The Elites Are Unanimous: Lower Everyone's Wages and Standard of Living -- Except They Don't Say it Out Loud
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Editor's note: This essay is derived from Jeff Faux's new book, The Servant Economy: Where America's Elite is Sending the Middle Class, which William Greider calls a "really important book" that tells the "astonishing story of how class works."
Calls for a bipartisan “Grand Bargain” on taxes and spending for the next decade ring out daily, if not hourly, from the politicians and pundits who dominate our political media. But the national discourse is silent on the tacit agreement both parties have already made on the future that lies ahead for the majority of working Americans: a dramatic drop in their living standards.
The United States can no longer satisfy the three great dreams that have driven most of its domestic politics since the end of World War II: the multinational corporate class's dream of limitless profits; the military-industrial complex's dream of global hegemony; and the dream of the people for rising incomes and expanding opportunities. One out of three? Certainly. Two out of three? Maybe. All three? No.
So far, Corporate America gets priority boarding in the economic lifeboat – with the safest seats reserved for Wall Street. Four years after the crash, the financial sector remains heavily subsidized with cheap federal loans that it uses to buy higher yielding bonds, speculate in exotic IOUs and pay outrageous salaries to those at the top. Larger than ever, they are more than ever “too big to fail.” As a result, Wall Street continues to divert the nation’s capital away from investment in sustainable high-quality jobs in America.
Next in line is the Pentagon and its vast network of corporate contractors, members of Congress with military facilities in their districts and media propagandists for the empire. The administration, along with some libertarian Republicans, insists that military spending will not be spared in the coming era of austerity, and has proposed modest cuts over the next decade. At the same time, virtually all of Washington supports the policies that require huge defense budgets, i.e., remaining in the Middle East, expanding in Latin America and containing China in its own neighborhood. The threatened across-the-board cuts in federal spending that become automatic if a long- term budget deal is not made by December will almost certainly be finessed in order to protect the military budget.
All of which leaves the American middle class on a badly listing, although not yet sinking, economic ship. Even before the financial crash, real wages for the typical American worker had been stagnant for 30 years as a result of: 1) trade and investment deregulation that shoved American workers into a brutally competitive global labor market for which they were unprepared; 2) the relentless war on unions that began with the election of Ronald Reagan in 1980; and 3) more recently, the erosion of the social safety net for low wage workers and the unemployed.
Still, workers continued to spend, and thus maintain national economic growth. While hourly wages flattened, overall family income rose because more women went to work. And cheap and accessible credit fueled everyone’s purchasing power
Today, with more women than men now employed, gains to family income from sending the wife to work are about exhausted. And given the huge overhang of non-payable debt on the part of both banks and consumers it will be a generation, if ever, before we see anther credit balloon strong enough to lift up the economy. So, now that these financial props have been knocked away, the trajectory of American incomes and living standards is a downward slope.
This decline will not be reversed by the long-awaited upturn in the currently stalled business cycle. Even with optimistic assumptions – e.g., that there will be no new recession, Europe avoids collapse, big US banks remain solvent -- there is little prospect for a sustained boom in the demand for American labor sufficient to overcome the downward pressure on workers’ share of the economic pie. Cost cutting has become the central strategy for most American business, and for most of them the easiest cost to cut is labor.