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David Paul

David Paul

Posted: October 10, 2010 11:36 PM

Today's Tea Party has a point. The political progeny of George Wallace Democrats, Richard Nixon's Silent Majority, the Reagan Democrats, supporters of Ross Perot, and Pat Buchanan's Peasants with Pitchforks -- largely white, working and middle class -- are very pissed off. And for good reason. The American middle class that was once the envy of the world has taken an economic beating.

Since 1970, the middle class' share of national income in the United States has steadily declined. Based on U.S. Census data, over the past 40 years, the middle class -- as represented by the middle quintile of households -- has improved its share of nation income in only four years, 1990, 1995, 2002 and 2007, and in aggregate saw a decline of 16% over the four decades. By way of comparison, the top quintile improved its share of national income by 17% over the same time period, and the top 5% of families by 31%.

The relative and absolute economic decline of the American middle class has accelerated. Back in the Mad Men years of the 1950s and 1960s, when the American middle class was the envy of the world, real household incomes grew by 35% and 35% in the respectively. Since then, real income growth has moderated, with growth rates of 6% in the 1970s and 1980s, before a brief uptick to 10% in the 1990s. Then the hammer fell, as over the past decade, real incomes for the middle quintile of American families declined by 6%.

So it is no surprise that, in Paddy Chayefsky's words from the 1976 film Network, middle class Americans are mad as hell and aren't going to take it any more.

What is surprising -- and disappointing -- is how easily manipulated the Tea Party movement has been, and how willing its followers seem to be to have their rage channeled against the chosen targets of self-interested and opportunistic leaders.

Socialism. Deficit spending. Healthcare reform. Barack Obama.

The current plight of the middle class had unfolding -- and accelerating -- for four decades, and this is the best Dick Armey and Sarah Palin and Glen Beck can come up with? And the millions of people embracing the Tea Party creed are willing to accept such blatantly shallow explanations for their plight?

The truth is that the plight of the middle class is a product of the triumph of capitalism, and is the direct product of deliberate national policies that have reflected the consensus of the American political and corporate establishment. Since the end of the Second World War, America has pursued national economic and foreign policies that have purchased world peace -- such as it is -- at a price of providing our former military and ideological adversaries with largely unfettered access to our markets. Free trade and the opening of world labor markets has supported dramatic growth in standards of living first in Japan and German in the wake of the Second World War, and then in China, the states of the former Soviet Union, India, and other smaller proxy states such as Vietnam as we "won" the Cold War.

Simply stated, we sought to create a world where the dominant world powers would compete in the economic marketplace rather than on the battlefield. Opening our markets brought billions of workers from the nations of our adversaries into direct economic competition with American workers. The impact of our integrated economic and foreign policies first emerged in the 1970s as Japan changed the landscape of the world auto industry and began an economic onslaught from which the American industrial heartland has never recovered.

The ensuing deterioration in the economic outcomes for middle class and working class Americans, and ultimately the decline in family incomes of the past decade, were masked by the steady declines in interest rates from their peak in the early 1980s and the growth in consumer and mortgage debt, which exploded over the past decade even as incomes declined in real terms. The now-familiar adage of the house-as-ATM-machine was very real, and sustained the illusion of growing disposable income until the music came to an abrupt halt in July 2008 when consumer debt peaked.

Real incomes across the American industrial heartland were doomed from the moment America chose to pursue its policy of open markets as a foreign policy tool. Competition with foreign workers depressed American real incomes as open markets pushed real wages toward a new equilibrium that would bring up living standards first in Germany, Japan and East Asia, and then across the globe. Flows of capital investment into new markets raised real incomes in these new markets, while the pressure on the American middle class continued unabated. While global economic growth ameliorated the depressing effect on wages in high-income countries, and technology and capital investment has maintained the level of productivity of American workers, it has done so at the expense of reducing employment levels, even as it increased aggregate output.

Socialism, deficits and healthcare are fine targets for bumper stickers and partisan finger pointing, but they have little to do with the plight many Americans face, but it has been capitalism, not socialism, that has led to the dramatic changes in the world economy that have pressured American real incomes and brought middle class America to where it is today. And these changes have been the product of Democrat and Republican administrations alike. Similarly, while today's deficits may loom as the next threat to our economic future, today they are neither crowding out investment in the private economy nor a plausible cause for the deterioration of middle class incomes over the past several decades.

Absent a more robust economic and political assessment of the state of our nation and the decline of the middle class, the Tea Party movement will lose its moment and leave us with nothing other than a few members of Congress who lack any meaningful platform that offers hope for a future that is different from the past. And the followers of Glen Beck, Sarah Palin and the rest will wonder what happened as they are reduced to just one more political constituency, complaining about their plight, claiming their entitlements, but doing little to build a brighter future for themselves or for the nation.