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Winner-Take-All Politics: How Washington Made the Rich Richer--and Turned Its Back on the Middle Class [Paperback]

Jacob S. Hacker , Paul Pierson
4.5 out of 5 stars  See all reviews (155 customer reviews)

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Editorial Reviews

From Publishers Weekly

Perhaps you haven't heard: over the last 30 years the middle class has shriveled while the wealthy enjoy the skewed economics of the gilded age. The authors do their best to blow the dust off of their subject by taking a close look at this political "30 year war" and carefully parsing its roots. Corporate coalitions, lobbying, tax policies geared to the wealthy, and the extreme use of the "rule of 60" filibuster have tipped the scales and ultimately heaped blame onto the majority party. While Government can affect the distribution of wealth, it doesn't catch up with economic realities in time, and a changing Washington blocks attempts at reform. Where moderates used to rule the swing vote, now radical conservatives have taken hold. Unions are powerless, public interest groups prevail, and Christian conservatives drag Republicans ever right. Meanwhile, voters remain poorly informed. Though they never shed the sheen of "old news," Hacker and Pierson end on a note of optimism: the middle class can take the majority again with a "politics of renewal" shepherded in on a wave of "mass engagement" and "elite leadership."
(c) Copyright PWxyz, LLC. All rights reserved. --This text refers to the Hardcover edition.

From Booklist

How did the widening gap between haves and have-nots—even worse, the haves and have-mores—come about? In the past 30 years, the top 1 percent have enjoyed 36 percent of all the income growth generated in the U.S. economy. Treating the growing socioeconomic gap like a whodunit, Hacker and Pierson painstakingly detail the gap between the superrich and everyone else. They paint a portrait of a nation that has fallen behind other developed nations in the widening income gap among its citizens. Worse, the wealth gap cannot be explained away by a lack of education or skills. Even among the well educated, a chasm has developed between the middle class and the wealthy. Whodunit? The U.S. government, which details changes in taxation and public policy, particularly regarding the financial markets, which have favored the wealthy at the expense of others over the last 30 years. Finally, they consider the long-term implications of this troubling trend and offer some encouraging signs—health care and financial reform, however anemic—and a growing discontent with the status quo. --Vanessa Bush --This text refers to the Hardcover edition.

Review

Winner Take All Politics is a powerfully argued book about a critically important subject, and I guarantee you it will make you think.”—Fareed Zakaria, GPN (CNN show)

“The Sherlock Holmes and Dr. Watson of political science, Jacob Hacker of Yale and Paul Pierson of Berkeley, about how Washington served the rich in the last 30 years and turned its back on the middle class. They’re marvelous…”—Bill Moyers

"The clearest explanation yet of the forces that converged over the past three decades or so to undermine the economic well-being of ordinary Americans."–Bob Herbert, The New York Times

"This book is a wake-up call. Read it and wake up."–Robert Solow, winner of the Nobel Memorial Prize for Economics in 1987

"Must reading for anyone who wants to understand how Washington stopped working for the middle class."–Elizabeth Warren, Assistant to the President and Special Advisor to the Secretary of the Treasury on the Consumer Financial Protection Bureau

“Important. . . . The collapse of the American middle class and the huge transfer of wealth to the already wealthy is the biggest domestic story of our time.... The good news reported by Hacker and Pierson is that American wealth disparitiesare not the residue of globalization or technology or anything else beyond our control. There's nothing inevitable about them. They're the result of politics and policies, which tilted toward the rich beginning in the 1970s and can, with enough effort, be tilted back over time (emphasis added for impatient liberals)” —Jonathan Alter, The New York Times Book Review

“Engrossing. . . . Hacker and Pierson . . . deliver the goods. . . . Their description of the organizational dynamics that have tilted economic policymaking in favor of the wealthy is convincing.”—Justin Fox, Harvard Business Review

"How can hedge-fund managers who are pulling down billions sometimes pay a lower tax-rate than do their secretaries?' ask the political scientists Jacob S. Hacker (of Yale) and Paul Pierson (University of California, Berkeley) in their deservedly lauded new book, Winner-Take-All Politics. If you want to cry real tears about the American dream—as opposed to the self-canonizing tears of John Boehner—read this book and weep. The authors' answer to that question and others amount to a devastating indictment of both parties.... The book deflates much of the conventional wisdom."—Frank Rich, The New York Times

“How the U.S. economic system has also moved ‘off center’ toward an extreme concentration of wealth, and how progressive efforts to reverse that trend have run aground. . . . A very valuable book.”—Ed Kilgore, Washington Monthly

“Hacker and Pierson make a compelling case. If Marie Antoinette were alive, she might aver of today’s great economically challenged masses, ‘Let them nibble on passbook-savings-account interest’—if they can manage to save anything, that is.”—David Holahan, The Christian Science Monitor

"A must-read book.... It broke down what was at stake in 2010 and will be at stake in 2012 better than anything I've read.... Hacker and Pierson show how politics has become 'organized combat.'"—Joan Walsh, Salon

“Buy a copy of Hacker and Pierson’s book and read it. Seriously. . . . This is the most complete and sustained explanation I’ve ever read of why, over the past 30 years, America has gone the direction it has even while most other countries haven’t. . . . For me, it was a 300-page ‘Aha!’ moment.”—Kevin Drum, Mother Jones

"The worst social change in America during my lifetime has been its shift from the land of middle-class opportunity to the land of super-rich privilege. The economic polarization of America is a familiar problem, but Jacob Hacker and Paul Pierson approach it in an original way, using detective-story procedure to identify an unsuspected culprit—one that has little to do with 'globalization' or 'technological revolution' or China or the like. Their case is convincing, and it builds to a recommendation of how Americans could organize to save their country's promise. I hope people read the book and follow its advice."—James Fallows, National Correspondent, The Atlantic

“This is a transformative book. It’s the best book on American politics that I’ve read since Before the Storm. . . If it has the impact it deserves, it will transform American public arguments about politics and policymaking.”—Henry Farrell, Crookedtimber.org

“Jacob Hacker and Paul Pierson combine enormous learning about how our political system actually works with a spritely facility for getting their ideas across—rare gifts in American political debate. Winner-Take-All Politics carries forward the argument from their path-breaking book Off-Center. It explains why the 2006 and 2008 elections only began a reform process that still has a ways to go. Hacker and Pierson have always stayed ahead of the conventional arguments and Winner-Take-All Politics keeps them in the lead.”—E.J. Dionne, Jr., author of Why Americans Hate Politics and Souled Out

“Hacker and Pierson deftly pose and solve a political mystery: How could our democracy have turned away from a politics of broadly shared prosperity that served most citizens? Clue: take a close look at the elite capture of the Democratic Party. Winner-Take-All Politics—stylishly written and well documented with evidence—is a must-read for understanding the great political puzzle of our time.”—Robert Kuttner, author of A Presidency in Peril and co-editor of The American Prospect

“Jacob Hacker and Paul Pierson brilliantly break the intellectual logjam over the causes of runaway inequality. Their findings put responsibility and control back into the hands of officeholders, elected and appointed. Winner-Take-All Politics is crucial reading for all those engaged in American politics.”—Thomas B. Edsall, political editor, Huffington Post, and correspondent, The New Republic

About the Author

Jacob S. Hacker is the Stanley B. Resor Professor of Political Science at Yale University. A Fellow at the New America Foundation in Washington, D.C., he is the author of The Great Risk Shift: The New Economic Insecurity and the Decline of the American Dream (a New York Times 'editors' choice), The Divided Welfare State, and, with Paul Pierson, of Off Center: The Republican Revolution and the Erosion of American Democracy. He has appeared recently on The NewsHour, MSNBC, All Things Considered, and Marketplace. He lives in New Haven, CT.

Paul Pierson is Professor of Political Science and holder of the Avice Saint Chair of Public Policy at the University of California at Berkeley. He is the author of Politics in Time, Dismantling the Welfare State?, and (with Jacob S. Hacker) Off Center. His commentary has recently appeared in The New York Times Magazine, The Washington Post, and The New Republic. He lives in Berkeley, CA.

Excerpt. © Reprinted by permission. All rights reserved.

Chapter 1

The Winner-Take-All Economy


Americans like crime dramas, and for good reasons. There is an exciting discovery that immediately creates mystery. The scene has clues to pore over (increasingly, with the latest in forensic technology). Suspects are found and interrogated, their motives questioned, their alibis probed. And if the crime drama is worth its salt, there are surprises along the way—unexpected twists and turns that hopefully lead to a satisfying explanation of the once-mysterious felony.

This book starts with a mystery every bit as puzzling as that of the typical crime drama, and far more important for the lives of Americans: Why, after a generation following World War II in which prosperity was broadly distributed up and down the income ladder, did the gains of economic growth start going mostly to those at the top? Why has the economy become more risky and unreliable for most Americans even as it has created vast riches for the well-positioned and well-off? The mystery is dramatic. The scene is strewn with clues. And yet this mystery has continued to bedevil some of the nation’s finest economic detectives.

It’s not as if the post-1970s transformation of our economy has gone unnoticed, of course: Even before the economic crisis that shook the nation in 2008, scores of economists and experts in allied fields, like sociology and political science, were creatively crunching the numbers and fiercely debating their meaning. Yet again and again, they have found themselves at dead ends or have missed crucial evidence. After countless arrests and interrogations, the demise of broad-based prosperity remains a frustratingly open case, unresolved even as the list of victims grows longer.

All this, we are convinced, is because a crucial suspect has largely escaped careful scrutiny: American politics. Understandably, investigators seeking to explain a set of economic events have sought out economic suspects. But the economic suspects, for the most part, have strong alibis. They were not around at the right time. Or they were in a lot of countries, doing just the same thing that they did in the United States, but without creating an American-style winner-take-all economy.

This chapter is not the place to pin the case on American politics—or spell out exactly how American politics did it. These are tasks for the rest of this book. But we will show what a convincing solution has to look like and introduce the clues that lead us to zero in on American politics as our prime suspect. In the next chapter, we will start laying out what we mean when we say, “American politics did it.” For, as will become clear, resolving our first mystery only raises a deeper one: How, in a political system built on the ideal of political equality and in which middle-class voters are thought to have tremendous sway, has democratic politics contributed so mightily to the shift toward winner-take-all?

Investigating the Scene

As in any investigation, we cannot find the suspects unless we know more or less what happened. A body dead for twenty-four hours yields a very different set of hunches than one dead for twenty-four years. Likewise, we need to be able to characterize the winner-take-all economy in clear, simple, and empirically verifiable terms to rule certain explanations out and others in. Unfortunately, much of the discussion of our current economic state of affairs has lacked such clarity.

Indeed, most of the economic investigators have actually been looking in the wrong place. Fixated on the widening gap between skilled and unskilled workers, they have divided the economic world into two large groups: the “haves” with college or advanced degrees; the “have-nots” without them. The clues suggest, however, that the real mystery is the runaway incomes and assets of the “have-it-alls”—those on the very highest rungs of the economic ladder. These fortunate few are, in general, no better educated or obviously more skilled than those on the rungs just below, who have experienced little or none of these meteoric gains.

The mystery, further, is not just why the have-it-alls have more and more. It is also how they have managed to restructure the economy to shift the risks of their new economic playground downward, saddling Americans with greater debt, tearing new holes in the safety net, and imposing broad financial risks on Americans as workers, investors, and taxpayers. The rising rewards at the top, as startling and important as they are, are only a symptom of a broader transformation of the American economy. The deeper mystery is how our economy stopped working to provide security and prosperity for the broad middle class. The deeper mystery, the mystery that has yet to be systematically outlined or unraveled, is the rise of the winner-take-all economy.

A big reason for the continuing confusion is that the largest body of evidence on which economic investigators have traditionally relied fails to capture the crucial facts. Most of those who have asked how the poor, middle class, and rich have fared have examined national surveys of income, such as the Census Bureau’s widely used Current Population Survey—the basis for those annual summaries of income and poverty trends that appear in the news late each summer. These surveys, however, have a serious problem: They do not reach many rich people and, even when they do, do not usually show their exact incomes. (Instead, they cap the maximum amount disclosed, a practice known as top coding.) As a result, most investigators are examining the winner-take-all economy without looking at the winners at all. It is as if Lifestyles of the Rich and Famous took you on an exciting tour of the financial life of a couple making $125,000 a year (“Look: their own washer and dryer!”).

Enter two young economists who have turned the investigation upside down: Thomas Piketty and Emmanuel Saez. They are a transcontinental team—Piketty is now based at the Paris School of Economics, while Saez is at the University of California, Berkeley (both are natives of France). In 2009, at age thirty-six, Saez was awarded the John Bates Clark Medal for the economist younger than forty making the greatest contribution to the discipline. The medal was, in large part, for pathbreaking work that he and Piketty have done using income tax statistics to paint a new and revealing portrait of the distribution of economic rewards in the United States and other rich nations.1

Piketty and Saez’s approach is simple but revolutionary. Rather than talking to witnesses, the most important of whom (the rich) cannot be easily found, they scour the scene itself. More precisely, Piketty and Saez tap into a source of data that is particularly good at revealing what the have-it-alls actually have: namely, income reported when paying taxes. Information that taxpayers provide about their wages, salaries, capital gains, and other income may contain errors—and sometimes deliberate errors. But tax forms require careful documentation that income surveys don’t, and taxpayers have strong legal inducements to get the numbers right. More important, the one group that the tax code generally singles out for special scrutiny is the rich, the very people whom income surveys tend to miss. To be sure, the tax data are not without flaws, and Piketty and Saez assiduously try to correct them (for example, they adjust the results to account for the fact that some people don’t file tax returns).1 But they are enormously better than survey results in capturing the full distribution of economic rewards.

And what the Piketty and Saez evidence uniquely shows is just how sharply our economy has tilted toward winner-take-all. Most of the gains of economic growth since the 1970s have gone precisely to those that the commonly used surveys miss—not just the top 10 percent, but especially the top 1 percent, and especially the highest reaches of the top 1 percent.

Three Big Clues

Compared with the standard surveys that portray the rich as earning upper-middle-class salaries, Piketty and Saez’s data are like DNA evidence in a case previously investigated using only eyewitness accounts. As it turns out, the DNA evidence reveals three essential clues that were previously neglected.

Clue #1: Hyperconcentration of Income

The first clue is that the gains of the winner-take-all economy, befitting its name, have been extraordinarily concentrated. Though economic gaps have grown across the board, the big action is at the top, especially the very top.

To grasp this point, consider an alternate reality in which income grows at the same pace for all groups in society. In this scenario, the rich get richer at the same rate as everyone else, so the share of national income earned by the rich stays constant. We might call this imaginary country Broadland—a counterfactual parallel to the real world of runaway gains at the top that the writer Robert Frank has evocatively termed “Richistan.”2

Broadland would not be some kind of egalitarian fantasy. It would simply be a country where economic growth was making the income distribution neither more equal nor less. It would, in fact, be pretty close to the situation that existed from the end of World War II until the early 1970s, a period in which incomes actually grew at a slightly faster rate at the bottom and middle of the economic distribution than at the top.

But Broadland is not the world of the past generation. Instead, the share of income earned by the top 1 percent has increased from around 8 percent in 1974 to more than 18 percent in 2007 (the last year covered by the data)—a more than twofold increase. If you include capital gains like investment and dividend income, the share of the top 1 percent has gone from just over 9 percent to 23.5 percent. The only time since 1913 (the first year of th... --This text refers to the Hardcover edition.
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