In what may end up being a particularly unfortunate example of poor timing, Donald Luskin, economic adviser to John McCain, published an article in Monday’s Washington Post, arguing that, as his candidate avowed recently, the U.S. economy is fundamentally sound.
This article appeared even as a wild scramble was taking place on Wall Street in an attempt to keep the financial markets from melting down. The day before, Lehman Brothers, one of the nation’s oldest and largest investment banks, filed for bankruptcy, after various attempts to engineer a bailout of the firm failed.
At the same time, the Bank of America announced it was buying troubled brokerage house Merrill Lynch, in a deal designed to staunch the bleeding from the ongoing mortgage-lending crisis.
Then the Federal Reserve made the shocking announcement that the U.S. government was essentially buying insurance giant AIG in return for $85 billion in loans – a rescue operation literally twenty-five times larger, in real terms, than the infamous 1979 bailout of Chrysler.
Stocks were down sharply on Monday, and on Tuesday morning McCain was advocating a 9/11-style commission to investigate the financial crisis his economic adviser told us Monday isn’t happening. Indeed, the GOP presidential candidate is suddenly sounding like William Jennings Bryan, railing against greedy Wall Street financers who have robbed America’s workers blind.
Anyway, Luskin’s argument is essentially that average Americans feel worse about their financial situation than the facts warrant, because politicians, most notably Barack Obama, are for reasons of electoral self-interest painting an unrealistically gloomy economic picture.
What Luskin’s argument overlooks are how the economic anxieties of Americans are the inevitable result of thirty years of widening income inequality, in a culture that also encourages conspicuous consumption and celebrates fantasies of unlimited wealth.
Consider that in 1978 the median household income in America — meaning half of households made less — was about $40,000, in current dollars. Today it’s about $48,000.
Meanwhile, the gross domestic product has grown by 140 percent, from about five trillion to around 11.7 trillion dollars, again in current terms. At the same time, the population has increased by 40 percent.
This means that, per person, the nation is nearly twice as rich as it was 30 years ago. Yet the income of the typical household has barely grown at all.
It’s hardly a mystery where all those extra trillions have gone — while median household wealth has increased only modestly, the income at the top of the economic pyramid has skyrocketed to such an extent that we now have a greater level of income inequality in America than at any time since before the Great Depression.
The priests of the "free market" (these are generally the same people who are currently trying to shake down the federal government for taxpayer-funded bailouts of some of our biggest financial institutions) will tell you all this is an inevitable product of global capitalism, and as unavoidable as the laws of thermodynamics.
That’s obviously untrue: the reason the rich have gotten so fabulously rich in America over the past generation is because almost every change in the rules of the economic game has been designed specifically to benefit them.
A new report from the Tax Policy Center, a Washington-based research group, reveals that McCain’s tax proposals promise more of the same — if they were enacted, the richest one percent of Americans would see a far larger percentage increase (and an astronomically larger gross increase) in their income than anyone else.
By contrast, the report claims that under Obama’s proposed tax plan, 95 percent of American taxpayers would see their after-tax incomes increase, while the richest Americans would experience a slight decline in the staggering wealth they’ve accumulated during our new Gilded Age.
And if that means people like John and Cindy McCain end up owning only eleven instead of twelve houses, that’s a price I suspect the average American voter is willing to pay.
(Paul Campos is a law professor at the University of Colorado and can be reached at Paul.Campos(at)Colorado.edu.)