US politics: inequality of income finally a political issue

Populism's Revival -- by James Lardner/ San Francisco Chronicle

Now that the Democratic victory has sunk partway in, maybe we can begin to process another result of this remarkable election: After a quarter-century of growing economic inequality, America decided to talk about it.

It's "the main issue that drove me to run," said James Webb at one of the 12 churches he visited a couple of Sundays before his squeaker victory over Virginia Sen. George Allen.

In Montana, Jon Tester ran as an old-fashioned populist -- a species long considered extinct in his part of the country. When the incumbent, Sen. Conrad Burns, accused him of fomenting class warfare, Tester delivered one of the more pungent putdowns of the political year. "I'm about the middle class, Sen. Burns," he replied. "You're about your rich crony lobbyist friends on K Street."

While few candidates talked as tough as the two underdogs who finally put their party in charge of the Senate, the home stretch of the campaign saw Democrats across the country picking up where John Edwards left off in early 2004 (before party strategists advised him that his "two Americas" message was too harsh). Even a few prominent Republicans felt a need to acknowledge that, in the words of Treasury Secretary Henry Paulson -- the Bush administration's designated feeler of middle-class pain -- "many" had not benefited from the economic expansion. Paulson was quick to add, of course, that inequality rose during most of the Clinton years as well, so "it would be "neither fair nor useful to blame any political party."

In the late 1970s and early '80s, when the inequality trend first surfaced, the most conspicuous victims were workers in industries shaken by competition from Asia. From then on, highly regarded authorities have continued to present the problem as a matter of technology and trade creating a "rising skill premium," as Federal Reserve Board Chairman Ben Bernanke put it at a congressional hearing earlier this year. Americans have clearly taken that analysis to heart. By and large, according to a recent Wall Street Journal/NBC News poll (in which the widening pay gap was rated the country's No. 1 economic problem by 24 percent of those surveyed), people don't hold Republicans responsible. They're more inclined to blame corporate greed or the global economy; and either way, they don't think there's much that mere humans, regardless of party, can do about it. But that fatalistic outlook is not supported by the facts.

If cheap imports (or, for that matter, low-wage immigrants) could explain a long, sharp increase in inequality, France, the Netherlands and much of Europe would be going through the same experience; they're not. If skill was the crucial factor, the long-term winners would be the top 20 or 30 percent of Americans. Instead, they've been the top 5, 2, or 1 percent -- the 1 percent who now pocket almost a fifth of all personal income, roughly twice what their share was during the 1960s and '70s.

The data suggests a story of power rather than skill -- rule-making power. The trail of evidence leads into the arcane world of economic policy; and if you look back over the past few decades, ignoring the catchy labels ("deregulation," "personal responsibility" and the rest), you'll find a pattern of government action -- on taxes, trade and the minimum wage, among other things -- favoring corporate insiders and financial manipulators over the rest of us.

You'll also find inaction -- a wholesale abandonment of the tradition of public investment that, in earlier periods of our history, from the Louisiana Purchase to the G.I. Bill and the Higher Education Act of 1965, earned the United States the right to honestly call itself a land of opportunity.

You'll find bipartisan complicity at many points along the way -- in the spring of 1994, for example, when virtually the entire U.S. Senate, with Democrats Joseph Lieberman, Barbara Boxer and Charles Schumer waxing especially indignant on Corporate America's behalf, shot down a proposal to clean up the accounting rules for stock options, thus setting the stage for the backdated-options scandal that has so far implicated the directors and executives of more than 120 companies.

Many of the Democrats who raised the issue on the 2006 campaign trail will be members of the new Congress that convenes in January. Their presence could finally mean an increase in the minimum wage (which even Wal-Mart now supports) and some desperately needed relief for middle-class families struggling with soaring college tuition costs. But what then? Soon thoughts will turn to 2008 and re-election, and the newcomers will be listening to old Washington hands giving them a host of reasons to lay off the subject. Some will follow that advice, some will resist. Maybe a few will make it their business not only to keep the discussion going, but to move beyond easy sound bites and calculations of what the issue can do for them, to a serious conversation about what it is doing to the country, and what we can do in response. Those who take that plunge could help bring two badly needed qualities back to American politics: credibility and hope.

(Jim Lardner is a senior fellow at Demos, a national, nonpartisan public policy and research center.)