Liberals in a quandary for 2014

The 2014 mid-term elections are nearly upon us and liberal Democrats are feeling feisty.

Though most political analysts give the Republicans an edge, the lefties smell an upset.

Progressive Democrats who stand for the 99 percent, or the 90 percent, seek a return to economic fairness. Unemployment compensation, the minimum wage and maintaining the food stamp safety net will dominate their election year campaigns.

But the economic and political realities of 2014 put them in a quandary.

 

On Monday, Senate Democrats will try to revive the issue of extending long-term unemployment benefits. Congress left town last month without addressing this issue, with the Democrats proposing a free ride -- $25 billion in additional jobless compensation that will add to the federal deficit. No offset in spending cuts to pay for the extension.

The reason why unemployment insurance was lost in the December banter over a modest bipartisan budget agreement is this: the celebrated spending pact only provides a net reduction of $25 billion over 10 years. Attaching a $25 billion UI extension would expose Congress as a fraud, reaching a budget deal devoid of deficit reduction.

If the liberals cannot maneuver a UI provision at a time when the GOP claims the economy is a mess, how can they accomplish any other piece of their progressive agenda?

Due to tea party efforts, fiscal issues are a constant roadblock. The left will get nowhere by simply arguing that deficits don’t matter.

 

Perhaps the most basic issue in the pursuit of greater economic equality is raising the minimum wage. But, despite high-profile protests at fast-food restaurants for a $15-an-hour “living wage,” that goal may be unattainable in the political world.

Congressional Democrats seek a much more modest increase, from $7.25 to $10.10 hourly over two years, putting the minimum wage at roughly its 1968 level – adjusted for inflation. Yet, if the bill passed hourly pay would still leave a four-person family with poverty wages.

A key ingredient that liberals will struggle with in 2014 is explaining to voters the sea change within the job market in the 21st Century.

The so-called typical household with a primary breadwinner who works a 40-hour week for decent wages, solid health care and a pension is heading toward extinction. The days when a worker was laid off and later “called back” by their employer are a memory, a throwback to a simpler time.

Steady pay increases and year-end bonuses are largely a fiction. Low-skilled workers now have few opportunities to find a good-paying job in manufacturing or construction.

A recent Rasmussen Reports poll found that only about a third of employed Americans work 40 hours a week. Forty percent now have to work more than 40 hours weekly to pay their bills, including 9 percent who work more than 50 hours a week. At the same time, about one in four now work fewer than 40 hours a week – not necessarily by choice.

One labor economist recently concluded that the “working poor” of America have reached such disturbing numbers that one-fourth of American households earn $18,000 or less, which means that they make 45 percent of the median U.S. wage.

Those calculations include the underemployed who are involuntarily working part time, and those who are seasonal or temporary workers.

The jumbled mess that comprises the current job market is evident. Globalization, automation and increasing sophistication in robotics have only muddled any attempts to maintain an American middle class, or to provide the working poor with a ladder to new opportunities.

The Democrats’ push for a higher minimum was must be accompanied by an explanation that shows the majority of minimum wage workers are now adults working full time, many with a family and young children. In most Southern states this is the new reality: one-fifth of all kids come from a home with at least one minimum wage worker.

The outdated image of the minimum-wage workforce consisting of teenagers working a part-time summer job or trying to earn money for college is a substantial impediment for the liberals. A two-tiered minimum wage system could establish higher pay for those 21 and over, and perhaps those who are married. But that could result in perverse incentives for business that would ruin the entire concept.

Al From, who helped rescue the Democratic Party from its 1980s doldrums by forming the centrist Democratic Leadership Council, recently said that the minimum wage alone cannot address income inequality. It must be accompanied by an expansion of the Earned Income Tax Credit, which From, borrowing a phrase from Ronald Reagan, called “the greatest anti-poverty program in the history of the country.”

The EITC exempts low-income workers from federal income taxes and, in many cases, pays them a subsidy based on their standard of living. But the EITC created the 47 percent that Mitt Romney talked about in the 2012 presidential campaign, and enhancing the credit could soon result in an America where two-thirds of taxpayers contribute nothing – not even a standard minimum payment -- to the income tax system.

Surely, Democratic Party leaders don’t want their stamp of approval on that kind of taxation inequality.

Tax reform, which will emerge as a big buzzword in 2014, could provide the surest way for liberals to hammer out a real change in this divided economy.

With the end of the recession (at least on Wall Street), the gap between CEO pay and workers’ wages is rising rapidly again, to a ratio of 273-to-1. Why not push a bold tax reform provision that imposes proportionately higher corporate taxes on those companies where the CEO’s piece of the pie represents a ratio of 100:1 or more?
 

How about tying wages to increasing productivity – a measure of output which represents the real engine of the U.S. economy – rather than the traditional cost-of-living increase? Find a way to utilize the corporate tax rate to penalize companies that display major disparities in their annual productivity increase compared to their annual wage increases.

Here’s why this is so important: From 1948 to the mid-1970s, increases in U.S. productivity and wages rose in tandem. The gap that emerged four decades ago now has grown to stunning proportions, with enormous gains in profits and earnings largely untethered to rising worker productivity.

How big is that gap? According to one estimate, if the previous merit system, with wages and productivity closely linked, was in place today, every low- and middle-income worker would earn an additional $3,200 a year.

That kind of money could breathe new life into the economy. And provide a sigh of relief for America’s beleaguered workers.