By Geoffrey Garrett
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The chances are vanishingly small that the Occupy Wall Street movement will realise its lofty dream of taking down Wall Street and Washington by bringing to the US the people power revolutions of the Arab Spring.
But something big is happening in the US. The nation’s economy is stagnant, its social compact is broken, and its politics is dysfunctional. No surprise that Occupy Wall Street on the left, just as the Tea Party two years ago on the right, is a shooting star movement motivated by the same just-say-no-to-the-establishment battle cry.
The irony, however, is that the measure of Occupy Wall Street’s success, like the Tea Party’s, will be how much it infiltrates traditional politics. And the tragedy is that the more successful it is, the less governable the US will become, and the less likely the country will face up to its demons.
Though their political views could not be further apart, the breeding ground for Occupy Wall Street and the Tea Party is the same. The quality of life for average Americans is getting worse and they see no real prospects of change. For a nation as inveterately optimistic as the US, this is a remarkable development. But it is rooted in sobering and staggering facts.
Median US household income rose in inflation-adjusted terms by more than 10 percent in the 1980s and 1990s, with much of the rise taking place in the second half of the 1990s. In the 2000s, real median household income in the US dropped by about 10 percent, with most of the decline since 2008.
The headline US unemployment rate was about 4 percent in Bill Clinton’s last year in office in 2000. It was 10 percent in Obama’s first year in the White House. The effective unemployment rate may well be over 15 percent. And unemployment is decreasingly a short term transition between jobs and more a grinding long term reality.
At the same time as so many Americans are hurting, the country’s high flyers are soaring. In 1980, the top 1 percent of income earners garnered 9 percent of national income. Today it is around 20 percent. In 1980, the average income of the top 1 percent was about 30 times that of the lowest 20 percent. Today it is more than 100 times.
American inequality has been rising for several decades, the product of globalization and the computer and Internet revolution. But average Americans accepted it in the 1980s and 1990s because their lives were getting better too. Today their lives are getting worse.
Government could enter the picture here to compensate the losers from turbo charged capitalism. But that isn’t possible in the US because Washington’s fiscal cupboard is bare.
The US is facing a ticking time bomb as the baby boomers retire and the government’s liabilities skyrocket. President of the Dallas Federal Reserve Richard Fisher has estimated the total bill at $100 trillion.
The combination of first fighting the war on terrorism and then battling the global financial crisis has dramatically increased budget deficits at a time the country can least afford it. Unless something changes, US public debt will roughly double over the 2010s to close at 90 percent of GDP.
Put it all together and it should be no surprise that Americans are mad as hell and looking for someone to blame. The Tea Party has been driving the Republicans’ just-say-no-to-Obama strategy for more than a year, ramming home the Reagan mantra that government is the problem, not the solution.
Now America’s left elite wants to make common cause with the protestors. New York Times columnist Paul Krugman and congressional leader Nancy Pelosi have voiced support for the protestors rallying cry that greed and excess on Wall Street is tearing apart the social fabric.
The partisan warfare the Tea Party inspired is morphing into class warfare as Democrats try to capitalise on the passion and energy of Occupy Wall Street among the young and the poor. This will only make it harder to get things done in Washington. And this can’t be good for anybody since ending Washington’s gridlock is essential to turning around the American economy and breathing life back into the global economy.
As Obama often says, the biggest nation building challenge he faces is at home. The success of Occupy Wall Street will probably increase the challenge, not reduce it.
The author is chief executive of the United States Studies Centre at the University of Sydney.