Who Killed the American Middle Class?

Since the phrase "It's the economy, stupid" seems to be making a comeback, I wanted to investigate exactly what policies and business practices have created our current situation of wealth inequality, job insecurity and general economic struggle in the US. During an election cycle it's easy to blame one side or another, but an objective accounting of the facts makes it clear - both Republicans and Democrats have been cooperating in creating this economic environment for well over 70 years. You'd have to go back to FDR to find a system of policies that actually benefited the middle class in the US.

The erosion of the working class in the U.S. can be traced back to a series of federal policies and corporate practices, starting with the Taft-Hartley Act of 1947, and continuing over decades with laws, deregulations, economic policies and business practices that haec undermined unions, suppressed wages, and increased wealth inequality to a level not seen since the Great Depression. Wealth inequality in the United States has reached levels comparable to those of the late 1920s, just before the Great Depression. During that era, the top 1% of households controlled a significant portion of the nation's wealth, a concentration that declined mid-20th century due to policies like the New Deal and post-World War II economic expansion. However, since the late 1970s, wealth inequality has been on the rise, with the top 1% now holding approximately 39.6% of the nation's wealth as of 2016, a level not seen since the pre-Depression era. This resurgence in wealth concentration mirrors the disparities of the 1920s, highlighting a significant shift in the distribution of economic resources over the past 50 years.

*(see below, National Bureau of Economic Research, 2021)

These policies collectively:

1. Weakened Unions: Further eroded the collective bargaining power of workers by making it harder for workers to organize, strike, or collectively bargain.
2. Suppressed Wages: Offshoring of manufacturing jobs and knowledge-worker jobs, gig economy practices, and anti-union rulings contributed to significant wage decreases over time by reducing workers' leverage to demand higher wages.
3. Increased Wealth Inequality: Tax cuts, financial deregulation, and trade policies disproportionately benefited corporations and the wealthy, while cuts to social programs hurt the working class.
4. Reduced Worker Protections: Erosion of public-sector union power and federal inaction on gig economy abuses left workers vulnerable.
5. Failed to Address Housing and Healthcare Inequities: Rising costs in these areas outpaced wage growth, increasing economic strain on the working class.

Here’s a timeline of the key policies:

1. Taft-Hartley Act (1947)

• Signed by: President Harry Truman (over his veto, Congress overrode it)
• Key Provisions:
• Restricted union activities, including outlawing secondary strikes (solidarity strikes by unions not directly involved in a dispute).
• Allowed states to pass "right-to-work" laws, weakening union power by prohibiting mandatory union dues.
• Required union leaders to sign anti-communist affidavits, marginalizing progressive and militant labor leaders.
• Impact: Weakened unions' ability to organize and strike, leading to a gradual decline in union membership and bargaining power.

2. Landrum-Griffin Act (1959)

• Signed by: President Dwight D. Eisenhower
• Key Provisions:
• Imposed strict reporting requirements on unions, increasing federal oversight.
• Made it easier for employers to challenge union elections.
• Impact: While aimed at curbing corruption in unions, it further weakened labor leadership and increased barriers to unionization.

3. Deregulation (1970s–1980s)

• Policies under: Presidents Jimmy Carter and Ronald Reagan
• Key Areas:
• Transportation (1978–1980): Deregulation of airlines, trucking, and railroads weakened unions in those sectors and drove down wages.
• Finance (1980s): Financial deregulation created economic volatility and shifted economic power toward the finance industry, which often benefited corporate interests over workers.
• Impact: Deregulation prioritized market efficiency over worker protections, resulting in job losses, wage stagnation, and the erosion of unionized industries.

4. Reaganomics (1980s)

• Policies under: President Ronald Reagan
• Key Provisions:
• Massive tax cuts for corporations and the wealthy (e.g., Economic Recovery Tax Act of 1981).
• Reduced top marginal tax rates from 70% to 28%.
• Shifted federal spending away from social programs to military expansion.
• Aggressive stance against unions, exemplified by Reagan’s firing of 11,000 striking air traffic controllers in 1981.
• Impact: Widened income inequality, reduced federal revenues for social services, and emboldened corporations to resist union efforts.

5. Tax Reform Act of 1986

• Signed by: President Ronald Reagan
• Key Provisions:
• Lowered the top corporate tax rate and individual income tax rates for high earners.
• Shifted more of the tax burden to working- and middle-class Americans by eliminating certain deductions.
• Impact: Reduced government revenue for public investments, increasing economic inequality.

6. NAFTA and Globalization (1994)

• Signed by: President Bill Clinton
• Key Provisions:
• North American Free Trade Agreement (NAFTA) removed trade barriers between the U.S., Mexico, and Canada.
• Impact: Accelerated the offshoring of manufacturing jobs, leading to factory closures, wage suppression, and the decimation of working-class communities dependent on industrial employment.

7. The 1996 Welfare Reform Act

• Signed by: President Bill Clinton
• Key Provisions:
• Replaced Aid to Families with Dependent Children (AFDC) with Temporary Assistance for Needy Families (TANF), imposing work requirements and time limits on welfare recipients.
• Impact: Reduced social safety nets for the working poor, pushing many into low-wage, insecure jobs without addressing systemic poverty.

8. Decline of Progressive Taxation (2001–2017)

• Policies under: Presidents George W. Bush, Barack Obama, and Donald Trump
• Key Provisions:
• Bush tax cuts (2001, 2003) significantly reduced tax rates for the wealthy.
• Trump’s Tax Cuts and Jobs Act (2017) lowered the corporate tax rate from 35% to 21%.
• Impact: Reduced public funding for infrastructure, education, and social programs while exacerbating wealth inequality.

9. Weakening of Labor Protections (2000s–2020s)

• Key Examples:
• Supreme Court rulings like Janus v. AFSCME (2018) undermined public-sector unions by eliminating mandatory union fees for non-members.
• Continued passage of "right-to-work" laws at the state level, encouraged by federal inaction to strengthen union protections.

10. Trade Policies and China’s Entry into the WTO (2001)

• Facilitated by: President Bill Clinton
• Impact: Enabled corporations to offshore manufacturing to China, further accelerating the decline of unionized, high-wage jobs in the U.S.

11. Bush Tax Cuts (2001, 2003)

• Signed by: President George W. Bush
• Key Provisions:
• Reduced tax rates across all income brackets, with the largest benefits going to the wealthy.
• Lowered the top marginal tax rate from 39.6% to 35%.
• Reduced capital gains and dividend taxes, favoring investors over wage earners.
• Impact: The tax cuts significantly increased wealth inequality by disproportionately benefiting the highest earners and corporations, while reducing federal revenue for social programs.

12. China’s Entry into the WTO (2001)

• Facilitated by: President Bill Clinton’s administration, implemented under George W. Bush.
• Impact: Allowed for the offshoring of millions of manufacturing jobs to China, accelerating the decline of industrial employment in the U.S. and devastating working-class communities.

13. Bankruptcy Abuse Prevention and Consumer Protection Act (2005)

• Signed by: President George W. Bush
• Key Provisions:
• Made it harder for individuals to declare bankruptcy.
• Forced more people to file under Chapter 13 (requiring repayment plans) rather than Chapter 7 (which discharges most debts).
• Impact: Increased financial strain on working-class Americans struggling with medical debt, unemployment, or other crises.

14. Great Recession and the Financial Crisis (2007–2008)

• Policy Failures:
• Deregulation of the financial industry (e.g., repeal of Glass-Steagall in 1999) allowed risky banking practices to proliferate, leading to the crisis.
• Bailouts for banks and corporations under the Emergency Economic Stabilization Act (2008) did not include significant relief for working-class homeowners, millions of whom lost their homes to foreclosure.
• Impact: The Great Recession wiped out trillions in household wealth, particularly for working-class families, while government aid primarily benefited financial institutions.

15. Affordable Care Act (ACA) - 2010

• Signed by: President Barack Obama
• Key Provisions:
• Expanded health insurance coverage through subsidies and Medicaid expansion.
• Required individuals to purchase health insurance (individual mandate).
• Impact: While it increased access to healthcare, the ACA’s reliance on private insurers meant many working-class families faced rising premiums, high deductibles, and limited plan options.

16. Dodd-Frank Act (2010)

• Signed by: President Barack Obama
• Key Provisions:
• Created the Consumer Financial Protection Bureau (CFPB) to protect consumers from predatory lending.
• Impact: While Dodd-Frank aimed to rein in Wall Street, many provisions were later weakened, leaving systemic issues in place. The working class saw limited direct benefit from these reforms.

17. Citizens United v. FEC (2010)

• Supreme Court Ruling:
• Allowed unlimited corporate spending on elections, treating money as free speech.
• Impact: Enabled corporations and the wealthy to dominate political influence, making it harder for working-class voices to shape policy.

18. Trade Policies and Job Loss

• Trade Adjustment Assistance Reauthorization (2011):
• Acknowledged the damage caused by trade agreements but provided minimal support for displaced workers.
• Impact: Free trade agreements continued to incentivize offshoring, disproportionately affecting manufacturing jobs.

19. Janus v. AFSCME (2018)

• Supreme Court Ruling:
• Ended mandatory union fees for public-sector employees who are not union members.
• Impact: Severely weakened public-sector unions, further diminishing collective bargaining power for workers in education, healthcare, and government.

20. Tax Cuts and Jobs Act (2017)

• Signed by: President Donald Trump
• Key Provisions:
• Reduced the corporate tax rate from 35% to 21%.
• Lowered individual income tax rates but set many cuts to expire by 2025 for middle- and low-income taxpayers while making corporate cuts permanent.
• Impact: Exacerbated income inequality by overwhelmingly benefiting corporations and high-income households. Working-class benefits were modest and temporary.

21. Erosion of Labor Protections and Workers’ Rights

• Gig Economy and Misclassification of Workers (2010s–2020s):
• Federal inaction allowed companies like Uber and Lyft to classify workers as independent contractors, denying them benefits like healthcare, overtime, and sick leave.
• COVID-19 Pandemic (2020s):
• Relief measures like the CARES Act provided temporary assistance, but systemic inequalities in healthcare, wages, and worker protections remained unaddressed.

22. CARES Act and Corporate Bailouts (2020)

• Signed by: President Donald Trump
• Key Provisions:
• Offered $500 billion in corporate bailouts with limited accountability.
• Impact: Short-term relief for workers, but the bulk of federal funds went to large corporations and did not address structural economic issues.

Again, these policies collectively:

1. Weakened Unions: Further eroded the collective bargaining power of workers by making it harder for workers to organize, strike, or collectively bargain.
2. Suppressed Wages: Offshoring of manufacturing jobs and knowledge-worker jobs, gig economy practices, and anti-union rulings contributed to significant wage decreases over time by reducing workers' leverage to demand higher wages.
3. Increased Wealth Inequality: Tax cuts, financial deregulation, and trade policies disproportionately benefited corporations and the wealthy, while cuts to social programs hurt the working class.
4. Reduced Worker Protections: Erosion of public-sector union power and federal inaction on gig economy abuses left workers vulnerable.
5. Failed to Address Housing and Healthcare Inequities: Rising costs in these areas outpaced wage growth, increasing economic strain on the working class.

*https://www.nber.org/reporter/2021number2/wealth-inequality-united-states