THE BLOG
12/15/2010 11:35 am ET | Updated May 25, 2011

The Great Disconnect

If an economic catastrophe befalls Americans and no one in power hears it, did it happen?

That was the question raised by a new Yale/Rockefeller Foundation report released yesterday that looks at the economic experiences of Americans during the Great Recession. Since one of us (Hacker) was a coauthor, we obviously gave it extra attention. Yet the picture it painted -- based on a two-wave survey between March 2008 and September 2009 -- was only confirmation of what most Americans know: there's a lot of economic pain out there.

According to the report, more than 90 percent of Americans experienced at least one major economic "shock" during these 18 months: a substantial drop in wealth or income, a large increase in nondiscretionary spending (such as medical costs), or similar dislocation. Even if you ignore big wealth losses -- ubiquitous because of the fall in the housing and the stock markets -- roughly 7 in 10 Americans saw their earnings substantially decline or their nondiscretionary expenses substantially rise. Nearly a quarter saw their income fall by 25 percent or more.

Even more worrisome, those who experienced these shocks were much more likely to report serious economic deprivation (going without food, housing, or medical care because of the cost). And this was true for middle-income families as well as the least advantaged. Indeed, more than half of families with incomes between $60,000 and $100,000 that experienced employment or medical disruptions reported being unable to meet at least one basic economic need.

Against this backdrop, the tax-cut deal brokered by President Obama looks like very weak tea. Extended unemployment benefits are a vital lifeline that will encourage spending to revive the economy, and the temporary cut in payroll taxes will provide an important, albeit modest and short-lived, boost. But a huge chunk of the bipartisan deal is tax cuts that the Congressional Budget Office has judged singularly ineffective as economic tonic, including massive cuts for the richest of Americans and their heirs that will pile on future debt, exacerbate inequality, and crowd out other, more effective measures -- all for little or no short-term economic gain.

What about a major effort to create jobs to rebuild our crumbling roads, bridges, and transportation system? Nope. What about giving more relief to struggling states that are laying off teachers and first responders? Nada. Perhaps we could step up the implementation of the health care law to provide expanded Medicaid benefits during this weak recovery, when millions of Americans are still losing their jobs and health insurance. Are you kidding?

That the tax-cut deal may well be the best that Obama could have gotten only makes the joke crueler. What's wrong with our politics that so much hardship evokes so little response?

At the event launching the Yale/Rockefeller foundation report, the panelists -- Ezra Klein of the Washington Post, Larry Mishel of the Economic Policy Institute, and Stuart Butler of the Heritage Foundation -- seemed genuinely puzzled by this question. Even Butler, an astute conservative thinker who saw the report as a chance to have a real conversation about the level and distribution of economic risk in the United States, appeared not to have a precise response.

Two answers floated around the room. The first is that our political system is so dysfunctional that even political leaders deeply worried about what's happening just don't see any prospect for serious action. Klein fingered the Senate filibuster, which has showed its ugly head again and again during the lame-duck session. With an intense conservative minority in the Senate, everyone from the president to those peddling deficit-reduction proposals to liberal democrats simply assumes that nothing that involves direct job creation or serious public spending or increased revenues -- even revenues gained by letting tax cuts expire -- is feasible.

But there was second hypothesis: Maybe a good chunk of the political class is just so insulated from the realities in the report that they don't feel the same sense of urgency that most Americans do. Things are terrible on Main Street, but on Wall Street, Pennsylvania Avenue, and K Street, they don't look so gloomy. How else can we explain why everyone in Washington was talking about deficit reduction (at least until they decided to blow another hole in the budget), even while polls show that Americans ranked it way, way below fixing the economy?

It's not clear which is scarier -- that our leaders don't think they can lead, or that they don't want to.

Either way, the middle-class economy keeps falling, and no one is there to hear it.

Jacob S. Hacker and Paul Pierson are the authors of Winner-Take-All Politics: How Washington Made the Rich Richer--And Turned Its Back on the Middle Class

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