In January of 1968, Dr. Norman Shumway performed the first successful U.S. adult heart transplant at Stanford Hospital in California. At the time, some complained the millions of dollars spent on the operation should have instead been used to feed the thousands of starving children in nearby communities. Nonetheless, the transplants continued and millions of children went hungry. It was a metaphor for the increasingly heartless nature of the U.S. economy.
Recently the economy has seemed to be reviving. Consumer confidence is up, the housing market is booming, and stock market indices have hit new highs. Nonetheless, millions of Americans either have no work or are working far beneath their capability. Almost half of our families have no assets. The 99 percent have been left behind,
Blame Reaganonics. During the Reagan era conservatives bewitched Americans with three malignant notions: helping the rich get richer would inevitably help everyone else, "a rising tide lifts all boats;" markets were inherently self correcting and there was no need for government regulation; and the U.S. did not need an economic strategy because that was a natural consequence of the free market.
What followed was a 30-year conservative social experiment with laissez-faire economics. A period where America's working families were abandoned in favor of the rich. A period where inequality rose as middle-class income and wealth declined. A period where corporate power increased and unions were systematically undermined. A period where CEO salaries soared and fewer and fewer families earned living wages. A period where American democracy morphed into plutocracy.
This chart summarizes the consequences.
America's productivity and GDP increased but household income was stagnant. All of us worked to improve our economy but only a few reaped the benefits.
Reaganomics produced a warped and brittle U.S. economy, where more than two-thirds of our GDP was housing related: building, buying, and furnishing new homes or borrowing against existing homes in order to maintain a decent standard of living. In 2008, when the credit bubble burst, the debt-based consumption model failed, taking down first the housing sector and then the entire economy, resulting in catastrophic job losses.
Since 2008 the economy has staggered back onto its feet. But the latest NBC News/Wall Street Journal poll found that most of us feel America is on the wrong track. After all, the U.S. economy depends upon steady consumption by working Americans and they aren't consuming as much as they did in the past because they are fearful.
Meanwhile, many businesses have the funds available to hire but, in many cases, they are filling what should be full-time permanent positions with part-time temporary workers or interns. When they do hire they are paying low wages.
Since the Reagan presidency the number of decent jobs has steadily eroded. When workers retire from a GM assembly line, and a job that pays good wages, they aren't replaced by their sons or daughters; they go to work at McDonald's. There has been an under-acknowledged "structural adjustment" that meant the U.S. consumer economy could not function unless average Americans went deeply in debt: borrowed up to the limit on their credit cards or used up their home equity.
Since the Reagan era, the heart has gone out of the American economy. The ratio of CEO salaries to those of rank-and-file workers has increased from 20:1 (1950) to 204:1 (2012). As productivity has increased, the benefits have disproportionately gone to the wealthy.
There are four consequences of this shift. First, greed has been legitimized. Conservatives embraced the philosophy of Ayn Rand and spread the myth that the wealthy enable the economy, while the poor deserve to suffer because they are slackers.
As a result, the American ethos has changed from "we're all in this together" and "I am my brother's keeper" to "what's in it for me" and "you're on your own." The value of collective action has been minimized -- "the triumphant individual" has squashed "the benevolent community."
Third, America has deified the corporation. Conservatives contend that what is good for Monsanto -- and other corporate giants -- is good for all Americans. Conservatives contend no harm is done by humongous corporations, who pay workers a pittance while a few executives earn enormous salaries. Conservatives deny that desecration of the environment has any long-term consequences.
Finally, America has lost the recipe for true prosperity. We've forgotten that a healthy economy depends upon steady consumption by working Americans. We've decided to ignore the chasm between the rich and poor. But inequality is not an isolated social phenomenon; it's an indication the U.S. economy has Stage III cancer.
America is not going to survive unless there are major social changes. Until we stop giving heart transplants to wealthy individuals like Dick Cheney and instead use the money to feed our starving children. Until we recover our heart.