As Drew Westen observes today, “400 people control more of the wealth than 150 million of their fellow Americans,” and “the average middle-class family has seen its income stagnate over the last 30 years while the richest 1% has seen its income rise astronomically.” These extremes cry out for a theodicy, justifying mammon’s ways to man. ..
In an ideal world, the S&P downgrade would jolt the US into recognition of how bizarre our economic policies have become. The very wealthy have captured more of the economy’s growth, but have seen their taxes reduced to near-record-low levels. As Juan Cole has argued, a self-reinforcing pattern of income gains at the top has left everyone else caught in a downward spiral of deleveraging, cutbacks, and austerity:
Most of our problems come from the US government coddling very rich people, which it does because the very rich pay for politicians’ campaigns and expect a payback. And as more and more of the country’s wealth has gone to the 750,000 families [at the top which have seen the fastest income gains], they have gained more and more control over Congress.
The recent budget deal accelerates the process, slashing funding for fundamental investments in the nation’s future in order to preserve the Bush tax cuts for the wealthy. Based on the work of Michael Perelman, Richard Seymour identifies the problems set to intensify:
The pathologies of the US economy are not exactly a secret[. . . ]: long-term underinvestment in research and development, low productivity resulting from a shift toward low wage service jobs, more financial vs productive investment, underinvestment in infrastructure, and an irrational military Keynesianism that results in the best innovation and research being conducted in secrecy . . . .
I have also commented on these trends, and I see them all as epiphenomenal of an increasingly short-termist elite angling for larger pieces of a shrinking pie. A little investment in transport, education, technology, and energy now may pay great dividends in the future. But in a world driven by quarterly profit statements, daily market fluctuations, and nanosecond-denominated high frequency trading, long-term value creation is decidedly unfashionable.