13. See responses to similar questions and topics in Benjamin Page and Lawrence Jacobs, Class War: What Americans Really Think About Economic Inequality (Chicago: University of Chicago Press, 2009).
14. Only a small proportion of poor children today will make it through college unless there is a drastic change in U.S. social and education policy. The disadvantages confronting poor children are too powerful and too many. Poor children grow up with poor neighborhoods, poor health, and poor schools, with parents of low educational attainment who cannot adequately help their children to succeed in school, and in the case of minorities, with the low expectations by the rest of society and with continuing discrimination and racism.
The end result is a startlingly strong correlation in America between the parents’ educational attainment and income and their children’s educational attainment and income. Households that have made it through college and to affluence are likely to raise their children to a bachelor’s degree and to affluence as well. Households in poverty and with low parental educational attainment are likely to bequeath their poverty to their children as well, despite every desperate effort to avoid that fate. According to careful studies carried out by the OECD, and shown in the figure on the next page, the United States actually has the lowest social mobility within the entire OECD, as indicated by the highest correlation of education levels of parents and children. This is a stunning fact, since it runs counter to the long-held supposition that the United States is the land of social mobility and opportunity for all.
15. Some may object to considering the marketplace a contrivance as opposed to a natural phenomenon reflecting humanity’s intrinsic propensity to “truck, barter, and trade” (in Adam Smith’s famous phrase). Yet when we consider that the modern marketplace is not based on bartering but on sophisticated monetary institutions and financial markets, commercial law, corporate law, intellectual dispute settlements, and state enforcement of contracts and protection of property, we can conclude that markets today are the product of complex legal and institutional design as well as underlying economic motivations to trade.
Source: Data from Organization for Economic Cooperation and Development, “Economic Policy Reforms, Going for Growth: OECD 2010.”
Chapter 4: Washington’s Retreat from Public Purpose
1. Franklin D. Roosevelt, Second Inaugural Address, January 20, 1937.
2. Ronald Reagan, First Inaugural Address, January 20, 1981.
3. Bill Clinton, radio address, January 27, 1996.
4. This great reversal of government after the 1960s is not a unique event in American history, according to historians. Arthur Schlesinger, Jr., among others, argued persuasively that America tends to experience waves of alternating public activism and retreat. In the 1870s to 1890s, for example, the great national industries—railways, steel making, oil, meatpacking, retailing by catalogue—first came into existence on a continental scale. Government stood in the shadows as the robber barons took the stage. The Gilded Age was born. Then came the reaction, first by the prairie populists who, like the Tea Party, railed against the depredations of Wall Street; next came the Progressives, who more systematically rolled out a series of reforms designed to rein in corporate abuses of the new national giants. The Progressive Era began to wane in the 1910s, and was swept away by the probusiness decade of the 1920s, when America longed to return to normalcy after World War I. The Roaring Twenties, the prelude to the Great Depression, had strong similarities to the years leading to 2008: very rapid financial innovation, soaring inequalities of wealth and income, a culture of financial speculation, real estate booms fueled by easy credit, and then finally a financial crash.
5. Unless otherwise noted, all proceeding budget data are from the Office of Management and Budget Historical Tables.
6. This allocation starts only in 1962 in the Office of Management and Budget Historical Tables (Table 8.2).
7. U.S. Census Bureau, “Population Division: Historical Census Statistics on the Foreign-Born Population of the United States: 1850–2000.”
8. U.S. Census Bureau, Income, Poverty and Health Insurance Coverage in the US: 2009, Tables B1, B2.
9. The chart below shows total revenues, defense and nondefense spending as a percentage of GDP.
10. During the early 1970s, the post–World War II monetary arrangement, known as “dollar-exchange standard,” came undone. From 1946 to 1971, the U.S. dollar was pegged to gold at $35 per ounce, with foreign central banks outside the United States enjoying the guaranteed right to convert their dollar reserves into bullion at the guaranteed price. Nixon closed the gold window (the gold-to-dollar conversion) on August 15, 1971, as the United States was being drained of its gold reserves. At the core of the crisis was overly expansionary monetary policy tied to the overheated U.S. economy, which itself was tied to the expanded costs of the Vietnam War. The United States could not both expand the money supply and honor the redemption of dollars into gold at a fixed price, so it gave up on the latter. The breakdown of the dollar-exchange standard led to modern history’s first peacetime era of major national currencies unlinked to either gold or silver. The result, for several years, was high inflation, partly as national central banks adjusted to their newly established freedom of maneuver, and the lack of a clear monetary anchor. By the 1980s, the world’s central banks had adjusted to the new era of flexible exchange rates and had brought inflation rates back down. Yet by the time this happened, conservative politicians and free-market ideologues were insisting that the burst of inflation during the 1970s was proof of the incapacity of government to manage the economy.
Source: Data from Office of Management and Budget Historical Tables (Tables 1.2, 3.1, and 8.4).
Many factors contributed to soaring oil prices. Partly the soaring oil prices reflected the overheated monetary conditions described. Another element of the high oil prices was the surge in oil demand relative to supply that resulted from years of rapid global economic growth. A third element was politics. The Arab nations gained control over their oil reserves in the early 1970s as supply conditions tightened and as postcolonial geopolitics unfolded. The rise of OPEC alone would have boosted oil prices in the period. Yet the Arab countries temporarily went one step further by launching a boycott of Western markets following the 1973 Arab-Israeli War. All in all, the decade was marked by high and unstable oil prices, and profound macroeconomic instability as a result.
11. Judith Stein, Pivotal Decade: How the United States Traded Factories for Finance in the Seventies (New Haven: Yale University Press, 2010).
12. At a key moment, Democratic senators from the Sunbelt contributed to the defeat of a prolabor bill in 1978, with Florida senator Richard Stone explaining that the prounion measures would “impede the progress of the sunbelt to attract jobs” (ibid., pp. 188–89).
13. Ibid., p. 193.
14. See Table 17.1 of the Office of Management and Budget Historical Tables.
15. See Table 3.1 of the Office of Management and Budget Historical Tables.
16. See Table 3.2 of the Office of Management and Budget Historical Tables.
17. Ibid.
18. International Energy Agency, Data Services.
19. For the change in income inequality, most recent data are for 2008. For the national poverty rate, earliest available data are for 1959. For earnings of full-time male workers, most recent data are from 2009.
20. Emmanuel Saez and Thomas Piketty, data set for “Income Inequality in the United States, 1913–1998,” updated July 2010.
Chapter 5: The Divided Nation
1. I have categorized the Sunbelt and Snowbelt as follows: The Sunbelt: Alabama, Arizona, Arkansas, California, Florida, Georgia, Louisiana, Mississippi, New Mexico, North Carolina, Oklahoma, South Carolina, Texas, and Virginia. The Snowbelt: Connecticut, Illinois, Indiana, Iowa, Kansas, Maine, Massachusetts, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, New Jersey, New York, North Dakota, Ohio, Pennsylvania, Rhode Island, South Dak
ota, Vermont, and Wisconsin.
2. Larry Dewitt, “The Decision to Exclude Agricultural and Domestic Workers from the 1935 Social Security Act,” U.S. Social Security Administration, 2010.
3. Lyndon Johnson knew that he was delivering the South to the Republican Party when he signed the Civil Rights Act of 1964 and the Voting Rights Act of 1965. On signing the Civil Rights Act, he supposedly turned to an aide and declared that he had delivered the South to the Republicans for a generation. It is a testament to his moral courage that he nonetheless acted so boldly.
4. Thomas Byrne Edsall and Mary D. Edsall, Chain Reaction: The Impact of Race, Rights, and Taxes on American Politics (New York: W. W. Norton, 1991), pp. 141–44.
5. For 1970 and 1990 Hispanic population data, see U.S. Census Bureau, “Hispanics in the US.” For 2007 data, see Pew Hispanic Center, “Statistic Portraits of Hispanics in the US, 2009.”
6. Zoltan Hajnal et al., “Immigration and the Political Transformation of White America: How Local Immigrant Context Shapes White Policy Views and Partisanship,” University of California, San Diego Center for Comparative Immigration Studies, International Migration Conference, March 12, 2010.
Research by Hajnal et al. confirms that the rise of the Hispanic population has led to a significant conservative shift of white Americans in locales with high concentrations of Hispanics:
[W]hite Americans who live in proximity to large numbers of Latinos tend to have more conservative views. All else equal, whites living in zip codes with larger Latino populations are less likely to want the federal government to reduce income inequality, less likely to seek increased spending on health care for the poor, less likely to want to do more to cover the uninsured, and almost significantly less likely … to view poverty as a serious problem. The implication of this set of findings is an important one. Latino context is now shaping core policy concerns of the American public. And it is doing so in a way that mirrors the negative reactions that have often faced the African American community in the past. In contexts where Latinos are prominent (and perhaps threatening), whites tend to be eager to reduce services and expenditures that benefit the bottom rungs of society. (pp. 21–22)
7. Congressional Budget Office, “The Impact of Unauthorized Immigrants on the Budgets of State and Local Governments,” December 2007.
8. Between 1900 and 1960, every president except Californian Herbert Hoover hailed from the Snowbelt: William McKinley (Ohio), Theodore Roosevelt (New York), William Howard Taft (Ohio), Woodrow Wilson (New Jersey), Warren Harding (Ohio), Calvin Coolidge (Massachusetts), Herbert Hoover (California), Franklin D. Roosevelt (New York), Harry Truman (Missouri), Dwight D. Eisenhower (Kansas), and John F. Kennedy (Massachusetts). After 1960, the only president from outside the Sunbelt was Gerald Ford of Michigan, who took office upon Richard Nixon’s resignation rather than by winning a national election. Ford went down to defeat in 1976, to Sunbelt candidate Jimmy Carter. The elected presidents between 1964 and 2004 include Lyndon B. Johnson (Texas), Jimmy Carter (Georgia), Ronald Reagan (California), George H.W. Bush (Texas), Bill Clinton (Arkansas), and George W. Bush (Texas).
9. The phenomenon at play is a result of America’s two-party system, in which the winning candidate (with 50 percent plus one vote) gets 100 percent of the power. The losing side gets no representation. This is different from a proportional representation system, as in much of Europe, where the share of national seats depends on the share of national votes. In our example, a national pro-government party would get 54 percent of the seats no matter where in the country the voters live.
10. The following data are from the Pew Forum on Religion & Public Life, “US Religious Landscape Survey: Religious Affiliation, Diverse and Dynamic,” February 2008.
11. For an overview of the increased sorting of American households by “education, income, race, and way of life,” see Bill Bishop, The Big Sort: Why the Clustering of Like-Minded America Is Tearing Us Apart (New York: Houghton Mifflin, 2008); Paul Jargowsky and Todd Swanstrom, “Economic Integration: Why It Matters and How Cities Can Get More of It,” Chicago: CEOs for Cities, City Vitals Series.
12. The following data are from Benjamin Page and Lawrence Jacobs, Class War? What Americans Really Think About Economic Inequality (Chicago: University of Chicago Press, 2009).
13. Professor Larry Bartels of Princeton University has found similar views in his own recent analysis of survey data. He identifies several characteristics of public attitudes, including strong support for equal opportunity and a belief that “some people don’t get a chance to get a good education,” and for the view that “rich people … pay less [in taxes] than they should” (53.1 percent). Larry Bartels, “Homer Gets a Tax Cut: Inequality and Public Policy in the American Mind,” Perspectives on Politics 3, no. 1 (March 2005).
14. Pew Research Center, “Trends in Political Values and Core Attitudes: 1987–2009,” May 21, 2009, pp. 72–73, 140.
15. Ibid., p. 106.
16. USA Today/Gallup Poll, June 11–13, 2010.
17. Jon Cohen, “Most Americans Say Regulate Greenhouse Gases,” Washington Post, June 10, 2010.
18. Rasmussen Reports, “Support for Renewable Energy Resources Reaches Highest Level Yet,” January 2011.
Chapter 6: The New Globalization
1. Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Oxford: Oxford University Press, 1993), Book 4, Chapter 7.
2. United Nations Conference on Trade and Development (UNCTAD), “Largest Transnational Corporations,” Document 5, http://www.unctad.org/templates/page.asp?intItemID=2443&lang=1.
3. For details on General Electric, see General Electric website and annual 10-K filing.
4. Foreign profits are equal to corporate earnings from abroad minus domestic earnings paid to foreign investors. Earnings from abroad include both the foreign profits of U.S. multinationals and the dividends received by U.S. residents paid by unaffiliated foreign corporations. The rising trend in the figure reflects in part the rising share of corporate profits earned by U.S. companies in their overseas operations, but may also reflect a rising tendency of U.S. companies to book their profits in overseas tax havens through artificial transfer pricing (that is, using artificial prices for cross-border transactions within the firm for the purpose of shifting reported corporate revenues to low-tax jurisdictions). Even if part of the rising share of foreign profits reflects artificial transfer pricing rather than actual changes in the location of corporate activities, the increased use of transfer pricing to avoid taxes would itself be a manifestation of the new globalization.
5. For U.S.-China trade: U.S. Census Bureau, “Foreign Trade: Trade in Goods with China.” For U.S. value-added data: U.S. Department of Commerce, Bureau of Economic Analysis, “Industry Economic Accounts.”
6. U.S. Bureau of Labor Statistics, “Current Employment Statistics: National.”
7. U.S. Bureau of Labor Statistics, “Establishment Data: Historical Employment.”
8. Ibid.
9. Shan Jingjing, “Blue Book of Cities in China,” Chinese Academy of Social Science.
10. UN Population Division Home Page.
11. The current shorthand for the emerging economies is the BRIC group: Brazil, Russia, India, and China, with a combined population of around 2.7 billion. If we define an emerging market to be any fast-growing developing country that is able to attract market-based private capital for a rapid scale-up of industrial production, we would want to include dozens more countries, including Chile, Egypt, Mexico, Nigeria, South Africa, and Vietnam. The combined real GDP of the developing world grew by around 7 percent in 2010, showing the scope of rapid growth in today’s developing countries.
12. H. Garretsen and Jolanda Peeters, “Capital Mobility, Agglomeration and Corporate Tax Rates: Is the Race to the Bottom for Real?,” CESifo Economic Studies 53, no. 2 (2007), pp. 263–93.
13. See Table 2.3 of the Office of Management and Budget Historical Tables.
14. Fo
r example, see Rasmussen Reports, “Energy Update,” April 2011.
Chapter 7: The Rigged Game
1. In the 2010 Swedish elections, for example, eight parties entered the Parliament and four are part of the governing coalition. The American political system, and to a lesser extent the systems of the United Kingdom, Canada, and Australia, are majoritarian; the parliamentary democracies of Western Europe tend to be consensus systems.
2. Maurice Duverger, “Factors in a Two Party and Multiparty System,” in Party Politics and Pressure Groups (New York: Thomas Y. Crowell, 1972), pp. 23–32.
3. All data from OECD Social Expenditure Database and OECD Statistical Database.
4. Consensus is also difficult because of the vastness and diversity of America’s population, with cleavages by region, race, ethnicity, and religion. America cannot be a consensus society in the same way as Denmark, Norway, or Sweden, as each of those is a country of a few million people that is ethnically and religiously homogeneous with a geographic range and diversity far smaller than those of the United States.
5. Institute for Democracy and Electoral Assistance, “Voter Turnout by Country.”
6. Spending in presidential election years (2000, 2004, 2008) averages around $1.5 billion more than in nonpresidential election years, with presidential and off-year elections on the same common upward trend.
7. Robert Kaiser, So Damn Much Money: The Triumph of Lobbying and the Corrosion of American Government (New York: Alfred A. Knopf, 2009), pp. 343–44.
8. Gallup Poll, “Automobile, Banking Industry Images Slide Further,” August 17, 2009.
9. Andrew J. Bacevich, Washington Rules: America’s Path to Permanent War (New York: Henry Holt, 2010).
10. Dwight D. Eisenhower, “Farewell Address,” January 17, 1961.
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