When have the Rich Gotten so Much Richer?
...I've been studying the long-term history of inequality in the United States. And it's hard to avoid the sense that it matters a lot which political party, or more accurately, which political ideology rules Washington. Since the 1920's there have been four eras of American inequality:The Great Compression, 1929-1947: The birth of middle-class America....
The Postwar Boom, 1947-1973: An era of widely shared growth....
Stagflation, 1973-1980: Everyone lost ground....
The New Gilded Age, 1980-?: Big gains at the very top, stagnation below. Between 1980 and 2004, real wages in manufacturing fell 1 percent, while the real income of the richest 1 percent -- people with incomes of more than $277,000 in 2004 %u2014 rose 135 percent.
What's noticeable is that except during stagflation, when virtually all Americans were hurt by a tenfold increase in oil prices, what happened in each era was what the dominant political tendency of that era wanted to happen. Franklin Roosevelt favored the interests of workers while declaring of plutocrats who considered him a class traitor, "I welcome their hatred." Sure enough, under the New Deal wages surged while the rich lost ground.
What followed was an era of bipartisanship and political moderation; Dwight Eisenhower said of those who wanted to roll back the New Deal, "Their number is negligible, and they are stupid." Sure enough, it was also an era of equable growth.
Finally, since 1980 the U.S. political scene has been dominated by a conservative movement firmly committed to the view that what's good for the rich is good for America. Sure enough, the rich have seen their incomes soar, while working Americans have seen few if any gains.... Bill Clinton was president for eight years. But for six of those years Congress was controlled by hard-line right-wingers. Moreover, in practice Mr. Clinton governed well to the right of both Eisenhower and Nixon.
Krugman concedes that other factors have been at work, and DeLong is not sure that government policies made all the difference. Let me just mention what a few of those policies have been.
From Roosevelt to Kennedy, taxes on the rich were very high. Under Roosevelt, a lot of pro-union legistlation was enacted. Kennedy reduced taxes a bit, and Reagan cut them dramatically for the rich while increasing them considerably for the middle and lower class. Reagan and the conservatives who followed also eroded protections for workers and unions. Both Democratic and Republican controlled congresses have been very generous in allowing the rich to hide or shelter their income from taxation. Bush junior has greatly exacerbated all the factors that tend to impoverish the working class and enrich the very rich. (by permitting hordes of illegal immigrants as well as through tax and labor - or rather, anti-labor, policies.)