Washington Post

So how do we re-create the American middle class?

Making our loopy tax code more equitable appears to be off the agenda, what with Senate Republicans’ refusal Monday to allow a vote on a tax hike for millionaires. And even if the “Buffett Rule” were enacted, it would do nothing to alter the rocketing inequality in Americans’ pre-tax income. With the Southern wage for manufacturing — roughly $14 an hour — becoming the national norm, and with hiring more prevalent for low-wage restaurant and retail jobs than for positions in higher-paid industries, the incomes of most Americans will continue to stagnate, if not decline.

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Why is this recovery different from all other recoveries?

Many of the reasons are widely known: Rebounding from a financial crisis takes an excruciatingly long time; the huge decline in housing values has reduced Americans’ purchasing power; large corporations are making do with fewer employees — at least, in this country.

But what really sets the current recovery apart from all its predecessors is this: Almost three years after economic growth resumed, the real value of Americans’ paychecks is stubbornly still shrinking. According to Friday’s Bloomberg Economics Brief, “the pace of income gains is well below that of the past two jobless recoveries and real average hourly earnings continue to decline.”

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With Rick Santorum’s withdrawal from the Republican presidential race Tuesday, Mitt Romney has now effectively won his party’s nod to go up against President Obama in November. But winning the Republican nomination in 2012 has required Romney to move well to the right of any GOP presidential nominee since Barry Goldwater. The Arizona senator, of course, relished what he acknowledged was the extremism of his positions. Romney, by contrast, has been compelled to become an extremist by the Republican primary electorate.

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In 2008, Wall Street backed Barack Obama. Hedge fund operators, private equity investors and mega-bank executives gave his campaign twice the amount they contributed to John McCain. Many of the financial masters of the universe saw in Obama a guy much like themselves — self-made, very bright, assertive and validated by all the right academic credentials.

Today, Alec MacGillis reports in the New Republic, Wall Street has turned against Obama with a vengeance. Hedge fund operators have given Mitt Romney four times what they’ve given Obama, MacGillis writes — and that doesn’t count their contributions to “super PACs” backing Romney and other Republican candidates. Just as notable are their assessments of Obama, which rival those of Glenn Beck at his most paranoid.

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Occupy Wall Street is not known for the precision of its economic analysis, but new research on income distribution in the United States shows that the group’s sloganeering provides a stunningly accurate picture of the economy. In 2010, according to a study published this month by University of California economist Emmanuel Saez, 93 percent of income growth went to the wealthiest 1 percent of American households, while everyone else divvied up the 7 percent that was left over. Put another way: The most fundamental characteristic of the U.S. economy today is the divide between the 1 percent and the 99 percent.

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Even as many European nations recoil from the obligations of economic union (because neither borrowers nor lenders are very happy these days), a radical cross-border European politics is being born.

Ironically, the founding document of a genuinely pan-European politics isn’t one that unites the continent. To the contrary, the fiscal compact that German Chancellor Angela Merkel persuaded her European Union colleagues to embrace — with an assist from French President Nicolas Sarkozy — has given rise to bitter dissents both within and among European nations. The pact, which codifies fiscal constraints that will inflict years of economic stagnation, if not accelerated decline, on such debtor nations as Spain and Greece, has divided Europe into rival camps — the Keynesian leftists against the austerity rightists.

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