PETER FENN

By PETER FENN

USNews & World Report, Thomas Jefferson Street Blog

As we move into 2014 there is a great deal on the plate of President Obama and members of the 113th Congress. There’s a stalled immigration bill, tax and entitlement reform, climate change, the farm bill, not to mention 1.3 million Americans who just got their unemployment benefits cut off and a defense budget where half the cost is benefits and salaries.

Many argue that the deficit is still the number one issue and that government must be cut while taxes or revenues are “off the table.” But after the shutdown disaster and the end-of-the-year agreement on a two-year budget the radical tea party faction has lost clout and most Republicans seem reluctant to engage in brinkmanship over a February extension of the debt limit.

The elephant in the room is the shrinking middle class and the rapidly growing inequality in America. This has not just critical economic implications but it impacts so much else about what America is, has been and will be. It affects how we educate our people, it affects how we live in cities, suburbs and rural areas, it affects how we deal with issues of race and ethnicity, it affects the very essence of how we define the American Dream. Are we really the “land of opportunity” any more?

If we fail to focus on, and tackle, the problems of inequality it will impact who we are as a country in more devastating ways than we can imagine. Who gets educated properly, who has the chance to advance, who lives in a stable, nurturing home, who has financial stability or even a hope for a better future, who holds the power? Never before have so many had the deck stacked against them.

[See a collection of political cartoons on the economy.]

Let’s look at the trends and the facts: The share of income of the top 1 percent peaked in 1928 at 25 percent, just before the crash. It dropped and leveled off to between 10-15 percent for nearly 60 years, from the 1930s to the late 1990s. During that time the middle class grew and opportunity flourished.

But things have changed. Over the past decade the share of income has risen to 1928 levels.

The top 1 percent have seen their income rise, according to the Congressional Budget Office, by 275 percent in the last 30 years. Those in the middle 60 percent during the same period have only seen a 40 percent increase. And in the last decade wages of middle class Americans have actually decreased. The average family income for the middle class is just over $51,000 the same as it was in 1999 and, of course, it costs more to live.

Let’s look at minimum wage workers. My first full paying job as a 15-year old kid was working on the Capitol grounds. I made $1.25 an hour in 1963, the minimum wage. I was lucky, actually, and the equivalent today would be $8.37 an hour, even higher than the current minimum wage of $7.25. In 1968, the equivalent for today hit $9.44 an hour and the unemployment rate was at 3.5 percent. Jobs weren’t lost, companies kept hiring workers and there were no harmful effects on businesses.

[See a collection of political cartoons on the budget and deficit.]

So why have we refused to raise the minimum wage to keep workers up to date with the times?

Part of the reason may be the declining influence of the union movement in America – a clear and consistent driver of creating a growing, thriving middle class from the 1930s on. Back in 1955 a third of workers were union members, by 1983 that number had dropped to 20 percent and in 2012, only a little over 11 percent of workers were union, and close to half of those were public employees. In 2012, only 6.6 percent of private sector employees were unionized.

Clearly, that trend is not turning around and clearly we need to seriously rethink what we need to do to rebuild the middle class and to provide the opportunity that is absent today.

[Read the U.S. News Debate: Should the Federal Reserve Keep Interest Rates Low?]

Several important steps might be:

1. Raise the minimum wage to keep up with historic trends, now.
2. A college education is critical in today’s internationally competitive environment. We need to double the number of college graduates in a generation and we need to provide the scholarship funds to do it, not unlike the G.I. Bill.
3. Make work places pro-family. Provide day care help, wellness centers, time off for family emergencies.
4. Continue to promote equal pay for equal work, reducing the disparity between male and female workers.
5. Rework our tax system so that it is fair and provides more opportunity for the middle class.
6. Increase the opportunity for job training and learning new skills.
7. Provide incentives for companies to give employees a stake in the company.
8. Strengthen health and safety regulations in the workplace, to prevent injuries and enhance productivity.
9. Encourage increased investment in plant and equipment and research and development through targeted tax incentives.
10. Increase research on social mobility, where the acute problems are and how to move people out of the cycles of poverty and hopelessness.

This deserves a combined effort by government and the private sector. A national conversation should be started as a 2014 New Year’s resolution, spearheaded by the White House and a coalition of the major business and labor organizations. A national commission, similar to Simpson-Bowles, should be formed soon to provide recommendations for action. This may be one way to break the Washington gridlock – working toward a common goal that we all share. (Even if my list of prescriptions is not everyone’s list!)