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Monday, June 16, 2014 12:59 AM


Time Lapse Image of Growing US Political Polarization; Root Cause of the Shrinking Middle Class




The above graph is part of a PEW research study on Political Polarization in the American Public.

In 2004, only about one-in-ten Americans were uniformly liberal or conservative across most values. Today, the share who are ideologically consistent has doubled: 21% express either consistently liberal or conservative opinions across a range of issues – the size and scope of government, the environment, foreign policy and many others. Looking at 10 political values questions tracked since 1994, more Democrats now give uniformly liberal responses, and more Republicans give uniformly conservative responses than at any point in the last 20 years.

To be sure, those with across-the-board liberal or conservative views remain in the minority; most Americans continue to express at least some mix of liberal and conservative attitudes. Yet those who express ideologically consistent views have disproportionate influence on the political process: They are more likely than those with mixed views to vote regularly and far more likely to donate to political campaigns and contact elected officials.

As Partisans Move Further Apart, the Middle Shrinks

In 2012, the Pew Research Center updated its 25-year study of the public’s political values, finding that the partisan gap in opinions on more than 40 separate political values had nearly doubled over the previous quarter century. The new study investigates whether there is greater ideological consistency than in the past; that is, whether more people now have straight-line liberal or conservative attitudes across a range of issues, from homosexuality and immigration to foreign policy, the environment, economic policy and the role of government.



Is Polarization Asymmetrical?

The ideological consolidation nationwide has happened on both the left and the right of the political spectrum, but the long - term shift among Democrats stands out as particularly noteworthy. The share of Democrats who are liberal on all or most value dimensions has nearly doubled from just 30% in 1994 to 56% today. The share who are consistently liberal has quadrupled from just 5% to 23% over the past 20 years. In absolute terms, the ideological shift among Republicans has been more modest, in 1994, 45% of Republicans were right-of-center, with 13% consistently conservative. Those figures are up to 53% and 20% today.

Polarization Among Elected Officials

As many congressional scholars have documented, Republicans and Democrats on Capitol Hill are now further apart from one another than at any point in modern history, and that rising polarization among elected officials is asymmetrical, with much of the widening gap between the two parties attributable to a rightward shift among Republicans. As a result, using a widely accepted metric of ideological positioning, there is now no overlap between the two parties; in the last full session of Congress (the 112th Congress, which ran from 2011-12), every Republican senator and representative was more conservative than the most conservative Democrat (or, putting it another way, every Democrat was more liberal than the most liberal Republican).

But this was not always the case. Forty years ago, in the 93rd Congress (1973-74), fully 240 representatives and 29 senators were in between the most liberal Republican and most conservative Democrat in their respective chambers. Twenty years ago (the 103rd Congress from 1993-94) had nine representatives and three senators in between the most liberal Republican and most conservative Democrat in their respective chambers. Today, there is no overlap.
There is much more in the 121 page PDF including discussion of attitudes regarding Gun Control, the NSA, Health Care, and Social Security.

Shrinking Middle Class

Rick Newman writing for the Daily Ticker says Empty Wallets Explain New Levels of Partisan Hatred.
A new study by Pew Research verifies much we already know about political extremism in America: It’s getting worse and interfering with social and economic progress. The big question is: Why?

Pew doesn’t address that question, but here’s a plausible answer: Voters are becoming angrier because living standards are falling and the middle class is shriveling. Prosperity breeds comity, but when it gets harder to get ahead, the natural inclination is for the losers to look for somebody to blame and the winners to feel more threatened. That’s been going on for nearly 30 years.

Income inequality began to worsen in the United States starting around the early 1980s.

Many voters don’t need to be told that the middle class is under stress, yet it’s increasingly apparent that political policies may have little to do with it. A recent study by economists at the Federal Reserve Bank of Dallas found that middle-class jobs are, in fact, disappearing, as many workers can attest. Yet the primary cause, they found, was technological change, with computers, robots and other gizmos increasingly replacing human workers in a lot of routine jobs that can be done by machines. The offshoring of jobs to lower-cost countries was also a factor, but not as big a one as some people may think.
Role of Political Parties

Newman states "it’s increasingly apparent that political policies may have little to do with [middle class stress]." I say that's nonsense.

We wasted $2 trillion in Iraq and more in Afghanistan fighting wars that did not need to be fought. That was for the direct benefit of those associated with the war machine.

Politicians caved into public labor unions hand over fist, time and time again. Wage and benefit disparity between private sector workers and public workers has never been wider than it is now.

Student loan programs made debt slaves out of kids while dramatically increasing the cost of education.

Countless "affordable home" programs and subsidies drove up the price of homes.

Democrats and republicans alike passed programs to bail out Wall Street at the expense of Main Street.

Role of the Fed

The self-serving Fed report Middle-Skill Jobs Lost in U.S. Labor Market Polarization blames technology and robots.

While technology changes and creative destruction are a part of the lost jobs picture, the Fed has had a major role in income disparity and polarization.
 
The Fed fostered bubble after bubble, with increasing amplitude each time, then pressed for bank bailouts when the banks got into trouble.

Artificially low interest rates benefit those with first access to money (the banks and the already wealthy), at the expense of savers and those on fixed income.

The Fed wants to force up prices but wages did not keep up. Is that the Fed's fault or the fault of corporations? I suggest the former. After all, it's not how much one makes that matters most, it's how far the money goes.

Moreover, the Fed's dollar debasement policy and artificially low interest rates makes it easy for corporations to invest in hardware and software robots to replace labor.

Politically, Obamacare gave businesses further reasons to replace workers where they could.

Closing the Gold Window

The roots of this crisis go back to Nixon Shock, "a series of economic measures taken by United States President Richard Nixon in 1971 including unilaterally canceling the direct convertibility of the United States dollar to gold. It helped end the existing Bretton Woods system of international financial exchange, ushering in the era of freely floating currencies that remains to the present day."

Please read the Nixon Shock link for the full story.

The short version is that the end of gold convertibility let countries run trade deficits and fiscal deficits as big as they wanted. Closing gold convertibility also let central banks print as much money as they wanted.

Fractional reserve lending, loose monetary policy, increasingly large budget deficits over time, and Congressional support for numerous wars without having to raise taxes to pay for them all go hand in hand.

Is it any wonder that deficits soared, asset bubbles formed, and income disparity rose?

Instead of  addressing the real cause of the fiscal crisis and the shrinking middle class, liberals blame corporations and the Fed blames robots.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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