Income inequality is an issue that cuts across party lines

As Democratic presidential candidate Hillary Clinton is inching her way to the left in support of the American wage earner, and Sen. Bernie Sanders (I-Vt.) keeps leading the charge, the problem of income inequality just keeps getting worse. If Democrats, no matter which one, can just keep making the case to the average American voter, the results in 2016 will be a foregone conclusion.

The latest announcement by the Department of Labor is that 223,000 jobs were created in June, and that the unemployment rate ticked down to 5.3 percent from 5.5 percent in the prior month. From those figures, one would get the impression that the U.S. economy is back on the rise; since jobs created in the first quarter only averaged 195,000, the new numbers represented a marked improvement. Added to this was a study produced by the Washington Center for Equitable Growth, rejoicing in the fact that income for the 99 percent increased 3.3 percent in 2014 — signifying the largest increase in 15 years — and that 3.1 million new jobs were created during that period.

{mosads}All good, right? Well, not so fast. During 2014, the richest 1 percent posted increases of 10.8 percent; if the average income of the 99 percent were reduced to 90 percent of wage earners, the increases amount to 2.8 percent. Inflation was 1.6 percent. So the overwhelming number of Americans made $900 more than they had the prior year, and the buying power of that was actually about $400. Supposedly Americans should feel happy with an extra $33 a month in their pockets.

The year 2014 was an important capstone, as it was the fifth year of the economic recovery. The problem is that 99 percent of Americans started the recession losing 11.6 percent of their income (2008 to 2009). According to the Washington Center for Equitable Growth’s study, the 99 percent have only recovered 40 percent of their losses.

While all but the 1 percent are creeping their way back to equilibrium, that 1 percent just keeps making disproportionately more, garnering 21.2 percent of all income in 2014 versus 20.1 percent in the prior year. It seems safe to conclude that there is no inclination in corporate America to restore workers to anything other than wage increases that are required by market pressure, or influenced by legislation or the fear of legislation.

To say that the liberal side of the Democratic Party has a timely issue is obvious. What is not nearly so obvious is that the potential for the economic argument could well gain traction across party lines and the diverse sectors of ethnic and religious groupings. In a truly gobsmacking other study by the Washington Center for Equitable Growth, 10,000 Americans were surveyed to determine: “What do Americans think should be done about inequality?” The results in some respects were mundane. The highest support was for minimum wage increases and increases in estate taxes. Deep suspicion and distrust was evidenced for government-administered programs such as the Supplemental Nutrition Assistance Program (food stamps). However, to quote directly from the study, “When respondents are given the actual data on the growing income gap in the United States, their concern about the problem increases by a staggering 35 percent — an effect equal in size to roughly 36 percent of the [l]iberal-[c]onservative gap on this question.”

There can be no more compelling evidence that making Americans aware of their circumstances will garner support. In recognizing this fact, it is important to note another element. Most Americans are intimately familiar with, and struggle with, their diminished economic circumstances, but they don’t relate their circumstances to a systemic problem. If it were possible to make them aware that their circumstance were system-wide, and that there were creditable political alternatives that could change those circumstances, it is an issue that has the potential of influencing at least 90 percent of wage earners and as many voters.

Democratic strategists need only follow Sanders’s lead on this issue, since it will appeal across party lines. Just as importantly, they need to take into account the irony also pointed out in the study. The more the income gap increases, the less the average American trusts its government. This can be a tacit acknowledgment that the average American somehow knows he or she is being swindled, and knows that government has enabled the perpetrators. Policy proposals to address income inequality should focus on changes in laws that do not require the government to administer them. And there are so many to add to minimum wage increases: mandatory vacation time; sick leave; maternity leave; shortened workweeks; hikes in Social Security payments; more paid holidays; improvements to healthcare coverage; changes in tax law; stock transfer taxes; mandatory, company-wide distribution of executive bonuses; stockholder control over executive compensation; rigorous antitrust enforcement; and many more.

There is no silver bullet for addressing the income gap, and there is no cure that will be initiated either by corporate or congressional action. These are changes that have to be forced upon reluctant legislators who have 40 years of “trickle-down” economics as a tradition to overcome. The left wing of the Democratic Party has a potential audience that far exceeds the majority of American voters — and the beat goes on. Income inequality is a political gift that just keeps on giving.

Russell is managing director of Cove Hill Advisory Services.