Unemployed workers march in Trenton, New Jersey, 1936.

Greed wins as labor loses leverage: A lesson from Depression history echoes in D.C. today

All of this has happened before: Economic desperation, a paralyzed legislature and a people's uprising



Bob Hennelly
August 10, 2020 9:00AM (UTC)

This article was originally published by InsiderNJ. Used by permission.

Last week ended with the U.S. Congress still locked in dysfunction over how best to address the rapid deterioration of our national circumstances.

As our federal government's paralysis continues, state government in my home state of New Jersey borrowed almost $10 billion to tide it over.

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Across the river, Gov. Andrew Cuomo of New York resisted calls to close his multi-billion-dollar budget gap by raising taxes on the wealthy, for fear they would opt to flee to another state.

Even leading Democrats like Cuomo are concerned about the care, feeding and preservation of his wealthiest denizens, worried that higher taxes for them during this existential crisis would prompt them to abandon the Empire State.

American pyramid

For decades now, as the marginal tax rate for high-end earners dropped from 90 percent during Dwight Eisenhower's tenure, great wealth has been on a roll, pressing it down to 37 percent. Wealth preservation has become such a national priority that when Rep. Alexandria Ocasio-Cortez, D-N.Y., suggested raising that top rate to 70 percent, the establishment howled that was far too radical.

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With the capture of our politics by the corporations and the country's richest, this approach of bending over to serve them has resulted in the amassing of massive government debt, which generates bonds — which themselves are purchased sold and speculated upon by the very folks at the top of our pyramid.

This has prompted state governments to embrace gambling as a source of revenue despite the destruction it brings to so many families in the most marginal of circumstances.

Meanwhile, in the midst of this once-in-a-century pandemic, a killer virus is proliferating along our socioeconomic fault lines, at the base of this weighty pyramid, exacting the heaviest toll on the poor and the essential workforce.

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Here in New Jersey, according to data from the Department of Labor the last week in July saw 28,063 new unemployment claims, bringing the total number of workers sidelined by the pandemic to 1.44 million, roughly 25 percent of our state's workforce.

At its worst, during the Great Recession of 2008-9, the state's jobless rate got as high as 9.8 percent.

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By comparison, over the arc of the several years of the Great Depression of the 1930s, joblessness in New Jersey ranged between 25 to 33 percent, with African-American unemployment as high as 50 percent.

Recovery stumbles

According to the July national job numbers, the initial rebound that came after the economy's COVID-19 meltdown has already lost steam as dozens of states reported increased infection and mortality rates.

In June, employers made 4.8 million new hires, after having laid off tens of millions earlier in the year. But in July, the U.S. Bureau of Labor Statistics reported only 1.8 million had been added. CNN reported that uptick was fueled disproportionately by lower-paying part-time jobs.

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A week or so back, the Commerce Department announced that in the second quarter the nation's GDP shrunk at an annualized rate of 32.9 percent, the most severe contraction in the 73-year history of such records.

Yet, as the bad news has piled up, unemployment benefits expired and evictions loomed for millions, Congress remained deadlocked, incapable of rising to the occasion.

It's understandable, in a sense. So many Washington politicians are insulated by wealth and privilege from the daily experience of the swelling ranks of Americans struggling day to day amid a killer pandemic which hits the poorest and people of color the hardest.

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Back in 2018, Quartz examined the personal financial disclosure filings for all members of Congress and found that the "typical" member was "12 times richer than the typical American household."

That same analysis found that "unlike the typical household lawmakers were relatively unscathed by the most recent recession," with the average member of Congress continuing to get richer while "the typical American household saw their wealth decline, dented by the 2008-09 financial decline."

That eye-opening analysis came right after Congress passed the $2 trillion Trump/McConnell Tax Cut and Jobs Act, which in its first year bestowed 50 percent of the tax cuts on the top 5 percent of income earners, according to a study by the Economic Policy Institute and the Center for Popular Democracy.

And, while the "tax benefits to middle or low-income individuals are modest and will expire in 2025 … the enormous tax breaks for corporations are permanent. By 2027, after the individual provisions expire, the top 1 percent of households alone will see 83 percent of the benefits of the TCJA."

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And post-pandemic, the ratio between the wealth of Congress and our president is surely even more grotesquely skewed.

An analysis from the Americans for Tax Fairness (ATF) and the Institute for Policy Studies Program on Inequality (IPS) documented that in the span of just three months during the pandemic, "the U.S. added 29 more billionaires while 45.5 million filed for unemployment."

Now tens of American families hang over the abyss of a pandemic while some Republicans suggest that the $600-a-week supplementary unemployment benefit they allowed to lapse was overly generous.

With long lines for food pantries and COVID testing, the nation that fancied itself the planet's wealthiest is awash in disease and food insecurity. We are living in a dystopia that's a cross between "The Hunger Games" and "The Apprentice."

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This has all been a half-century in the making. This pandemic caught us at a time of grotesque wealth concentration and income disparity, which was the direct consequence of a bipartisan effort over decades to advance the interests of multinational corporations over those of America's working families.

Between the hundreds of millions in campaign contributions and the revolving-door incentives that reward "public service" with lobbying work, the fix was in.

Tough all over

U.S. tax policy has long provided incentives for U.S.-based multinationals to shift their operations offshore and even to shift their profits to the kinds of tax havens that are always trying to outdo each other to attract capital.

"This is the perfect time to highlight the role of global tax," said James Henry, an attorney and senior advisor to the Tax Justice Network, which tracks international tax avoidance trends. "We now have public budgets on a worldwide basis under extreme fiscal stress, due to the loss of revenue and with governments at all levels facing cruel decisions of making cuts in the midst of a pandemic."

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In 2005, the Tax Justice Network estimated that $11.5 trillion was held offshore by the world's wealthiest individuals. A decade later, the international advocacy group published an estimate that the offshore stash ranged from $21 to $32 trillion.

After World War II, as multinational capital became "king of the world," labor was losing its luster as corporations raced around the planet to play one nation's workforce off another.

The great uncoupling

By the 1970s, the wages American workers earned did not keep pace with our productivity. Even as women entered the workforce in ever greater numbers, American families kept falling further behind as U.S. corporations became multinational behemoths. With wages flat, Americans took on more and more debt. As the power of capital consolidated its grip on our political system from the Beltway to State Street, labor unions withered.

Fifty years ago, one out of three workers was in a union.In 1981, President Ronald Reagan's mass firing of striking air traffic controllers was a body blow to the movement. By 1983, only one in five workers was represented. Today, it is just one in 10 and still on the decline.

"Where labor is concerned, recent decades strongly resemble the run-up to the Great Depression," wrote the New Yorker's Caleb Crain:

Both periods were marked by extreme concentrations of personal wealth and corporate power. In both, the value created by workers decoupled from the pay they received: during the nineteen-twenties, productivity grew forty-three per cent while wages stagnated; between 1973 and 2016, productivity grew six times faster than compensation.

And unions were in decline: between 1920 and 1930, the proportion of union members in the labor force dropped from 12.2 per cent to 7.5 per cent, and, between 1954 and 2018, it fell from thirty-five per cent to 10.5 per cent.

At the outset of the pandemic much was made of the "essential workforce," who were hailed as heroes. But as the weeks have churned into months it appears these workers have lost their leverage.

Union supporters in Congress have not been able to get enough colleagues to sign on to the COVID-19 hazard pay provisions, even as essential workers in industries like meat processing as well as health care providers and first responders are getting sick from the virus and dying, all while putting their families at risk.

Similarly, there's real resistance from Republicans in Congress to backstop local, county and state governments that find themselves in fiscal free-fall. More than a million public workers have already been laid off in the midst of a nearly unprecedented public health crisis.

Gravity wins

Once these kinds of structural dominoes start falling, gravity takes over. There's a synergy to it. With the federal government's refusal to launch a coordinated national public health response compounded by its abdication of its role as fiscal guarantor, the states, counties and local governments will all bear the burden of Washington's neglect.

New Jersey's Great Depression timeline remains instructive.

Just two years after the 1929 stock market crash, "confronted with sharply reduced revenue," the state government cut its budget from $34.5 million in 1931 to $19.7 million in 1933, according to the New Jersey Almanac.

The collapse of Trenton's tax revenues was accompanied by a precipitous decline in county and local property tax revenues as real estate values collapsed. Some local governments had to issue scrip — promissory notes that committed the municipality to actual cash payment at some prescribed future date.

Occupy Trenton 

At one point in 1936, the state was close to running out of money to provide the most basic sustenance for more than 100,000 families on relief.

Like Washington today, the New Jersey capital was hopelessly deadlocked on what to do, even as the state's population's situation continued to deteriorate.

According to a digest of Daily Record news accounts collected by the Morris County Library, covering the action in Trenton through March in April of 1936, the legislature was stuck. It couldn't decide if it wanted to divert money from highway accounts, levy a "luxury tax" on amusements, soft drinks, cosmetics and cigarettes or just dump administration of the program on the local governments:

All day and all night and into the early hours of yesterday morning they sat, flanked by State police, in belief their presence would be pressure enough upon the legislators to bring about relief measures, while Republicans caucused and caucused until worn down to the breaking point. One Assemblyman keyed to the limit of sane endurance broke into song with "Home, Sweet Home,'"another emerged from the caucus room, tears streaming down his cheeks, and sat exhausted in his seat in the assembly chamber. "My God, do they know they are dealing with human souls?" cried a woman in the gallery. "Have they ever experienced relief? Do they know what it means to starve?"

As the political stalemate continued, the AP dispatches carried accounts of thousands of unemployed workers converging on Trenton.

TRENTON, (AP) — Powell Johnson, secretary of the Workers' Alliance, whose members have held possession of the New Jersey Assembly chamber night and day since Tuesday afternoon, said today the group would surrender the chamber when the lawmakers return to their desks tonight… Several thousand of the unemployed were expected to come to Trenton from various sections of the State to take part in a State House demonstration on behalf of the unemployed.

For going on a week "a hundred members of the Workers' Alliance" spent the "night sleeping in the Assemblymen's swivel chairs" subsisting "on coffee, bread, cold meats and macaroni donated by Trenton merchants and friends of the group."

The Daily Record reported that at a Trenton prayer service in support of the takeover by the unemployed, the Rev. Robert Smith of Grace Episcopal Church told the "shabby men and women to 'keep up the fight,' and invoked the deity to 'break down all smugness and self-complacency and lead all men to be more indignant of injustice, more indignant of oppression and deprivation.'"

That same night, as the occupation continued, "spectators in white collars and fur coats watched the good-natured jobless poke fun at the Assemblymen in their sixth 'evening session' of a mock legislative meeting. They adopted a resolution 'appropriating $1,000 to permit Governor Harold G. Hoffman and Mayor Frank Hague of Jersey City to go to Alaska and survey the Alaska salmon, its life, loves and tax problems, so the New Jersey Legislature will be free to do its duty without outside influence."


Bob Hennelly

Bob Hennelly has written and reported for the Village Voice, Pacifica Radio, WNYC, CBS MoneyWatch and other outlets. He is now a reporter for the Chief-Leader, covering public unions and the civil service in New York City. Follow him on Twitter: @stucknation

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Commentary Coronavirus Economy Great Depression Insider Nj New Jersey Pandemic Recession

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