrast to the GOP leadership, the American public overwhelmingly favors a minimum wage increase. In fact, most Americans would be more likely to vote for a Congressional candidate who favors increasing the minimum wage.

I certainly hope they succeed in their efforts and put a little more money into the pockets of our lowest wage earners, but a little is exactly what it would be.

According to a Center on Budget and Policy Priorities analysis:

  • The federal minimum wage has remained at $5.15 for nine years.
  • Since its last increase in 1997, the minimum wage has lost 20 percent of its value.
  • The minimum wage is at its lowest level in terms of purchasing power in fifty years.
  • At 31 percent, the minimum wage is at its lowest as a share of the average American wage since 1947.
  • It takes a full day of work for a minimum-wage worker to buy a tank of gas.

I just don't think incrementally raising the rate by a couple of dollars over the next two years will exactly lift people out of poverty. It is entirely possible that the price of gas per gallon, alone, will rise that much, or more, over the same time span.

I have, frankly, lost patience with rhetorical flourishes like this one from Charles Schumer:

"It is shocking that in this Republican do-nothing congress, even the minimum wage is something that they won't go for," Schumer said.

There are many terms I would use to describe the Republican controlled Congress, but "do-nothing" is not one of them. I can't help wondering what focus groups helped Schumer pick that particular turn of phrase, but it is typically tin-eared. The GOP has accomplished one of the most massive transfers of wealth in American history. That's sure as hell not nothing. Democrats have done little to stop and many have voted with them on numerous tax-cuts that have emptied the nation's coffers into the pockets of the very, very wealthy.

As American Prospect points out, while only 12 percent of Americans currently fall below the poverty level, the fortunes of most Americans are falling relative to increases in the cost of living.

Today, with only 12 percent of Americans officially poor, the challenge of leadership is more complex. Yet four Americans in five have had basically stagnant living standards since the mid-1970s. That's because three decades of economic growth have gone almost entirely to the top, not merely the top 20 percent but mainly the top 1 percent.

In other words it isn't trickling down. The gap between average workers and the upper echelons of management is ever-increasing.

Chief executive officers in the United States earned 262 times the pay of an average worker in 2005, the second-highest level in the 40 years for which there is data, a nonprofit think-tank said on Wednesday.

In fact, a CEO earned more in one workday than an average worker earned in 52 weeks, said the Economic Policy Institute in Washington, D.C.

Economist Paul Krugman has long claimed that we may, in fact, be entering another Gilded Age, with a new class of robber barons. In this seminal piece originally published in the paper of record in 2002, he charts the thirty year rise of a new elite and the disappearance of the middle-class. To be super-wealthy is fashionable, once again, after a brief hiatus in the 50s and 60s. Sadly most Americans are in denial that these "tectonic shifts" have occurred. Says Krugman:

My sense is that few people are aware of just how much the gap between the very rich and the rest has widened over a relatively short period of time. In fact, even bringing up the subject exposes you to charges of ''class warfare,'' the ''politics of envy'' and so on. And very few people indeed are willing to talk about the profound effects -- economic, social and political -- of that widening gap.

Yet you can't understand what's happening in America today without understanding the extent, causes and consequences of the vast increase in inequality that has taken place over the last three decades, and in particular the astonishing concentration of income and wealth in just a few hands. To make sense of the current wave of corporate scandal, you need to understand how the man in the gray flannel suit has been replaced by the imperial C.E.O. The concentration of income at the top is a key reason that the United States, for all its economic achievements, has more poverty and lower life expectancy than any other major advanced nation. Above all, the growing concentration of wealth has reshaped our political system: it is at the root both of a general shift to the right and of an extreme polarization of our politics.

Last week the Washington Post reported on the disappearance of the middle-class neighborhood.

Widening income inequality in the United States has been well documented in recent years, but the Brookings analysis of census data uncovered a much more accelerated decline in communities that house the middle class. It far outpaced the decline of seven percentage points between 1970 and 2000 in the proportion of middle-income families living in and around cities....

The Brookings study says that much more research is needed to better understand why middle-income neighborhoods are vanishing faster than middle-income families. But it speculates that a sorting-out process is underway in the nation's suburbs and inner cities, with many previously middle-income neighborhoods now tipping rich or poor.

As the article states, there is research to be done on why middle-class neighborhoods are disappearing faster than middle-income people, but I could point to a couple of possible reasons not addressed by the Post. The most obvious is that housing prices are terribly inflated, with even those little suburban matchboxes from time of yore going for sums unaffordable to the average wage earner. Beyond that much of the housing boom has been of the McMansion variety, marketing well-appointed, pre-fab monstrosities to the extraordinarily well-heeled. Housing prices have outstripped income growth for the majority of Americans. So the rapid polarization of American neighborhoods doesn't surprise me all that much.

I was raised by one of those men in a "gray flannel suit," Krugman describes. My grandfather was one of those men for whom capitalism had worked; rising from a working class background to the level of a top executive. But the excesses of the modern CEO would have sickened him.

He housed his family in one of those suburban matchboxes that sprung from the ground like so many mushrooms after WWII. He ran a large division of a major corporation and, as such, was the chief executive of one of the major employers of our town. It was a puzzlement to many why so many of the men who worked for my grandfather, lived in houses so much larger and grander. My grandfather was not given to such pretensions and couldn't see the point in heating so much unnecessary house. He lived a modest, if very comfortable, life.

At the time of his retirement, CEOs were earning a little more than 20 times the salaries of working stiffs. He thought that was too grave a disparity and argued with his executive colleagues about it. He was a product of a bygone era and with the advent of the Reagan years I saw him struggle with a kind of culture shock, as he watched the world go mad. He had survived the Great Depression, pulled himself up by his bootstraps, and lived the American Dream, as the New Deal made the rise of the middle-class possible. He watched it begin to slip away and raged against the dying of the light. I am only grateful that he did not live to see the rise of this new plutocracy because it would surely have killed him. Though I cannot help but wonder what he would have made of the Senators of the Democratic Party, to which he donated lavishly in his day, quibbling over an all-be-it very necessary $2 wage increase, while the entire middle-class way of life is disappearing.


Chris said...

Good lord, you are so right about $5.15 an hour...whats that after taxes? It is such a sad state of affairs...I'm ready to vote out every single person in Congress and get someone in their that actually cares about what WE care about!

Anonymous said...

There's a site of which you should be aware, NationMaster, that has comparative statistics of every sort imaginable.

Including those on income disparity.


1. Go to the site
2. Choose "Economy" for your type of stat in the drop-down menu.
3. Then use the drop-down menu below that to look for the stats beginning with "Income distribution"...see where the US stacks up.

Yes, the US is fast becoming a banana republic. I don't think the ruling class have quite thought this through. Middle class folk don't join in revolutions; dispossessed proles do.

When you ain't got nothin', you got nothin' to lose.

Anonymous said...

I meant to give you an example.

For example:

When you click on "Poorest 10%" you will see what percentage of the national income the poorest 10% of the population receives.

In Japan, ranked #3, the poorest 10% of the population receive 4.8% of the national income.

In Canada, #48, the poorest 10% receive 2.8% of the national income.

In the class-conscious United Kingdom, #75, the poorest 10% receive 2.2% of the national income.

In the United States, #85, the poorest 10% of the population receive 1.8% of the national income.

The richest 10% of the United States now receive 30.5% of its income, which mean we are not quite returned to the sorry years of the Gilded Age, but we are getting close.

What is missing from your otherwise excellent analysis is the fundamental danger the inequality of wealth poses to democracy.

In the gilded era of the 1920s, the last time the richest 1% of Americans owned over 40% of the wealth, U.S. Supreme Court Justice Louis Brandeis warned,

"We can have democracy in this country or great wealth concentrated in the hands of a few, but we can't have both."

Internet Esquire said...

How do you respond to the position that expanding the EITC would be a much more effective way of helping the working poor than raising the minimum wage?

Curmudgette said...

Internet Esquire said:

How do you respond to the position that expanding the EITC would be a much more effective way of helping the working poor than raising the minimum wage?

The link you provided does not provide any statistics or projections about how much money an EITC would actually put into the pockets of minimum wage employees. Granted I did not click through all your links to see if you address that elsewhere and you are welcome to post that data here, if you have it, in another comment. But its hard to "respond" to a proposition that does not provide that basic information.

I will respond, however to what I read on the blog entry you linked to. For starters, a grammar lesson. I'm assuming you are the author of said entry.

Of course, this begs the same question that was asked of me, "Where's the money going to come from?"

No sir. It does not beg the question. It raises the question. To beg the question is to employ a logical fallacy known as petitio principii or "circular logic." More simply, it is to leave the question begging. Example: "Of course the Bible is the irrefutable word of God. It says so in the Bible." For a more thorough explanation, this Wikipedia entry explains it well, or check the grammar website of your choosing. Don't feel too bad. It's a common mistake.

But as to the substance of the argument presented in that blog entry; that an employees wealth should not come from employers. I find this premise preposterous on its face. What exactly is an employer's responsibility to his employees if not to pay them for their labors? For that matter, why not have people work for other people's businesses, so that those businesses acquire wealth, and just put employees straight onto the dole. Your suggestion does that as a half measure; splitting the responsibility for low wage employees between employers and the government. Where does government money come from? Taxpayers. So by hypothetically lowering the low wage earner's tax burden, you're actually transferring the responsibility for that worker to taxpayers who make more money. Tax dollars have to come from somewhere or government comes to a grinding hault. Our infrastructure collapses. I know that's what Grover Norquist and his ilk want, but that takes into a whole 'nother discussion.

As I said in my article, CEOs now make 262 times what their lowest paid employees make. At it highest measure, before the collapse of the internet bubble, it was over 300 times. When did employers stop thinking it was their job to pay the people who work for them? Money is supposed to come from working. The answer we get from free-market fundamentalists over and over, as to why top tier executives deserve such heady remuneration is that they've worked for it. Well, we're all working for it.

You know why my grandfather hated that pay disparity between top exectutives and laborers? He had been a laboror. He worked in a mill for 2 years out of high school and saved enough money to pay for a semester of college. He worked hard at his studies and made it through the rest of the way on scholarships at a very prestigious university, from which he graduated in the top third of his class. He had 17 job offers when he graduated. The American Dream came true for him because he worked. And he knew what a hard day's work was worth. He knew damn well that he worked no harder as a chief executive running a mill than the mill workers under him. Many of them worked harder in a given day than he did and he felt a responsibility to them because the sweat of their brows provided him and his family a very nice lifestyle.

We are reverting to a feudal system, in which employers feel entitled to accumulate wealth, but feel no obligation to those who do the hard work that makes their wealth possible. Transferring that obligation to the government (taxpayer) is not an answer.

Anonymous said...

Silly Curmudgette. The business of a business is to maximize its profits, and paying workers a decent wage eats into profits. It's very simple reasoning.

In California, some of the most fervent supporters of the anti-immigrant Republican Party are to be found among the large agricultural producers in the Central Valley, who maximize their profits by using....illegal immigrants from Mexico and Central America to harvest the crops. Illegal immigrants are the "ideal employees" for Republicans because they can be paid sub-minimum wage, have no legal rights, receive no benefits, and are absolutely terrified of their employers.

We are not moving towards feudalism for those 11 million illegal immigrants; we have already arrived.

Studies have been done on one of the world's biggest corporations, Wal-Mart, that proves that Wal-Mart is subsidized by the taxpayers. Wal-Mart does not pay its non-management employees a true living wage, so many of those employees are dependent on local charities and government programs to keep body and soul together.

Whenever Wal-Mart opens a store, especially in an impoverished area, the number of people applying for aid through local food pantries and government programs such as Section 8 housing and food stamps always increases. Always.

Those people are Wal-Mart employees.

I like the idea of former Senator John Edwards, who is probably going to run for President next time around: we need to reward work, not wealth. I was one of the few who did not celebrate Warren Buffett's very generous donation of the bulk of his multibillion dollar fortune to charity. I was actually appalled by the failure of many people to grasp that Buffett's huge donation bespeaks a return to a feudalistic era in which we commoners depend upon the generosity of the wealthy. I don't want charity to provide for education and health care, for example; I want to claim those things as the right of all Americans.

Curmudgette said...

I have to give Warren Buffett his props. There is nothing wrong with donating to charity. Mr. Buffett has also been one of the most active critics of Bush's tax cuts for the wealthy and spoke out recently against the GOP's determination to abolish the Estate Tax. I agree that we should not need to depend on the largesse of billionaires, and in a perfect world we would not. But as long as poverty and wealth disparity exist, and they have in some form or fashion from time immemorial, I'm glad at least some rich people are taking their greater responsibility seriously and setting an example.

"I think that a rich person should leave their children enough so they can do anything but not enough that they can do nothing," Buffett told reporters in Manhattan.

Buffett said he believes in what he called "equality of opportunity," which is why he said the bulk of his personal fortune is going to charity instead of to his three children.

"It isn't in keeping with my view of how the world should operate to create huge amounts of dynastic wealth," he said.

Anonymous said...

Ah, but as generous as Buffett is, it's still a GIFT--and he could structure his estate so that his heirs could keep the whole $44 billion or whatever it is (if the Republicans have their way).

On the other hand, if rich people were taxed at the rates in effect during Eisenhower's presidency, when the top rate was 92%, there'd be no question of Buffett making a gift because it would be the right of society to take that wealth and redistribute it for the good of society as a whole. Notice that Buffett gave the bulk of his fortune to the Gates Foundation, which has a particular purpose. Well, nobody got to vote on that decision, did they, except Buffett. Perhaps there is a better use for the $40 billion or whatever the actual amount is that is NOT the Gates Foundation?

Buffett is almost entirely unique in the extent of his generosity and his outlook. (Schwarzenegger fired Buffett as one of his economic advisers after Buffett correctly pointed out that California's Prop 13 is killing its schools, by the way.)

Buffett is not setting an example of any sort. Philanthropic organizations report that the "super rich" (those with net assets more than $150 million) generally give only a little more than 1% of their wealth to charities, and that those "charities" are often institutions with which they have connections (Harvard University, for example).

Harvard University is not my idea of a charity--but it IS the idea most wealthy people have when they speak of their "charitable donations".

The Congressional Budget Office has issued a study that shows if the Republicans get their way and pass the estate tax repeal they want, charitable donations will be reduced from about $38 billion a year (in non-Warren Buffett years!) to about $25 a billion a year. Add up $13 billion a year over time and you're talking about real money.

Curmudgette said...

Anonymous said:

Buffett is not setting an example of any sort. Philanthropic organizations report that the "super rich" (those with net assets more than $150 million) generally give only a little more than 1% of their wealth to charities, and that those "charities" are often institutions with which they have connections (Harvard University, for example).

Of course he's setting an example. Others may not follow that example, but that doesn't mean he hasn't set one. Unlike those who donate 1%, he's donated the bulk of his estate; and not to Harvard, or the local opera company, or any of the other fashionable, elitist "charities" of the type that Arianna Huffington heaps scorn upon. I too would have chosen different recipients. Personally I think the direction of most cancer research, for instance, is wrongheaded. But I still don't think that's the point. He's not to blame for the many changes to the tax code that he, himself, has spoken out against. I think he's actually made a very bold statement about social responsibility and the perils of inherited wealth, at a time when the estate tax is being debated. I agree with you that the system is fucked, but then so does Warren Buffett.