Why the Democratic Party Has Abandoned the Middle Class
in Favor of the Rich By Kevin Drum Mother Jones Posted
on Alternet.org May 27, 2011
http://www.alternet.org/story/151108/why_the_democratic_party_has_abandoned_the_middle_class_in_favor_of_the_rich

The following article first appeared in Mother Jones.
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In 2008, a liberal Democrat was elected president.
Landslide votes gave Democrats huge congressional
majorities. Eight years of war and scandal and George
W. Bush had stigmatized the Republican Party almost
beyond redemption. A global financial crisis had
discredited the disciples of free-market
fundamentalism, and Americans were ready for serious
change.

Or so it seemed. But two years later, Wall Street is
back to earning record profits, and conservatives are
triumphant. To understand why this happened, it's not
enough to examine polls and tea parties and the makeup
of Barack Obama's economic team. You have to understand
how we fell so short, and what we rightfully should
have expected from Obama's election. And you have to
understand two crucial things about American politics.

The first is this: Income inequality has grown
dramatically since the mid-'70s--far more in the US
than in most advanced countries--and the gap is only
partly related to college grads outperforming
high-school grads. Rather, the bulk of our growing
inequality has been a product of skyrocketing incomes
among the richest 1 percent and--even more
dramatically--among the top 0.1 percent. It has, in
other words, been CEOs and Wall Street traders at the
very tippy-top who are hoovering up vast sums of money
from everyone, even those who by ordinary standards are
pretty well off.

Second, American politicians don't care much about
voters with moderate incomes. Princeton political
scientistLarry Bartels studied the voting behavior of
US senators in the early '90s and discovered that they
respond far more to the desires of high-income groups
than to anyone else. By itself, that's not a surprise.
He also found that Republicans don't respond at all to
the desires of voters with modest incomes. Maybe that's
not a surprise, either. But this should be: Bartels
found that Democratic senators don't respond to the
desires of these voters, either. At all.

It doesn't take a multivariate correlation to conclude
that these two things are tightly related: If
politicians care almost exclusively about the concerns
of the rich, it makes sense that over the past decades
they've enacted policies that have ended up benefiting
the rich. And if you're not rich yourself, this is a
problem. First and foremost, it's an economic problem
because it's siphoned vast sums of money from the
pockets of most Americans into those of the
ultrawealthy. At the same time, relentless
concentration of wealth and power among the rich is
deeply corrosive in a democracy, and this makes it a
profoundly political problem as well.

How did we get here? In the past, after all, liberal
politicians did make it their business to advocate for
the working and middle classes, and they worked that
advocacy through the Democratic Party. But they largely
stopped doing this in the '70s, leaving the interests
of corporations and the wealthy nearly unopposed. The
story of how this happened is the key to understanding
why the Obama era lasted less than two years.

About a year ago, the Pew Research Center looked looked
at the sources reporters used for stories on the
economy. The White House and members of Congress were
often quoted, of course. Business leaders. Academics.
Ordinary citizens. If you're under 40, you may not
notice anything amiss. Who else is missing, then? Well:
"Representatives of organized labor unions," Pew found,
"were sources in a mere 2% of all the economy stories
studied."

It wasn't always this way. Union leaders like John L.
Lewis, George Meany, and Walter Reuther were routine
sources for reporters from the '30s through the '70s.
And why not? They made news. The contracts they signed
were templates for entire industries. They had the
power to bring commerce to a halt. They raised living
standards for millions, they made and broke presidents,
and they formed the backbone of one of America's two
great political parties.

They did far more than that, though. As historian Kim
Phillips-Fein puts it, "The strength of unions in
postwar America had a profound impact on all people who
worked for a living, even those who did not belong to a
union themselves." (Emphasis mine.) Wages went up, even
at nonunion companies. Health benefits expanded,
private pensions rose, and vacations became more
common. It was unions that made the American economy
work for the middle class, and it was their later
decline that turned the economy upside-down and made it
into a playground for the business and financial
classes.

Technically, American labor began its ebb in the early
'50s. But as late as 1970, private-sector union density
was still more than 25 percent, and the absolute number
of union members was at its highest point in history.
American unions had plenty of problems, ranging from
unremitting hostility in the South to unimaginative
leadership almost everywhere else, but it wasn't until
the rise of the New Left in the '60s that these
problems began to metastasize.

The problems were political, not economic. Organized
labor requires government support to thrive--things
like the right to organize workplaces, rules that
prevent retaliation against union leaders, and
requirements that management negotiate in good
faith--and in America, that support traditionally came
from the Democratic Party. The relationship was
symbiotic: Unions provided money and ground game
campaign organization, and in return Democrats
supported economic policies like minimum-wage laws and
expanded health care that helped not just union members
per se--since they'd already won good wages and
benefits at the bargaining table--but the interests of
the working and middle classes writ large.

But despite its roots in organized labor, the New Left
wasn't much interested in all this. As the Port Huron
Statement, the founding document of Students for a
Democratic Society, famously noted, the students who
formed the nucleus of the movement had been "bred in at
least modest comfort." They were animated not by
workplace safety or the cost of living, but first by
civil rights and antiwar sentiment, and later by
feminism, the sexual revolution, and environmentalism.
They wore their hair long, they used drugs, and they
were loathed by the mandarins of organized labor.

By the end of the '60s, the feeling was entirely
mutual. New Left activists derided union bosses as just
another tired bunch of white, establishment Cold War
fossils, and as a result, the rupture of the Democratic
Party that started in Chicago in 1968 became
irrevocable in Miami Beach four years later. Labor
leaders assumed that the hippies, who had been no match
for either Richard Daley's cops or establishment
control of the nominating rules, posed no real threat
to their continued dominance of the party machinery.
But precisely because it seemed impossible that this
motley collection of shaggy kids, newly assertive
women, and goo-goo academics could ever figure out how
to wield real political power, the bosses simply
weren't ready when it turned out they had miscalculated
badly. Thus George Meany's surprise when he got his
first look at the New York delegation at the 1972
Democratic convention. "What kind of delegation is
this?" he sneered. "They've got six open fags and only
three AFL-CIO people on that delegation!"

But that was just the start. New rules put in place in
1968 led by almost geometric progression to the
nomination of George McGovern in 1972, and despite
McGovern's sterling pro-labor credentials, the AFL-CIO
refused to endorse him. Not only were labor bosses
enraged that the hippies had thwarted the nomination of
labor favorite Hubert Humphrey, but amnesty, acid, and
abortion were simply too much for them. Besides,
Richard Nixon had been sweet-talking them for four
years, and though relations had recently become
strained, he seemed not entirely unsympathetic to the
labor cause. How bad could it be if he won reelection?

Plenty bad, it turned out--though not because of
anything Nixon himself did. The real harm was the
eventual disaffection of the Democratic Party from the
labor cause. Two years after the debacle in Miami,
Nixon was gone and Democrats won a landslide victory in
the 1974 midterm election. But the newly minted members
of Congress, among them former McGovern campaign
manager Gary Hart, weren't especially loyal to big
labor. They'd seen how labor had treated McGovern,
despite his lifetime of support for their issues.

The results were catastrophic. Business groups,
simultaneously alarmed at the expansion of federal
regulations during the '60s and newly emboldened by the
obvious fault lines on the left, started hiring
lobbyists and launching political action committees at
a torrid pace. At the same time, corporations began to
realize that lobbying individually for their own
parochial interests (steel, sugar, finance, etc.)
wasn't enough: They needed to band together to push
aggressively for a broadly pro-business legislative
environment. In 1971, future Supreme Court justice
Lewis Powell wrote his now-famous memo urging the
business community to fight back: "Strength lies in
organization," he wrote, and would rise and fall
"through joint effort, and in the political power
available only through united action and national
organizations." Over the next few years, the Chamber of
Commerce morphed into an aggressive and highly
politicized advocate of business interests,
conservative think tanks began to flourish, and more
than 100 corporate CEOs banded together to found a
pro-market supergroup, the Business Roundtable.

They didn't have to wait long for their first big
success. By 1978, a chastened union movement had
already given up on big-ticket legislation to make it
easier to organize workplaces. But they still had every
reason to think they could at least win passage of a
modest package to bolster existing labor law and
increase penalties for flouting rulings of the National
Labor Relations Board. After all, a Democrat was
president, and Democrats held 61 seats in the Senate.
So they threw their support behind a compromise bill
they thought the business community would accept with
only a pro forma fight.

Instead, the Business Roundtable, the US Chamber of
Commerce, and other business groups declared war.
Organized labor fought back with all it had--but that
was no longer enough: The bill failed in the Senate by
two votes. It was, said right-wing Sen. Orrin Hatch
(R-Utah), "a starting point for a new era of
assertiveness by big business in Washington." Business
historian Kim McQuaid put it more bluntly: 1978, he
said, was "Waterloo" for unions.

Organized labor, already in trouble thanks to
stagflation, globalization, and the decay of
manufacturing, now went into a death spiral. That
decline led to a decline in the power of the Democratic
Party, which in turn led to fewer protections for
unions. Rinse and repeat. By the time both sides
realized what had happened, it was too late--union
density had slumped below the point of no return.

Why does this matter? Big unions have plenty of
pathologies of their own, after all, so maybe it's just
as well that we're rid of them. Maybe. But in the real
world, political parties need an institutional base.
Parties need money. And parties need organizational
muscle. The Republican Party gets the former from
corporate sponsors and the latter from highly organized
church-based groups. The Democratic Party, conversely,
relied heavily on organized labor for both in the
postwar era. So as unions increasingly withered
beginning in the '70s, the Democratic Party turned to
the only other source of money and influence available
in large-enough quantities to replace big labor: the
business community. The rise of neoliberalism in the
'80s, given concrete form by the Democratic Leadership
Council, was fundamentally an effort to make the party
more friendly to business. After all, what choice did
Democrats have? Without substantial support from labor
or business, no modern party can thrive.

It's important to understand what happened here. Entire
forests have been felled explaining why the working
class abandoned the Democratic Party, but that's not
the real story. It's true that Southern whites of all
classes have increasingly voted Republican over the
past 30 years. But working-class African Americans have
been (and remain) among the most reliable Democratic
voters, and as Larry Bartels has shown convincingly,
outside the South the white working class has not
dramatically changed its voting behavior over the past
half-century. About 50 percent of these moderate-income
whites vote for Democratic presidential candidates, and
a bit more than half self-identify as Democrats. These
numbers bounce up and down a bit (thus the "Reagan
Democrat" phenomenon of the early '80s), but the
overall trend has been virtually flat since 1948.

In other words, it's not that the working class has
abandoned Democrats. It's just the opposite: The
Democratic Party has largely abandoned the working
class.

Here's why this is a big deal. Progressive change in
the United States has always come in short, intense
spurts: The Progressive Era lasted barely a decade at
the national level, the New Deal saw virtually all of
its legislative activity enacted within the space of
six years between 1933 and 1938, and the frenzy of
federal action associated with the '60s nearly all
unfolded between 1964 and 1970. There have been
exceptions, of course: The FDA was created in 1906, the
GI Bill was passed in 1944, and the Americans with
Disabilities Act was passed in 1990. And the courts
have followed a schedule all their own. Still, one
striking fact remains: Liberal reform is not a
continuous movement powered by mere enthusiasm. Reform
eras last only a short time and require extraordinarily
intense levels of cultural and political energy to get
started. And they require two other things to get
started: a Democratic president and a Democratic
Congress.

In 2008, fully four decades after our last burst of
liberal change, we got that again. But instead of five
or six tumultuous years, the surge of liberalism that
started in 2008 lasted scarcely 18 months and produced
only two legislative changes really worthy of note:
health care reform and the repeal of Don't Ask, Don't
Tell. By the summer of 2010 liberals were dispirited,
political energy had been co-opted almost entirely by
the tea party movement, and in November, Republicans
won a crushing victory.

Why? The answer, I think, is that there simply wasn't
an institutional base big enough to insist on the kinds
of political choices that would have kept the momentum
of 2008 alive. In the past, blue-collar workers largely
took their cues on economic policy from meetings in
union halls, and in turn, labor leaders gave them a
voice in Washington.

This matters, as Jacob Hacker and Paul Pierson argue in
one of last year's most important books,
Winner-Take-All Politics, because politicians don't
respond to the concerns of voters, they respond to the
organized muscle of institutions that represent them.
With labor in decline, both parties now respond
strongly to the interests of the rich--whose
institutional representation is deep and energetic--and
barely at all to the interests of the working and
middle classes.

This has produced three decades of commercial and
financial deregulation that started during the
administration of a Democrat, Jimmy Carter, gained
steam throughout the Reagan era, and continued under
Bill Clinton. There were a lot of ways America could
have responded to the twin challenges of '70s-era
stagflation and the globalization of finance, but the
policies we chose almost invariably ignored the
stagnating wages of the middle class and instead
catered to the desires of the superrich: hefty tax cuts
on both high incomes and capital gains. Deregulation of
S&Ls (PDF) that led to extensive looting and billions
in taxpayer losses. Monetary policy focused excessively
on inflation instead of employment levels. Tacit
acceptance of asset bubbles as a way of maintaining
high economic growth. An unwillingness to regulate
financial derivatives that led to enormous Wall Street
profits and contributed to the financial crisis of
2008. At nearly every turn, corporations and the
financial industry used their institutional muscle to
get what they wanted, while the working class sat by
and watched, mostly unaware that any of this was even
happening.

It's impossible to wind back the clock and see what
would have happened if things had been different, but
we can take a pretty good guess. Organized labor, for
all its faults, acted as an effective countervailing
power for decades, representing not just its own
interests, but the interests of virtually the entire
wage-earning class against the investor class. As
veteran Washington Post reporter David Broder wrote a
few years ago, labor in the postwar era "did not
confine itself to bread-and-butter issues for its own
members. It was at the forefront of battles for aid to
education, civil rights, housing programs and a host of
other social causes important to the whole community.
And because it was muscular, it was heard and heeded."
If unions had been as strong in the '80s and '90s as
they were in the '50s and '60s, it's almost
inconceivable that they would have sat by and accepted
tax cuts and financial deregulation on the scale that
we got. They would have demanded economic policies
friendlier to middle-class interests, they would have
pressed for the appointment of regulators less captured
by the financial industry, and they would have had the
muscle to get both.

And that means things would have been different during
the first two years of the Obama era, too. Aside from
the question of whether the crisis would have been so
acute in the first place, a labor-oriented Democratic
Party almost certainly would have demanded a bigger
stimulus in 2009. It would have fought hard
for"cramdown" legislation to help distressed
homeowners, instead of caving in to the banks that
wanted it killed. It would have resisted the
reappointment of Ben Bernanke as Fed chairman. These
and other choices would have helped the economic
recovery and produced a surge of electoral energy far
beyond Obama's first few months. And since elections
are won and lost on economic performance, voter
turnout, and legislative accomplishments, Democrats
probably would have lost something like 10 or 20 seats
last November, not 63. Instead of petering out after 18
months, the Obama era might still have several years to
run.

This is, of course, pie in the sky. Organized labor has
become a shell of its former self, and the working
classdoesn't have any institutional muscle in
Washington. As a result, the Democratic Party no longer
has much real connection to moderate-income voters. And
that's hurt nearly everyone.

If unions had remained strong and Democrats had
continued to vigorously press for more equitable
economic policies, middle-class wages over the past
three decades likely would have grown at about the same
rate as the overall economy--just as they had in the
postwar era. But they didn't, and that meant that every
year, the money that would have gone to middle-class
wage increases instead went somewhere else. This
created a vast and steadily growing pool of money, and
the chart below gives you an idea of its size. It shows
how much money would have flowed to different groups if
their incomes had grown at the same rate as the overall
economy. The entire bottom 80 percent now loses a
collective $743 billion each year, thanks to the
cumulative effect of slow wage growth. Conversely, the
top 1 percent gains $673 billion. That's a pretty close
match. Basically, the money gained by the top 1 percent
seems to have come almost entirely from the bottom 80
percent.

And what about those in the 80th to 99th percentile?
They didn't score the huge payoffs of the superrich,
but they did okay, basically keeping up with economic
growth. Yet the skyrocketing costs of things like
housingand higher education (PDF) make this less of a
success story than it seems. And there's been a bigger
cost as well: It turns out that today's
upper-middle-class families lead a much more precarious
existence than raw income figures suggest.

Jacob Hacker demonstrated this persuasively in The
Great Risk Shift, which examined the ways in which
financial risk has increasingly been moved from
corporations and the government onto individuals.
Income volatility, for example, has risen dramatically
over the past 30 years. The odds of experiencing a 50
percent drop in family income have more than doubled
since 1970, and this volatility has increased for both
high school and college grads. At the same time,
traditional pensions have almost completely
disappeared, replaced by chronically underfunded 401(k)
plans in which workers bear all the risk of stock
market gains and losses. Home foreclosures are up
(PDF), Americans are drowning in debt, jobs are less
secure, and personalbankruptcies have soared (PDF).
These developments have been disastrous for workers at
all income levels.

This didn't all happen thanks to a sinister 30-year
plan hatched in a smoke-filled room, and it can't be
reined in merely by exposing it to the light. It's a
story about power. It's about the loss of a
countervailing power robust enough to stand up to the
influence of business interests and the rich on equal
terms. With that gone, the response to every new crisis
and every new change in the economic landscape has
inevitably pointed in the same direction. And after
three decades, the cumulative effect of all those
individual responses is an economy focused almost
exclusively on the demands of business and finance. In
theory, that's supposed to produce rapid economic
growth that serves us all, and 30 years of free-market
evangelism have convinced nearly everyone--even
middle-class voters who keep getting the short end of
the economic stick--that the policy preferences of the
business community are good for everyone. But in
practice, the benefits have gone almost entirely to the
very wealthy.

It's not clear how this will get turned around. Unions,
for better or worse, are history. Even union leaders
don't believe they'll ever regain the power of their
glory days. If private-sector union density increased
from 7 percent to 10 percent, that would be considered
a huge victory. But it wouldn't be anywhere near enough
to restore the power of the working and middle classes.

And yet: The heart and soul of liberalism is economic
egalitarianism. Without it, Wall Street will continue
to extract ever vaster sums from the American economy,
the middle class will continue to stagnate, and the
left will continue to lack the powerful political and
cultural energy necessary for a sustained period of
liberal reform. For this to change, America needs a
countervailing power as big, crude, and uncompromising
as organized labor used to be.

But what?

Over the past 40 years, the American left has built an
enormous institutional infrastructure dedicated to
mobilizing money, votes, and public opinion on social
issues, and this has paid off with huge strides in
civil rights, feminism, gay rights, environmental
policy, and more. But the past two years have
demonstrated that that isn't enough. If the left ever
wants to regain the vigor that powered earlier eras of
liberal reform, it needs to rebuild the infrastructure
of economic populism that we've ignored for too long.
Figuring out how to do that is the central task of the
new decade.


Kevin Drum is a political blogger for Mother Jones. For
more of his stories, click here. Get Kevin Drum'sRSS
feed.

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