Wednesday, August 22, 2012

Lessons from the Gilded Age

Medicare, Social Security, unemployment insurance, collective bargaining rights - who could have imagined political attacks on the programs that American workers and retirees have long relied upon for economic security? As Republican politicians, such as Romney and Ryan, seek to fundamentally alter or destroy these programs under the mantle of fiscal responsibility, they insist that these policies need “repair” to survive. But a look at history, especially the period surrounding the Great Depression, reveals parallels to today and provides clarity as to their motives. 

During the Gilded Age (1880s -1920s), an enormous economic gap existed between the small number of billionaires who owned most of the country’s wealth, and the rest of the American people. These capitalists had made use of generous government land and dollar giveaways to start them on their way towards building vast personal fortunes in the manufacturing, railroad, oil, steel, and finance industries. With their wealth came political power which ensured that government policy largely benefitted corporate interests. 

The Great Depression signaled the beginning of a very different climate for the leaders of American enterprise. By the time the unemployment rate climbed to 25%, this ruling class had lost the trust and admiration of the American people. As President Roosevelt and Congress struggled to get the economy back on track, dire economic circumstances provoked strikes and protests against the old laissez-faire economic order and deplorable working conditions. This political unrest fueled the governmental policy-making that lead to the New Deal. Among the policies passed in 1934 were: collective bargaining rights, a national minimum wage and maximum-hour work week, unemployment insurance, Social Security, and financial regulations. As the government began the monetary investment in World War II that most economists believe ended the Depression, it was clear to the American population that government had an important role to play in their lives. 

Rich industrialists had resisted such government policies for decades, but had finally lost their clout. Their financial dominance melted away as the top marginal income tax rate more than tripled under the New Deal, from 24% to as much as 79% by the end of the Roosevelt administration (President Eisenhower further spiked this tax to 91%), and federal taxes on corporate profits and estates rose significantly. 

Wealthy business leaders predictably reacted to their misfortune by organizing against the New Deal. They formed free enterprise groups whose mission was to get rid of government policies which shifted spending towards the common good and away from their pockets. But their attempts to paint the New Deal as a threat to personal liberty failed to sway a public that had so recently benefitted from the very programs the wealthy were disparaging. Their warnings of the dangers posed by high taxation and regulation were contradicted by the longest period of economic prosperity and equality in U.S. history, lasting from the late 1940s to the early 1970s. President Johnson’s expansion of government help with Medicare, Medicaid, food stamps, etc. dealt them a further blow.  

The corporate rich were undeterred, however. Their goal was, and remains, to regain the power and financial advantage lost to them by the implementation of the New Deal.  They have made great strides over the last three decades, and as they have rebuilt their wealth and power, their ability to influence government policy has returned to the days of yore. We can see this influence in recent Republican accomplishments.Tax rates on the wealthy and corporations have been slashed. Union protection for workers and the regulation of corporations have been decimated. Corporate profits have once again soared. And the real after tax income of the wealthiest 1 percent of Americans has exploded upward, while the income of the lower classes has stagnated or declined, returning economic inequity to the level present during the Gilded Age.

Conservatives see these times of financial hardship as a prime opportunity to justify the erosion of the safety net programs of the New Deal and the Great Society, rather than take less drastic measures that are possible to ensure the viability of these programs. Meanwhile, they refuse to act on measures which history has shown would help return our country to economic stability, such as the reinstatement of financial regulations and top tax rates to Clinton-era levels, the closing of corporate loopholes, and ending subsidies for already prosperous industries. Business tax cuts remain the platform of their economic policy in spite of the acknowledgement by the vast majority of economists that they do not “trickle-down” to benefit the majority of Americans. America isn’t “broke”; government policy has simply been skewed once again to ensure that our country’s wealth flows to the top. As the richest country in the world, we need to reject the claim that we can’t continue to help the vulnerable among us and ensure the economic security of our citizens.