Yes, this is a long post. But when you are trying to illustrate how a superpower can fall, it takes some words.
In the last installment I discussed how the inevitable leveling of globalization started eroding the well-being of American workers, who had enjoyed an enviable advantage after WW2, due to a series of factors — most of which now have been reduced by globalization.
In this installment, we’ll see how the Republican party played both sides of America’s decline in the 2010’s: firstly, to lure disaffected American workers with promises of economic benefit while in reality, they sought (and succeeded) to line the pockets of the wealthy. Along the way, they helped destroy the concept of political civility which had unified the U.S. through many crises of the past and set the stage for a political disaaster.
A rising tide – but not for you: globalization’s pernicious effect on wages
The 1990s found Republicans and conservatives in general reeling from an unanticipated success by the Clinton administration: balanced budgets, falling crime rates, and economic growth. These factors weren’t all due to Clinton, who had his own problems in the personal sphere, but his leadership did well for the U.S. as a whole:
- no ruinous wars
- welfare reform
- reasonable taxation (highest marginal rate just 1/2 what it was under Carter)
- open trade (NAFTA had been signed by his predecessor, the Republican H.W. Bush)
Generally, Clinton was business-friendly. One act of Clinton’s signified his business-friendliness — and was the most fateful signing of a bill for the 21st century: the Gramm–Leach–Bliley Act, sponsored by three prominent Republicans, which set conditions for a financial crisis to threaten the entire global banking system. (That crisis would come in 2009). Nice job, there, Bill.
Clinton did benefit from a rise in productivity which had nothing to do with is leadership. It was during his time as President that big gains in productivity through automation brought huge windfalls to U.S. corporations — but not their workers:
This chart is from an excellent post by David Dayen about wage growth here, and is notable for two salient trends:
- Starting in the early 1980s, we start seeing a big payoff from computers aiding office (information technology), factory automation and engineering (CAD/CAM).
- Worker compensation benefited very little from the rise in productivity since 1977.
The Economic Policy Institute has this to say about wages in the 21st century:
The wage-setting mechanism has been broken for a generation but has particularly faltered in the last 10 years, once the robust wage growth of the late 1990s subsided. Corporate profits, on the other hand, are at historic highs. Income growth has been captured by those in the top 1 percent, driven by high profitability and by the tremendous wage growth among executives and in the finance sector.
When workers don’t benefit from a rising tide — whether it is ‘supply side economics’ or benefits from globalization and automation — you can expect unrest. Combine that with political and economic ignorance and you have a recipe for disaster.
The CEO pay gap and wage inequality
The dot-com bust of 2000 threw a out of people out of work, so it was an employer’s market, even in Silicon valley. Meanwhile, CEOs since the 1990’s were enriching themselves on stock options, due to changes in tax rules intended to reduce CEO pay — President Clinton’s administration limited to $1 million the salary that was deducible from a company’s expenses — the notorious ‘sub-paragraph 4c’ modification. Result: companies switched to compensating CEOs with stock options, and — surprise — CEOs did whatever they could to increase stock prices and cash in those options. The CEO-to-worker pay gap hit a high of 300 in 2000, just before the bust:
That gap now stands at around 240, about 6X what they were until the 1980s. The payoff? Probably none. CEO option incentives are no more than a casino, while CEO pay and performance are not even correlated:
Currently, of the largest companies in America (those in the S&P 100), CEO pay has no correlation with either performance or market capitalisation. —The Economist.
The (younger) Bush doctrine: talk like a dude, help the rich
Politically, there may have been hand-wringing over the pay gap but nothing was done about paragraph 4c’s impact. The 2000s saw Republican resurgence, with George ‘W’ at the helm and Republicans clawing back control of the House. But despite appealing as a ‘regular guy’ to his more cerebral opponents, George W. did nothing for the middle class stressed by globalization and automation. His tax cuts benefited the top tier households:
In 2004, the middle 20 percent of households will receive 8.9 percent of the tax cuts.
By contrast, millionaires — totaling just 0.2 percent of U.S. households — will receive 15.3 percent of the tax cuts…The tax cuts will confer more than $30 billion on the nation’s 257,000 millionaires in 2004 alone. —CBPP.org.
Bush’s appeal to workers with his calls for tax cuts was a flim-flam that could only be put over a financially unsophisticated electorate. After all, the rich pay most of the taxes — the tax cut rhetoric should have been obvious as a benefit mainly to the rich:
The top 1 percent of taxpayers paid 33.7 percent of all individual income taxes in 2002. …taxpayers who rank in the top 50 percent of taxpayers by income … have paid over 94 percent of all individual income taxes. In 2000, 2001, and 2002, this group paid over 96 percent of the total. — U.S. Treasury, via about.com
It made no sense to appeal to the middle class to cut taxes, but Americans bought it. Even Bush’s ‘middle class’ provisions were a sop. The CBPP said in 2004:
The top one percent of the income spectrum will receive an average tax cut of almost $33,700 from all of the other tax-cut provisions in 2004, while the middle fifth of households will receive an average tax cut of just $100. The other tax cuts provide those at the top of the income scale with average tax benefits more than 300 times larger than the benefits that those in the middle of the income spectrum are receiving. This gap will widen even further over time. — CBPP.org.
Bush: no hands on the wheel
Meanwhile, Bush’s policies appeared to heap insult onto lower and middle-class Americans. For instance, he froze Pell grants and cut low-income energy assistance. In this period, globalization impacted white collar workers: contract tech houses like Tata and Wipro started displacing huge swathes of American white-collar workers. This is when you started seeing articles describing workers forced to train their foreign replacement appearing. White collar workers met their blue collar predecessors at the unemployment line.
Meanwhile, the 2000 stock crash stung the middle class, but the widespread catastrophe of the 2008 housing crisis ($2 trillion lost in retirement accounts) can clearly be landed in the younger Bush’s lap. It was the Bush administration’s Federal Reserve that oversaw the conditions for the 2008 disaster: they allowed interest rates to flatline for far too long and eschewed regulation. Contrary to popular belief among the middle and working classes, financial regulations help them, not the opposite. Deregulaton helped the top 1% — Bush’s real friends were in the Financial Sector and the executive suite.
Also, the shift to Federal deficits (from Clinton’s surpluses) to deficit spending occurred under Bush’s tenure and was due in large part to his tax cuts. That was a non-trivial shift: running the Federal government in deficit meant that Congress had fewer options open when the 2008 crash occurred.
Meanwhile, it was also during this time that pension funds faced huge losses, and were finally forced by the government to face reality — companies had to actually fund them. In 2004, U.S. companies were $300 billion behind in their pension liabilities. Result – benefits were trimmed, employees paid off or refused pensions, or, as in the United Airlines bankruptcy, lost altogether. (It was not fun flying on UA after that deal went down. They were a surly bunch, and understandably so.)
Result? Workers from blue collar unions (pension fund liabilities) to white collar techies (seeing 401(k) and stock option losses) were not only losing jobs to their overseas competitors and seeing no rise in incomes, but losing their hopes for retirement. The stage was set for a protest movement, and the Tea Party provided the vehicle.
By the time Barack Obama was elected President, America was in deep trouble.
Discontent + ignorance: the fragmentation of the body politic
Discontent was rife in the mid-2000s. That was fuel for a revolution, the oxygen was a general ignorance most Americans have for economics and politics:
What we do know is that nearly every study conducted on voter knowledge finds a big chunk of the electorate understands next to nothing about American governance. To varying degrees, this is what allows Hillary Clinton, Donald Trump, and other platitude-spewing populists to lean on identity, anger, grievances, empathy, and jealousy rather than policy. — The Federalist
You think they overstate? Knowledge takes work, and Americans really don’t work at their political or economic understanding. 41% of Americans had not read a nonfiction book in the last year (HuffPost). 27% have read no book at all (NBC). Other channels for understanding politics are uneven at best.
The nightly news isn’t what it used to be — ever since the advent of ‘Happy Talk‘ news in the 1970s, the content has been radically diluted. Meanwhile, only 40% of Americans do any reading to gain in-depth understanding of said news. You wonder if its the same 41% that actually read non-fiction books.
As for newspapers with credible reporting staffs, the top 25 represent a local and online circulation of about 55 million. Sound impressive? Those numbers are dwarfed by just the circulation of the top 10 consumer magazines (AARP, Better Homes and Gardens, People, etc.), at over 80 million. Those might not be mutually exclusive, but it clearly shows a national preference for easy reading versus hard news and analysis.
Meanwhile, only 43% of Americans trust their news sources — troubling for news outlets, many of which have tainted their own nest with biased reporting. That implies that as a people, Americans may be more likely to trust their own (often uneducated) opinion over fact — if they even get the facts.
Hello? Is that me I’m hearing? The News Echo Chamber
And do we get facts, or opinion delivered as if it were fact? The rise of cable news since the 1980s enabled targeted audiences, leading to less editorial balance in American news. Later, the explosion of media channels in the Internet resulted in so many outlets that anyone with a bias can find a news outlet that panders to their tastes. The result for many consumers is an echo chamber, where individual prejudices are reinforced instead of being challenged. People don’t like to be challenged — it makes them uncomfortable. This effect even affects our leaders:
Cruz is a smart man, [but]… After spending too much time in the Republican echo chamber, he may believe what he says….in retrospect, the rise of talk radio, Fox News Channel and right-wing Web sites may have done greatest harm to conservatives themselves. The right-wing echo chamber breeds extremism, intimidates Republican moderates and misleads people into thinking that their worldview is broadly shared. — New York Times.
You could say the same thing about liberals listening to MSNBC or reading Salon.com and HuffPost. However, the Left in the US is far more balanced in its sourcing of news than the right:
“…a new survey by the Pew Research Center…. Among consistently conservative respondents, 47 percent chose Fox News as their main source “for news about government and politics.” The next largest group, 11 percent, chose local radio. Responses among liberals, by contrast, were much more fragmented. Fifteen percent of consistently liberal respondents chose CNN, 13 percent chose NPR, 12 percent chose MSNBC and 10 percent chose the New York Times. — The New Republic.
Furthermore, the New Republic goes on to say “Eighty eight percent of consistently conservative respondents said they trust Fox News, compared with 52 percent of consistent liberals who say they trust MSNBC.” Put together a conservative base who listen to very biased news sources with undue credulity, and you have the basis for a very dangerous movement.
Challenging opinions is a crucial part of developing knowledge; the dialectic method has been used since ancient Greece. It produces healthy minds and uncovers truths. When we lost our taste for adult discourse, we set the stage for failure of the American political system.
The end of civility and its threat to American governance
Even the most clueless of populations will eventually ‘get it,’ and after a quarter century of wages flatlining and the rich getting richer, a critical mass of heretofore snoozing American electorate woke up and created a movement: the Tea Party.
“There are a lot of people just waking up,” says Jack Walsh, who belongs to a Tea Party group in Texas. “They know something is wrong with their government, but they don’t know what it is.” — The Week,
The Tea Party movement sprang from Ron Paul’s 2008 presidential primary organization. The activity around that bid provided a nexus of funding and like-minded operatives who captured the foul mood of American electorate and capitalized on it. The conservative establishment at first encouraged the Tea Partiers, grasping the lightning rod in hopes it would energize the Republican base:
“[in early 2009]…CNBC analyst Rick Santelli unleashed an on-air rant against government bailouts of banks and debt-ridden mortgage holders with taxpayer funds, calling for a modern-day Boston Tea Party. The rant became an instant YouTube sensation, and soon protesters began calling themselves Tea Partiers, and “tea” was turned into an acronym—for Taxed Enough Already. Fox News began heavily promoting the movement, and on April 15, Tax Day, raucous protests were held all over the country. Obama’s health-care-reform package was the primary target.” — The Week
Republicans hoist on their obstructionist petard
Being a protest movement, the Tea Party operatives who came into power in 2010 and 2012 had a conundrum: how to represent the anti-establishment forces while being part of the establishment? Their solution was obstructionism. They certainly had a precedent: the Republican party had been acting more like a spurned spouse than a loyal opposition for several years. As of June, 2007, the 110th Congress had hit several unhappy milestones:
So far, in the first half of the first session of the 110th Congress, there have been THIRTEEN cloture votes on motions to proceed – each one wasting days of Senate time. (110th Congress, Roll Call Votes #44, 51, 53, 74, 129, 132, 133, 162, 173, 207, 208, 227, and 228). In comparison, in the first sessions of the 108th and 109th Congresses combined, there were a total of FOUR cloture votes on motions to proceed. — Oliver Willis
I’ll be clear: the Republican Party set the stage for Tea Party tactics they would later decry.
After the election of Barack Obama in 2008, the Republicans put their obstructionist agenda into high gear, destroying two centuries of American political tradition and compromise. We had a two party system that led America through its infancy as a nation, through numerous wars and financial panics, two world wars and a Great Depression. Our traditions of respect for those across the aisle, even when in opposition, had enabled Congress to pass groundbreaking legislation and appoint critical government operatives for over two centuries. Yet the Republicans met with a malice aforethought to bring down Obama, abandoning all pretense of a loyal minority:
“If you act like you’re the minority, you’re going to stay in the minority,” said Keven McCarthy, quoted by Draper. “We’ve gotta challenge them on every single bill and challenge them on every single campaign.” — The Guardian, 2009
By 2012, and the re-election of Barack Obama, the Republican obstructionism reached farcical levels as they tried to deny the will of the electorate:
“Minority Leader Mitch McConnell (R-Ky.) came out to argue that the president needs to show “leadership” in solving the economic crisis facing Congress….Apparently, leadership is throwing out everything Obama campaigned on and implementing the policies voters had expressly rejected on election night. Such obliviousness to political reality would be crazy if it hadn’t been the signature of Republicans in the 112th Congress.” — Policy.Mic
In 2013, we see a litany of obstructions in the appointments of government positions, affecting millions of Americans who depend on the government to function:
“In the history of the Republic, there have been 168 filibusters of executive and judicial nominations. Half of them have occurred during the Obama Administration – during the last four and a half years. These nominees deserve at least an up-or-down vote.” — democrats.senate.gov
Objective numbers were compiled by several scientists:
“…it is unprecedented for the minority party to obstruct and delay to the level that Republicans have done to Obama in the 112th Congress.” — Washington Post
In 2014, the Republicans doubled down, furthering their war on the middle class:
“Republicans have blocked every effort since the stimulus to maintain infrastructure, hire teachers, raise the minimum wage, give equal pay for women, stop special tax breaks for millionaires [and] corporations (especially oil companies), stop tax breaks for sending jobs out of the country, provide student loan relief, help the long-term unemployed, and more. Instead they insist on even more tax breaks for oil companies and billionaires, on cutting environmental protections, deregulating oil companies, and so on.” — ourfuture.org
The media took notice. Even the most clued-out voter had to know of this tactic. “The GOP made the 112th Congress the least productive on record. And yet, they’ve had the time to vote to repeal Obamacare 37 times. — MSNBC.
Even Bloomberg – the businessman’s most businesslike news service, had this to say:
“The White House has cast Republicans’ position as unprecedented brinkmanship that defies the Constitution. The president’s overtures to Senate Republicans — including rounds of telephone calls and a meeting in the Oval Office — have largely been rebuffed, as Grassley has not budged on his pledge to block Obama’s nominee.” — Bloomberg.
Remember that phrase: “That defies the constitution.” The Democratic Whip in 2014 compiled a litany of obstructionist acts, viewable here.
Now I am the master — Darth Vader
It’s startling how badly the Republicans gummed up our governance. But what is more startling is that the Republican establishment was disingenuous enough to complain when the Tea Party refused to play ball with them. Cruz and the Tea Partiers blocked a Republican immigration bill. A crucial pipeline safety bill. They were petty enough to block a museum, and bills to protect women’s safety. But those were mere child’s play compared to what they over the budget.
In 2011, the Tea Party threatened a government shutdown, rationalizing that “A shutdown will show that much of the government isn’t needed.” Note the states with the most Tea Partiers (the South) are also heavily dependent on defense spending and the highest-use states of medical disability (paid for by the taxpayer) as a way of life. The hypocrisy, ignorance or simply lack of self-awareness of these people is staggering. Their parents, co schools have failed to instill the least acceptable level of civic knowledge and awareness required for an electorate to function.
In 2013, the Tea Party did shut down the government, risking a default on American debt, over an issue they knew they could not win. A U.S. Government default could have been unbelievably disastrous, and indeed, the Treasury’s credit rating was cut in 2011 just from the threat of a default. Republicans blamed the Tea Party, the Speaker of the House (Republican) said, as he tried to negotiate a budget deal:
“You mean the groups that came out and opposed it before they ever saw it?” he asked. ”They’re using our members, and they’re using the American people for their own goals. This is ridiculous. Listen, if you’re for more deficit reduction, you’re for this agreement.” — MSNBC.
Well, hell, where did the Tea Party learn their obstructionist tricks from? Who had laid the foundation for the breakdown of political decorum in the United states, the lack of civility and descent into disloyal opposition for their own gains? The Republicans, as I have illustrated above.
You cannot legislate with scorched earth policies. Bohner is gone, but the legacy of his Congresses live on in a nightmare even worse than the Tea party: the ne plus ultra of incivility and lack of decorum, of ignorance parading around en flagrante delicto. Our own little fascist, Donald Trump.
Next installment: what Trump represents, his chances of victory, and how that could lead to the dissolution of American power.