Formisano - Plutocracy in America: how increasing inequality destroys the middle class and exploits the poor

PLUTOCRACY in AMERICA

How Increasing Inequality Destroys the Middle Class and Exploits the Poor

RONALD P. FORMISANO

2015 Johns Hopkins University Press

All rights reserved. Published 2015

Printed in the United States of America on acid-free paper

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Library of Congress Cataloging-in-Publication Data

Formisano, Ronald P., 1939

Plutocracy in America : how increasing inequality destroys the middle class and exploits the poor / Ronald P. Formisano.

pages cm

Includes index.

ISBN 978-1-4214-1740-0 (hardcover : alk. paper) ISBN 978-1-4214-1741-7 (electronic) ISBN 1-4214-1740-5 (hardcover : alk. paper) ISBN 1-4214-1741-3 (electronic) 1. EqualityUnited States. 2. PovertyUnited States. 3. Income distributionUnited States. 4. DemocracyUnited States. 5. United StatesEconomic conditions2009- 6. United StatesSocial conditions1980- I. Title.

HN90.S6F67 2015

305.50973dc23 2014043206

A catalog record for this book is available from the British Library.

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Johns Hopkins University Press uses environmentally friendly book materials, including recycled text paper that is composed of at least 30 percent post-consumer waste, whenever possible.

With this book, I have been fortunate to work with Robert J. Brugger, editor, historian, Vietnam vet, and friend, a second time. Others at Johns Hopkins University Press who have also guided it and me through the process and deserve thanks are Andre Barnett, Becky Clark, Julie McCarthy, and Kathy Alexander. I was lucky to have Kathleen M. Capels as my copyeditor. The copyeditors for my previous books with Hopkins and other presses had all done competent, even excellent work, but none was so engaged, so well informed, or helpful. She and her husband, Terence Yorks, also took on the difficult task of compiling an index for a complex book.

The presss anonymous reader of the manuscript provided criticism that improved the final result.

The research fund associated with my William T. Bryan Chair of American History at the University of Kentucky, from which I recently retired, provided resources that helped to make this book possible. My superb research assistant, Dana Caldemeyer, a doctoral student and promising historian, could not have carried out her duties any better than she did. She did everything she was asked to do, quickly, responsibly, and usually ahead of schedule.

Several colleagues and graduate students in the University of Kentucky History Department came to a discussion of an earlier version of and made valuable suggestions.

Dean Baker of the Economic Policy Institute kindly read and corrected some errors; other errors, mine, may yet have crept in there and elsewhere.

As usual, my historian friends Joseph A. Conforti and John Zeugner, whose own writing I admire, read parts of the manuscript, improved the prose, and gave steady encouragement. Last, but most important, Erica, Laura, and Matthew provide the kind of support that no one else on the planet can give.

In the state the good aimed at is justice; and that means what is for the good of the whole community. Now it is pretty clear that justice in a community means equality for all.

ARISTOTLE, Politics

In 20082009 the Great Recession devastated the economy, and millions of Americans lost jobs, homes, health insurance, retirement funds, and more, sinking into a netherworld of struggling to get by. Even before then, the startling increase of inequality in income and wealth in the United States had attracted the attention of scholars and pundits. Inequalitys arrival as a topic at the forefront of public consciousness was ratified when it entered popular culture as a source of jokes for late-night talk show hosts. The revelations regarding unethical and fraudulent practices by financial firms, which triggered the economic debacle, intensified the publics awareness of inequality. So too did the Bush and Obama administrations bailouts of reckless firms with taxpayer money, while borrowers with risky mortgages lost their homes. The federal governments tender concern for Wall Street at the expense of Main Street came into sharp relief.

This recession also cast a harsh light on the persistence of poverty, re-igniting politicians debates about the effectiveness of the nations safety net. Not since the launch of the War on Poverty in the 1960s have the political and media establishments devoted so much rhetoric and conflicting diagnoses as to the best methods of helping fellow citizens damaged by the plunging economy.

When Occupy Wall Street erupted in the fall of 2011 with the slogan We Are the 99 Percent, it succeeded in casting a spotlight on the excessive gains of the inordinately wealthy, on overpaid and undertaxed executives, on corporations that pay no taxes at all, and on all those enriched by financially friendly laws and deregulation. Protesters in the OWS camps, both young and old, asked the nation: where are the jobs, and what had happened to equal opportunity? Corporate America and Wall Street suddenly became targets of populist anger on the Left and Right, and high-flying CEOs and hedge-fund managers morphed from celebrities into villains. The backlash against concentrated capital recalled the excoriation of robber barons during the First Gilded Age of the late nineteenth century and the pointed criticism of malefactors of great wealth during the Progressive Era in the early twentieth century, and was last experienced when President Franklin Roosevelt denounced economic royalists in the throes of the 1930s Great Depression.

A momentary hiccup in the reputations of the superrich, however, did nothing to stop the flow of income to the top, which continued to accelerate. The land of opportunity now is rightly taunted as the United States of Inequality for All. Social mobility has diminished. That fact has not really penetrated the consciousness of most Americans, who do not realize that almost all other economically advanced countries enjoy greater socioeconomic mobility than the United States. Instead, the platitudes of politicians and the Horatio Alger mythology of rags to riches still hold wobbly sway in the popular imagination.

Middle-class and low-income families putting in long hours at work, often holding two jobs, as well as workers increased productivity, were not delivering Americas promise. As 2014 ended, the wealth gap between upper-income and middle-income families reached record high levels, the widest in thirty years, according to a report from the Pew Research Center. In 2013, the median income of the most affluent had surged to $639,400, nearly seven times that of middle-income households ($96,000). The dollar needle for middle-class people did not move since the Great Recession, reinforcing the larger story of Americas middle-class household wealth stagnation over the past three decades. The upper tiers wealth rose to nearly 70 times that of the lowest-income families. From the middle to the