We need to recover our stolen living standards

As the US Census Bureau informs us that median household income has dropped yet again in 2011, this time by 1.5%, I think it’s useful to bring forward a graph I posted at the end of last year (which I haven’t updated for today’s news).  The period shown is between 1975 and 2010 and both median income and per capita GDP are initially based at 100.

(Data sources: US Census Bureau and St. Louis Fed)

This is an exceptionally clear portrait of how the top levels of US society are hijacking the living standards of the majority.  Productivity growth is simply not being shared. Whereas per capita GDP has nearly doubled since 1975, median household income has barely gone up 10%.  The conclusion is staggering – if median household income simply kept the same relation to per capita GDP that it had in 1975, it would now be at about $85,000 versus the actual $50,054, a 70% pay raise!  It’s difficult to even imagine how much more liveable our country would be.

What we see happening in broad daylight is an elite tier – roughly the top 10% – actively dispossessing the living standards of the majority.  It’s thievery, plain and simple and it’s been going on from 1975 through to this very minute.  There’s no law of physics involved; the thievery can directly be traced to corporate and government policies regarding downsizing, outsourcing, consolidations, destruction of unions, off-shoring, automation, taxes, and so on.

But completely absent in our supposedly democratic political debate is any focus whatsoever on this historically unprecedented crime.  For the Democrats, the only number we hear them concerned about is $250,000 – five times the median income.  All while they’re secretly meeting at this very hour to decide how much (not whether) to cut “entitlements” and to what level to reduce the corporate and top individual tax rates!  In fact, it’s clear that the unspoken public policy is one of even further cutting wages in order to better “compete” in the global arena.  We see this not only in the attacks on public employees, but in the wage cuts imposed on workers in the GM bailout.

Despite all its great social and racial problems, the couple decades after World War II offered the average American a far more egalitarian society than the near feudal one we have today.  We need to keep that period front and center in our political consciousness.  The minimum demands today should be to get back the living standards that have been stolen and that means huge increases in median income.  There’s no getting around it, the theft of living standards has been gargantuan and the correction must therefore be of a similar magnitude.  How exactly it’s done is a matter for debate, but the question of whether it actually needs to happen should be “off the table” as they say.  For starters, I’d think, tax rates should be drastically increased for high incomes to levels approaching 100% and re-distributed downward.  Minimum incomes should be dramatically raised.  There should be no cuts in programs benefiting the median family, they in fact need to be expanded.  All Americans should be guaranteed a good job which will be greatly facilitated by fully taking into account the flexibility of our fiat currency.

Would this hurt the economy?  The vast weight of evidence would say absolutely not given that the vast inequality we have today is almost certainly the prime cause of our crisis.  The only real option for getting out, in fact, is a restoration of purchasing power to the vast majority.