America grows richer, but most families lose ground: Editorial

President Barack Obama speaks during the White House Summit on Working Families in June. (MANDEL NGAN)
on August 01, 2014 at 5:01 PM, updated August 01, 2014 at 5:59 PM
The average American family is no longer rising with the tide.

The economy grew at a vigorous 4 percent clip last quarter, profits remain near historic highs and the stock market continued its upward march.

So why doesn’t this feel better? One reason is that the average growth rate over the last decade has been about 2 percent, and most economists regard the big jump last quarter as a fluke.

But the bigger reason is that most Americans do not benefit when the economy grows. Yes, the pie is getting larger; the gross domestic product has grown by 26 percent since 2000. But most Americans are losing ground — the median income has dropped by about 6 percent in the same period.

Don’t blame American workers. They are producing more goods and services per hour, with productivity growing about as fast as the overall economy. If they were paid what their labor is worth, wages would have risen in tandem.

That’s how the American economy worked for the three decades after World War II, when the fruits of economic growth were shared broadly. When President Kennedy said that a rising tide lifts all boats, that was indeed true.

But not today. Between 1973 and 2008, all the benefits of economic growth went to the top 10 percent of households, and the majority of it went to the top 1 percent. The average American family is no longer rising with the tide.

Market forces explain much of it. Globalization has forced American workers to compete more directly with low-wage workers in places like China and Mexico. Technology has taken a bite as robots displace factory workers and computers displace secretaries. So has the demise of labor unions and persistently high levels of unemployment.

All of this has demolished the bargaining power of American workers, especially those with the lowest skills. Employers pay less, even as their profits rise, because they can get away with it. They don’t need to offer higher wages to attract workers.

So pardon us if we don’t join the celebration over the healthy uptick in the GDP. It is simply not enough when wages remain stuck at such low levels, as July’s jobs report confirmed.

Republicans often deride this concern as envy of the rich or an attempt to score political points through class warfare. It would be bad enough if they ignored the problem, but they actually make it worse.

They sharpen the pain for those at the bottom by cutting unemployment benefits, food stamps and college scholarships. They would love to kill Obamacare, even without a replacement plan. They are even blocking an increase in the paltry minimum wage.

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They cut taxes in ways that are consistently tilted in favor of the rich and they want more, even now. They are hostile toward unions and have sabotaged the enforcement of even the weak protections for labor organizing in existing law. They block efforts to boost employment with a crash program to rebuild the nation’s infrastructure.

Democrats don’t have all the answers. They resist blaming any of this on cultural factors that are clearly at play, such as the breakdown of the American family. But they are, at least, making some effort to broaden the benefits of economic growth.

A Gallup poll released in January showed 67 percent of Americans are dissatisfied with the distribution of wealth and income today, including nearly half of Republicans.

Maybe some of them are absorbed with envy. But if it means they want more economic justice, then we second that motion.