The last-minute deal to end the “fiscal cliff” settles very little. Congressional Republicans agreed to a small increase in taxes on individuals making more than $400k, while Democrats were able to extend the protections of the social safety net, like unemployment benefits, for two more months. Come February, the American electorate will have to go through another round of this perverse game of chicken with the “debt ceiling” debate.
According to Talking Points Memo, “a key provision of the fiscal cliff deal only buys down the sequester for two months, meaning deep cuts to domestic and defense spending will take effect at the end of February, right when the debt limit will have to be increased.”
It’s easy to see that the deal doesn’t defuse the Republican strategy of preventing the normal functioning of government in order to exert leverage on state policy. Another battle is looming in which Republicans will have a stronger hand politically. Paul Krugman’s take is that Obama’s “evident desire to have a deal before hitting the essentially innocuous fiscal cliff bodes very badly for the confrontation looming in a few weeks over the debt ceiling.”
Had we gone over the cliff, taxes would have been restored to Clinton-era levels. But why should there be any popular objection to restoring taxes to the level everybody was paying in the 1990s? The reason is that legislators have masked the real decline in wages over the last 10 years by cutting taxes, and rising prices have squeezed the middle class to the point that a small tax increase would have a major effect on their ability to make ends meet.
Michael Hudson points out the deception behind the political rhetoric over taxes: “The emerging financial oligarchy seeks to shift taxes off banks and their major customers (real estate, natural resources and monopolies) onto labor. Given the need to win voter acquiescence, this aim is best achieved by rolling back everyone’s taxes. The easiest way to do this is to shrink government spending, headed by Social Security, Medicare and Medicaid. Yet these are the programs that enjoy the strongest voter support. This fact has inspired what may be called the Big Lie of our epoch: the pretense that governments can only create money to pay the financial sector, and that the beneficiaries of social programs should be entirely responsible for paying for Social Security, Medicare and Medicaid, not the wealthy. … The raison d’être for taxing the 99% for Social Security and Medicare is simply to avoid taxing wealth, by falling on low wage income at a much higher rate than that of the wealthy.”
Wages have fallen as capital has creamed off a greater proportion of the national income at labor’s expense. The key to employers’ ability to hold down wages is the decline of unions. They were able to organize effectively when the mass of Americans worked in factory jobs while the economy was expanding after World War 2. But unions have faced a war of attrition over the last 30 years as structural changes in the economy were accompanied by corporate-friendly legislative restrictions on their bargaining strength. These were political decisions that were aimed at destroying the gains of the New Deal.
Harold Meyerson notes in the Washington Post “how central the collapse of collective bargaining is to American workers’ inability to win themselves a raise. Yes, globalizing and mechanizing jobs has cut into the livelihoods of millions of U.S. workers, but that is far from the whole story. Roughly 100 million of the nation’s 143 million employed workers have jobs that can’t be shipped abroad, that aren’t in competition with steel workers in Sao Paolo or iPod assemblers in Shenzhen. Sales clerks, waiters, librarians and carpenters all utilize technology in their jobs, but not to the point that they’ve become dispensable. Yet while they can’t be dispensed with, neither can they bargain for a raise.”
Outsourcing undermined the unions’ base and this, while facilitated by new technology, resulted from decisions of the US government to open up the domestic economy to world trade. The consequence was a withdrawal of capital from direct manufacturing in the US in favor of the higher-profit areas of marketing and distribution. As manufacturing declined, corporations became increasingly financialized, facilitating the growth of monopolies.
Steve Fraser spells it out in TomDispatch: “Rates of U.S. investment in new plants, technology, and research and development began declining during the 1970s, a fall-off that only accelerated in the gilded 1980s. Manufacturing, which accounted for nearly 30% of the economy after the Second World War, had dropped to just over 10% by 2011. … The ascendancy of high finance didn’t just replace an industrial heartland in the process of being gutted; it initiated that gutting and then lived off it, particularly during its formative decades. The FIRE sector, that is, not only supplanted industry, but grew at its expense – and at the expense of the high wages it used to pay and the capital that used to flow into it.”
As well as being weakened by structural changes in the economy, unions have faced an ideological assault. As more and more workers found themselves on temporary assignment, without contracts or benefits, their resentment was leveraged electorally against organized labor by billionaire-funded campaigns aimed at dividing unionized employees from other workers.
Walmart is a model for this turn to absolute exploitation of workers. The company, according to In These Times writer David Moberg, “heavily influences standards for vast swaths of the American economy, from retail to logistics to manufacturing. Over the past few decades, Walmart’s competitive power—a combination of size, technology and cut-throat personnel policies—has played a role in dramatically reducing American retail workers’ average income and unionization level (from 8.6 percent in 1983 to 4.9 percent in 2011).” Walmart now pays less than what a worker needs to reproduce his or her labor-power, offloading the costs of healthcare, housing etc. onto the rest of society. It is a strategy that results in destroying a generation of workers – a form of destruction of capital – devaluing labor.
Low wages and opposition to unions are more than just a means of gaining market share. They are also a way of establishing power over the workforce. Labor historian Nelson Lichtenstein explains: “Wal-Mart’s hostility to a better-paid and healthier workforce is as much an issue of power as it is a question of prices and profits. High wages reduce turnover and awaken employee expectations, transforming the internal culture of the workplace. Decent wages lead to real career and the expectation of fair treatment over a lifetime of employment. That in turn might well lead to demands for a steady work shift, an equitable chance at promotion, retirement pay, and even the opportunity to make one’s voice heard in a collective fashion.” [Nelson Lichtenstein, The Retail Revolution, New York 2009:250]
In 2012, union struggles for a living wage challenged not only the business strategy of companies like Walmart, but also the political strategy of the plutocracy to weaken and destroy unions and dump responsibility for social welfare onto the individual. Moberg notes: “OUR Walmart joins a host of smaller campaigns by workers in other precarious and penurious industries, like logistics, fast food and domestic work. With enough density of membership, service-sector unions can raise standards in local, and ultimately national, markets. For example, in San Francisco and New York, where 90 percent of hotel housekeepers are unionized, average hotel housekeeper wages are $19 to $26 an hour, compared to a national average of $10.10.”
Across the country, low-waged workers in various industries are empowering themselves by fighting back. The Occupy movement’s achievement to raise consciousness of inequality, new approaches to union organizing, and outpourings of solidarity such as the support for victims of Hurricane Sandy, point the way forward for 2013.