The American economy and its tax system have been punishing the American worker for years and there's no end in sight.

I lived in Michigan from 1976 to 1988, during the collapse of the U.S. auto industry, when laid-off workers used sledge hammers to take out their frustrations on Toyotas. They were being told that their jobs were going overseas because they had priced themselves out of the market and unionization was the culprit.

I lived in Japan during 1980. The Japanese blamed the problems of the American car companies on low worker morale resulting from the gap between their pay and that of over-paid managers and executives.

When I returned to Japan at the end of the 1980s, affluence was everywhere, CEOs were beginning to make American-style salaries, and ordinary people and pundits were wringing their hands with anxiety, predicting that the "bubble economy" was about to burst. A few years later, it did.

In 1989, I moved to North Carolina where I witnessed and wrote about the closing of the South's oldest furniture factory - White Furniture Co. in Mebane. It was Michigan all over again. White's demise symbolized the end of the furniture and textile industry in North Carolina. Economists still pointed at the high wages of American workers, but this time they couldn't blame the unions. North Carolina is a so-called right-to-work state, meaning unions are very few and quite weak.

Conditions were grim at White. Wages and benefits were considerably lower than they would have been in Michigan, and yet White and other factories closed down, their business sent abroad.

The story is so common- place as to be a cliché. Another 3.3 million jobs are predicted to transfer offshore in the next decade. Who is to blame? Is this all really the fault of overpaid workers? I don't think so. Between 1979 (when Michigan auto workers were hammering Toyotas) and 1995 (when White was closing), the salary of the median American worker had actually dropped 4.6 percent, from $25,896 to $24,700.

But, during the same period the top 1 percent of U.S. families had an increase in income of 78 percent. The American wage gap between a typical CEO and a typical worker had grown from 40 times to 190 times. The differential is now over 500 times.

The gap grows every year, and now it is nourished by a changed taxation philosophy. Since the 1930s, America has had a tax structure designed to keep a strong middle class by distributing enormous wealth made at the top of society to public works that benefit all.

Now, with every tax cut, the rich-poor gap widens. Declining social services ensure that those at the bottom stay there. Most Americans don't understand this changing tax philosophy because the chunk taken from their own paychecks is at a historically high level. That is why we feel we are over-taxed. That's why the politicians' "No More Taxes!" is such a crowd-pleaser. But, in terms of actual revenue, middle-class payroll taxes are almost beside the point.

The largest federal revenue stream comes from corporate taxes and taxes on America's top 5 percent. Those are exactly the taxes being whacked. They are at their lowest level since the end of World War II, and the share paid by the rich is narrowing.

The result is a disaster for the middle and working classes. The lack of tax revenues means record national debt, states unable to pay their bills, impoverished public education, high unemployment, entrenched poverty, collapsing medical systems, a threatened Social Security system. The rich have multimillion-dollar rebates to buy private versions of all of these. As the poor get poorer, you don't have to pay them as much for personal services, the one sector of the working-class economy where there are still jobs.

Ordinary people are competing against one another in impossible situations in order that a very few can win monetary rewards. In the world of Reality TV, that's called "Survivor." Turn off the television and it's called "America."

Cathy N. Davidson, vice provost for interdisciplinary studies at Duke University, wrote the text for "Closing: The Life and Death of an American Factory," a book done with photographer Bill Bamberger.

Copyright © 2004, Newsday, Inc.

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