Northwest Airlines CEO Richard Anderson resigned in 2004 to take another lucrative job, this one with a major health insurance company. He left Northwest as it was headed for bankruptcy and eventual sale to Delta. In spite of Northwest’s troubles, Mr. Anderson, like other top executives at Northwest, was covered by three generous company pensions. Anderson cashed in his for a lump-sum payment of $3,028,700. Northwest’s workers had a much rougher landing. Half of their jobs were eliminated outright. The survivors saw their traditional guaranteed pensions morph into 401(k) plans funded at what amounted to $85-a-month for every year they worked. Anderson’s 14 years with the airline would have resulted in a contribution of $1,190 per month toward a decidedly more modest retirement.
Christine, a flight attendant who wishes to remain anonymous, stayed with Delta. In the transition, Christine lost her union, most of her pension, had her wages cut, and lost seniority standing. She supported her dwindling income with a job as a waitress at a posh country club. Approaching 65, Christine had hoped her pension would provide an acceptable retirement. The waitress job helped for a while, but then came the recession and that income dwindled as well. Christine was at a loss for what she might do. “What has this country come to?” she wondered.
I don’t think I’m alone in being troubled by Christine’s question. For the past several years, I’ve been trying to come to terms with the changes we need in our political system to make sure our society and economy work for all of us.
The United States is a wealthy country. Why then do we hear so many stories of families evicted from their homes when unemployment runs out, or senior citizens who must choose between spending their limited funds on groceries or life sustaining medications, or the mother who can’t get a job because she must spend her time nursing her invalid son? We open the paper to read yet another story about the achievement gap in our schools. We watch the news and are shocked to learn that the United States is the world’s leader in putting its citizens behind bars. Sometimes, in the back of my mind, I wonder if the blessing of a child so intelligent that he or she could one day develop a cure for cancer will be wasted because that child can’t afford college.
These kinds of thing don’t happen, or at least shouldn’t, when there is a nationwide commitment for everyone to have what they need to develop their potential. This commitment goes beyond lip service and political speeches. It involves deliberate policies that maintain what I call a “middle class economy.” A middle class economy is not one in which every single person makes a certain amount of money. Even in a middle class economy, some are rich and some are poor. But most of the people have most of the money. Most of the people can take care of themselves and fully develop their potential. There is also a commitment by those who have most of the money and potential to support programs that allow the less fortunate to develop the skills to meet their own needs.
Right now we are in the process of losing our middle class economy. We know this from news stories, and far too many of us know it from bitter personal experience. This loss of our middle class economy and the resultant shift to a “winner take all” economy of rich and poor are behind most of the problems with which we struggle as a society.
The Spirit Level (2009) by Richard Wilkinson and Kate Pickett helped me see how and why this is so. The authors demonstrate in powerful terms how growing inequality is crippling both our society and our economy in ways that will make it harder to address critical problems we face as a nation. Page after page of graphs illustrate how we have fallen behind other developed nations in the things a well-functioning economy must provide. Wilkinson and Pickett make a solid case that it is not so much the average income of a society that matters. More important is how that income is distributed. Countries that have the most equal income distribution do best on health and social indicators.
According to Wilkinson and Pickett, income inequality is related to “lower life expectancy, higher rates of infant mortality, shorter height, poor self-reported health, low birth weight, AIDS, and depression.” They collected data from dozens of other rich countries on health, level of trust, mental illness, drug and alcohol addiction, life expectancy, infant mortality, teenage birth rates, obesity, children’s educational performance, homicides, imprisonment, and social mobility. “What is most exciting about our research is that it shows that reducing inequality would increase the well-being and quality of life for all of us,” the authors say. Today we have a choice: use public investment to reduce inequality or pay for the social harm caused by inequality.
Ours is the oldest modern democracy, but present day policies and court decisions are undermining our basic democratic principles. Immense power has been ceded to an organized cadre of financial elites who have figured out how to buy their way into controlling our government. The past thirty years have seen two related trends: (1) an unraveling of benefits and opportunities for the vast majority of Americans, and (2) a massive increase in wealth for a handful of people. We all know about the first of these trends. The second has commanded our attention more recently through movements such as Occupy Wall Street. To make matters worse, if we don’t take decisive action, we can expect more of the same. Emmanuel Saez, an economist at the University of California Berkeley, has carefully documented the shift toward a rich-and-poor economy. He says, “The market itself doesn’t impose a limit on inequality, especially for those at the top.” He’s right and his partner in research, Thomas Picketty has documented this in his recent book “Capital in the 21st century.” As I write this, the very wealthy are enjoying a good recovery while others fall further behind.
Wilkinson and Pickett also believe: “Modern societies will depend increasingly on being creative, adaptable, inventive, well-informed, and flexible, able to respond generously to each other and to needs wherever they arise. Those are societies not in hock to the rich, in which people are driven by status insecurities, but of populations used to working together and respecting each other as equals.”
At one time, almost every American agreed that each and every one of us should have the opportunity to develop God-given talents to reach their greatest potential. This didn’t mean that everyone would choose to use that opportunity, or that anyone would be made to use it. It did, however, mean that everyone had that opportunity. We know that we are all better off as a society when every American realizes their full potential. As the late Senator Paul Wellstone once said, “We all do better when we all do better.”
Our descent from an economy that provided for all of us to one that provides for only a few has been no accident. Nor was it inevitable. An organized, well-funded effort on the part of conservative corporations and big business gradually changed the direction of our country. The story of how government has gone from limiting greed to encouraging it is chronicled in several recent books namely, Kim Phillips-Fein in her book, Invisible Hands: The Businessmen’s Crusade Against the New Deal (2009); Paul Pierson and Jacob S. Hacker tell much the same story in a different way in Winner Take All Politics (2010); as does Hedrick Smith in Who Stole the American Dream. When the Supreme Court determined that money was speech in 1976, things began to change quickly. The super-rich suddenly gained an advantage in their campaign to silence the power of people and weaken our democracy. Today, with the Robert’s Supreme Court decision on the ‘Citizen’s United’ case, corporations are “people,” and even misinformation and lies spread by these strange new “people” are protected speech.
Economic value is created by law. Similarly, the distribution of wealth and the flow of capital can flow one way or the other with the stroke of a legislator’s pen. Property rights and the distribution of wealth can just as easily deny liberty to some as easily as it bestows it on others. Amatry Sen, a Nobel Award winning economist, argues that hunger is not a product of the shortage of food. The fact is hungry people lack rights (the entitlement) to eat. The law decides, or as Sen puts it, “The law stands between food availability and food entitlement. Starvation deaths can reflect legality with a vengeance.” A “free market” system rests on a set of legal rules establishing who can do what and enforces those principles through the courts.
As President Franklin Roosevelt surveyed the ravages of the Great Depression and set out to do something about it, he said: “ The thing that matters in any industrial system is what it does actually to human beings….” In other words, our economic system must be just. The laws we put in place determine whether it is or is not just. The existing distribution of wealth and opportunity is a product of social choices. An evaluation of those policies and how they affect real people make it much harder to claim that rights should be defined by freedom from government intervention.
Chief Justice Charles Evans Hughes, who served from 1930-1941, argued that the Constitution protects “liberty in a social organization which requires the protection of law against the evils which menace the health, safety, morals and welfare of the people.” Beginning with the founding of our nation, we have a rich tradition of concern for equality and protection from the abuses that wealth, poorly distributed, can bring about. Over 200 years ago, super patriot Tom Paine advocated that public employment be utilized to assist those needing work, that a system of social security should provide for retirement at age 60, and that the state should provide funds so that poor families could educate and care for their children. In another example, the end of the Civil War saw the passage of amendments to the Constitution that banned slavery and limited the degree to which states could discriminate against their citizens. These amendments, in turn, broadened democracy and set us on a path that eventually resulted in the establishment of voting rights for blacks, women, and the young (18 and older).
Franklin Roosevelt began a new tradition of establishing fundamental rights for all citizens when he talked about what he called an “economic bill of rights.” Much of the New Deal centered on adding economic rights to the freedoms guaranteed in the Bill of Rights. We have seen those commitments whittled away as the power of money and a few organized super-wealthy interests have influenced the course of our government. This trend must be stopped and reversed. We need to find ways to curb the control of money in our politics. We must go even further and establish in our Constitution a commitment to the common good and the preservation of our middle class society.
Those of us not among the super-rich elites helplessly watch our economic rights and many of our civil rights effectively disappear as we lose opportunities to move up the ladder of success. America has always been thought of as a land of opportunity, a country in which those who worked hard and made smart decisions could get ahead. Not every country has had such aspirations. In many African and Central American countries, for example, so many people are so poor and have so few ways to improve themselves that they live without hope. There are many more third world countries (sometimes called “banana republics”) around the globe than there are countries with middle class economies. These countries have virtually no middle class. A few people at the top control almost all of the country’s wealth. Everyone else lives in poverty without hope or opportunity. To often this control at the top results in national decisions that enrich the ruler, sell of whatever resources an nation may hold and neglect the needs of the people. Looking around the world, one gets the impression that banana republics are the norm and middle class economies are the exception. But one also sees clearly that our middle class economy didn’t just happen: it was built and maintained, just like a nice house or the interstate highway system.
How do you build and maintain an enduring middle class economy? In my judgment, every middle class economy must have a foundation of policies in place that guarantee these five building blocks of a middle class economy:
· Health care for everyone
· Quality education for everyone
· A sustainable, affordable source of energy and food
· A world-class transportation system
· Living wages for all working people
The first two, health care and education, insure that no one will be denied the chance to develop his or her potential. No one should be permanently sidetracked because of an illness he or she cannot afford to treat. The importance of an affordable, quality education goes without saying.
We must also reach beyond individuals to insure that businesses can thrive and provide employment. That’s why I’ve included energy and transportation in the foundation of a middle class economy. An affordable, reliable food and energy sources allow citizens to sustain themselves and businesses to plan for the long term with confidence rather than fear of shortages and price hikes. A high quality transportation system means that businesses can get their products to market, obtain the supplies they need when they need them, and that employees can get to work. A policy of living wages for all working people assures a proper balance of opportunities for individuals and for business. If a society leans too far toward individuals, there will be insufficient business income and employment will suffer. On the other hand, if business is favored too heavily over individuals, opportunities develop for only the wealthiest members of the society and individuals find it increasingly difficult to avoid risk and find affordable food and shelter. As personal income broadly declines, so does the economy’s ability to pay for the products produced by businesses.
The building blocks of a middle class economy can’t be taken for granted. For example, in many countries fewer than half of the people age 15 and over can read and write a short, simple statement about their everyday life. In others, health care is so substandard that one in ten babies will not live to see their first birthday. Those that do survive have a life expectancy of no more than 50 years. Only 10 percent of the roads in some countries are paved. Rising costs and shortages of fossil fuels threaten all of the world’s economies, both rich and poor. Workers in some countries subsist on a few dollars per day.
A piecemeal legislative approach, crafting bills to address various ills–from protecting the environment to the achievement gap to childhood obesity—isn’t enough to stop the erosion of our middle class economy. In fact, history has shown that even electing a sympathetic President isn’t enough; the problems we try to address individually are symptoms of the growing inequality in our society. The evidence is overwhelming. Millions of us still have no health insurance, our education system is no longer tops in the world, we rely too much on unsustainable oil sources, our roads and bridges are falling apart, and wages are going down at the same time corporate profits go up. In the 1970’s, 99 percent of our citizens shared 91 percent of the nation’s income; today, that share has fallen to 60 percent.
What can the United States do to save its middle class economy? Will we continue on a path to third world status or will we renew our commitment to opportunity for all of our citizens? As Bill Moyers has said, “In the wake of Citizens United, popular resistance is all that can prevent the richest economic interests in the country from buying the democratic process lock, stock, and barrel.” I urge you to support a holistic approach that adequately protects the building blocks of a middle class economy. Our Constitution speaks of “promoting the general welfare.” It’s time to put in place policies built on the foundation of these building blocks that get us to that goal.
MINNESOTA: BUILDING AN ECONOMY THAT WORKS FOR EVERYONE
The Minnesota State Legislature recently concluded its biennial legislative session. When lawmakers convened at our state Capitol in January of 2013, we faced big challenges that are all too common throughout our nation, such as perpetual budget deficits, stagnant wages and funding cuts to core needs and services like health care, infrastructure and education.
The middle class, our most effective engine for economic growth and shared prosperity, was suffering due to a stubborn unwillingness to invest in our future largely due to partisan gridlock. But after a historic election brought single party control of government to Minnesota for the first time in over two decades, state lawmakers moved Minnesota in a new direction and made extraordinary progress building a middle-class economy that works for everyone.
Here are some the major highlights from Minnesota’s 2013-2014 legislative session that are helping to build a middle-class economy around five core priorities: Health care for everyone; Quality education for everyone; Sustainable sources of energy and a healthy environment; World-class transportation system; Living wages for working people.
HEALTH CARE FOR EVERYONE
- Created MNsure, Minnesota’s online health insurance marketplace, which offers the lowest rates in the entire country.
- According to a June 2014 University of Minnesota study, the percentage of uninsured Minnesotans has dropped to the lowest level in state history, and the second-lowest level in the nation behind Massachusetts.
- Over 250,000 Minnesotans have signed up for coverage through MNsure and enrollment continues to grow at a pace of roughly 1,000 additional people per day.
- Young adults can stay on their parents’ health insurance until their 26th birthday.
- Many health plans are required to cover certain preventive care services at no cost, such as blood pressure and cholesterol tests, mammograms, colonoscopies and more.
- Insurance companies must provide coverage for adults and children with pre-existing conditions.
- Insurance companies cannot cap the amount of care you receive in a year or in your lifetime.
- Insurance companies cannot charge women higher premiums than men.
- Insurance companies required to spend at least 80% of the money they take in on premiums on your health care and quality improvement activities instead of administrative, overhead, and marketing costs.
QUALITY EDUCATION FOR EVERYONE
- Paid back the ‘school shift’ and ended the practice of borrowing billions from our schools.
- Invested over $485 million in K-12 education, including funding for early childhood scholarships and all-day Kindergarten for every child.
- Reduced student debt by freezing undergraduate resident tuition at public colleges and universities for two years and making the largest investment in state financial aid in over a decade.
- Strengthened anti-bullying policies so students can focus on learning and achieving.
- Improved instruction of English language learners to help grow our pool of multilingual workers
- Reformed student assessments to prioritize college and career readiness.
- Expanded the school lunch program to ensure every child receives a hot meal regardless of ability to pay.
- Provided free breakfast to every Kindergartener.
SUSTAINABLE ENERGY AND HEALTHY ENVIRONMENT
- Established a solar energy standard of 1.5 percent by 2020, with a goal of 10 percent by 2030.
- Expanded community access to solar energy by allowing cities, businesses, churches or any group of five or more people to share power from a single set of solar panels.
- Allowed utilities to offer community solar to groups of customers in their territory.
WORLD-CLASS TRANSPORTATION SYSTEM
- Made a $300 million down payment on the ‘Corridors of Commerce’ program, enabling MnDOT to improve safety and access along key trunk highway routes in Greater Minnesota.
- Secured $100 million in state bonding dollars for highways, roads and bridges.
LIVING WAGES FOR WORKING PEOPLE
- Raised Minnesota’s minimum wage for the first time in nearly a decade and approved automatic annual increases based on the rate of inflation.
- Increased funding for nursing homes and long-term care providers by five percent.
- Appropriated state funding to help women obtain skills needed to secure high-wage, high-demand jobs in fields such as computer science and engineering where women are underrepresented.