NORTON META TAG

10 January 2013

The Obama Coalition vs. Corporate America 9JAN13

A very interesting article sent to me by a friend, and my comments to her. Thanks again Heidi....
Thomas B. Edsall
Tom Edsall on politics inside and outside of Washington.

The slow implosion of the Republican Party — along with the growing strength of a Democratic coalition dominated by low-to-middle-income voters — threatens the power of the corporate establishment and will force big business to find new ways to reassert control of the policy-making process.
The warning signs are everywhere.
The development carrying perhaps the most symbolic significance was the abandonment last week by 85 House Republicans and 40 of the 47 Republican senators of their longstanding commitment not to raise taxes. The tax increase was imposed on the affluent, a core Republican constituency. The Wall Street Journal’s editorial page did not mince words, not that it ever does:
The Senate-White House compromise grudgingly passed by the House is a Beltway classic: the biggest tax increase in 20 years in return for spending increases, and all spun for political purposes as a “tax cut for the middle class.”
The potential institutionalization of a majority Democratic coalition of the downscale – including single women, minorities, union members and the young — is equally (if not more) ominous for members of the top 0.1 percent and for the corporations that have profited over the past 40 years.
Voters in this ascendant coalition believe “politicians help the rich get richer and corporations collect record profits while refusing to hire or increase wages or salaries for workers,” according to an extensive study conducted by the Democratic polling firm Greenberg Quinlan Rosner Research.
Although there is a pro-business wing of the Democratic Party — associated with figures like current and former Treasury Secretaries Timothy Geithner and Robert Rubin, and with centrists like Senators Mark Warner of Virginia, Thomas R. Carper of Delaware and  Max Baucus of Montana — this faction is in danger of being submerged by a surge of redistributional demands coming from voters in the bottom half, income-wise.
This isn’t the only thing causing problems for what we used to call Big Business — represented by the Business Roundtable, the United States Chamber of Commerce, the National Association of Manufacturers, the American Bankers Association and other trade associations — which faces a set of challenges that have the potential to threaten its clout.
Economists on both the right and left, from Kenneth Rogoff of Harvard University to the Times columnist Paul Krugman, are increasingly talking about the detrimental consequences of high concentrations of economic and political power – concentrations that threaten the innovation that is supposed to be what makes unequal outcomes worth the price.
Daron Acemoglu of M.I.T., who wrote the highly regarded book “Why Nations Fail: The Origins of Power, Prosperity, and Poverty” with James A. Robinson of Harvard, argues that concentrations of wealth and market power allow “the already well off and already well organized” to exercise excessive leverage through “lobbying, campaign contributions and otherwise” that distort market processes.
The wide range of hostility to big business is reflected in the views of Erick Erickson, the influential right-wing blogger at RedState.com who, “through a mix of incendiary posts, canny self-promotion (he has 24,540 Twitter followers) and endorsement of conservative primary candidates” has made himself “a conservative powerhouse.” Erickson contends that a central failing of the Republican Party is its subservience to the business elite:
The Republican Establishment gets their head patted as they sip wine with major C.E.O.s who want Washington to just do something. But these C.E.O.s have something in common. They want Washington to work for them. Washington working for Fortune 500 does not equate to Washington working for families or entrepreneurs or small businesses. We have an unlevel playing field with Washington picking winners and losers with cushy jobs for the elites when they leave the Capitol.
A second development that raises the level of hostility to corporate chieftains is the fact that there has been, over the past decade, a sharp decline in the reward for work.
Margaret Jacobson and Filippo Occhino of the Cleveland Federal Reserve  documented this decline in a paper published in September, “Labor’s Declining Share of Income and Rising Inequality.” The following chart shows the continuing shift in the distribution of national income from labor to the owners of capital, beginning in 2000:
Cleveland Fed
An additional chart put together by the Cleveland Fed demonstrates that from 1948 to 1973 compensation rose at almost exactly the same rate as productivity; in other words, workers gained proportionately as their productivity improved. Over the following two decades, from 1974 to 1995, however, the rate of compensation growth fell behind productivity by roughly 0.25 percent a year, and then fell even further, by 0.5 percent, over the years from 1996 to 2011. For a worker making $25,000 a year in 1974, the failure of his pay to keep up with his productivity growth means that he made $5,763 less in 2011, $43,225, than he would have had his pay kept up with productivity gains, $48,988.
The more workers recognize that their wages are not keeping up with their productivity gains, the more they are likely to press for redistributive government action through tax policy or by other means.
Cleveland Fed
Jacobson and Occhino write
that economists have identified three long-term factors that explain why “the wage-productivity gap has widened and the share of income accruing to labor has declined.” The first is the decline of unions and the resulting weakening of the bargaining power of labor. The second has been the movement of well paying jobs overseas – the “migration of relatively more labor-intensive sectors from advanced economies to emerging economies. As a consequence, the sectors remaining in the advanced economies are relatively less labor-intensive, and the average share of labor income is lower.” The third factor is automation and technology advances which have encouraged a shift from workers to machines — “technological change connected with improvements in information and communication technologies, which has raised the marginal productivity and return to capital relative to labor.”
The shift of income from labor to capital occurs at a time (and may well be one of the causes) of huge increases in the share of income flowing to C.E.O.’s and those at the top of the income distribution.
Although the stars are lined up in favor of the anti-corporate left, American business, when its back is to the wall, has historically proved to be extraordinarily resourceful.
Just over 40 years ago, at a similarly volatile moment, Lewis F. Powell, Jr. wrote a 6,030-word memo to the United States Chamber of Commerce that has gained legendary status: The Powell Manifesto or, as it was formally titled, “Confidential Memorandum: Attack on American Free Enterprise System.” The soon-to-be-appointed associate justice of the Supreme Court warned: “We are not dealing with sporadic or isolated attacks from a relatively few extremists or even from the minority socialist cadre. Rather, the assault on the enterprise system is broadly based and consistently pursued. It is gaining momentum and converts.”
In the face of this onslaught, business mobilized and by 1977 was back on top, defeating liberal initiatives like consumer protection and labor law reform during the Carter administration. Then, in 1980, a unified coalition of corporations and trade associations helped Ronald Reagan win the presidency, and the Republican Party wrested control of the Senate.
The 1980 election marked the start of a quarter-century of corporate political hegemony that permeated the administrations of Reagan, George Bush, and George W. Bush – as well as, to a substantial degree, the administration of Bill Clinton.
In other words, the current Republican implosion notwithstanding, it would not be surprising to see conservative feet on Democratic throats before too much time has passed.
http://opinionator.blogs.nytimes.com/2013/01/09/the-obama-coalition-vs-corporate-america/?emc=eta1 

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