Inequality for All Briefing Notes

Focussing on the last forty years, Robert Reich charts the scale and trajectory of economic inequality in the USA and assesses its impact on economic growth and American democracy.

He demonstrates how the economic position of the “middle class” has declined:  not only relatively compared to the wealthy, but also absolutely in terms of disposable income and earning power.

He stresses how this matters for economic growth and the viability of the “American Dream”. Reich argues that, in a consumer economy like the USA, the engine of economic growth is the consumer demand of the middle class.

Union membership was a key means of protecting and enhancing the earning power of the middle class, but has significantly declined (from 35% in the 50s to 11.3% today). The growth of two income households mitigated the decline in individual (traditionally male) earning power, but in recent years households have dramatically increased their reliance on debt to maintain their standards of living. In 1969, the ratio of debt to household income was 1:1; by 2008, it had risen to 12:1.

Wealth and income inequality

• The top 1% holds 35%+ of the nation’s wealth; the bottom 50% controls 2.5%.
• The richest 400 Americans have more wealth than the bottom 150 million Americans.
• In 1970 the top 1% took home 9% of national income; today, they take home 23%.
• In 1970 the ratio of CEO earnings to their average employee was 50:1; by the 2000s, it was 350:1.

Are these claims overstated?  This Film Night should encourage us all  to take these issues seriously, investigate the situation for voters overseas and in our home states, and decide for ourselves.

Earning power

• 1978: ‘typical male worker’ earned $48,302; 2010, earned 33,751.
• 1970s:  $35,143 median disposable income; housing cost 15,579; healthcare, 1,686; college, 903.
• 2010:   $26,578 median disposable income; housing cost 21,684; healthcare, 7,082; childcare, 3,005; college, 1,833.

Reich comments: “Government sets the rules by which the market functions. All of  these rules are necessary to construct a free market. The real question is whom do these rules benefit and whom do they hurt?”

Some Talking Points: 

• Rising inequality: Picketty’s work is causing a storm with critics arguing (as they have done for years) that it is not happening. What data do people use to make their cases?  What do you consider valid and reliable data?

•  If it is happening, why? The film identifies both political and economic causes. What are the main economic explanations? What are the political explanations? Can we counter this politically, or is it just ‘globalisation’?  Is the USA different, or is inequality rising everywhere?

• President Obama has called for a focus on policies to address inequality. What more could or should the Obama and Clinton administrations have done to raise awareness and address this issue?

• What are the key policies that you think Democrats can or should be focussing on at national and state levels to address deepening inequality?  How should “inequality” be addressed in the mid-terms?