Who stole the American dream?

>>> that fight over the fiscal cliff in washington comes down to. the president and the democrats say the wealthy should pay a little more while the republicans say the wealthy already pay too much. let them keep their money and they'll create jobs for the rest of us they say. well, a little historic perspective shows why the republican argument is false. and veteran journalist hedrick smith harbors that perspective in his new book false. in the last 40 years, the middle class has been squeezed financially. and sidelined politically. the average worker's salary remained flat and retirement security has largely disappeared. but the pay for ceos has skyrocketed from 40 times the salary of the average company worker in 1980 to 4 times it by 2000 all made possible thanks to powerful corporate interests in washington which shifted the balance of power politically. hen rick smith joins us now. rick, thank you so much for coming in. i'm going to let you make your message without a lot of q & a. what is the kernel of how people have been squeezed? because they know they've been squeezed.

>> of everybody tells us the middle class has been squeezed because of globalization and technology, because of market forces , impersonal forces. when i dug into this and started to look back, what i found out what really happened when you were working for tip o'neill as speaker of the house , that was when there was a power shift . louis powell who was corporate attorney named to the supreme court by richard nixon actually wrote a memo and said, we're getting killed. business is getting killed politically by the environmental movement , by the labor movement , by the women's movement, by the consumer movement. ralph nader and those guys. he said, get to washington , take the high ground . and sure enough, literally within months, the business roundtable was formed, can national association of manufacturers move their head quarters to washington . there were 175 companies when powell wrote his memo that many lobbying offices in washington . several years later, there were 2,400. 50 thous people working for business trade. they stuffed the consumer movement. they got deregulation, they got tax cuts , all kinds of things. so the power shift tilted the policy towards business, towards the wealthy. that started in the late 70s late rally when you and i were there. starnlths you had what i call wedge economics in the economy. used to be that the prosperity, the growth of american productivity was shared. middle class had its share along with the owners, along with the shareholders. the productivity of the american workforce doubled from 1945 to 1975 .

>> i know a lot about this. there's gucci gulch for all the lobbyists tell us how to write tax policy . a lot of businesses draft the bills and draft them for the republicans. talk how that works. i don't think the public knows some of that.

>> they're doing exactly what you're saying. they started out by doing it. the 401(k), it was never intended to be a national retirement plan . it was stuck into the legislation by barbara conable, an upstate new york republican as a favor to xerox and kodak because they had their head offices in his home district . they wanted a tax shelter for retirement payments to executives. that's how it started. they wrote it. it was 401(k) because it's 401 provisions down in the tax code . it was so small nobody knew it was there. you guys didn't know it was there.

>> instead of having a solid pension with a guaranteed annuity coming to you, you have 401(k)s which have shrunk in many cases over the years.

>> what you got is hundreds of billions of dollars of expenditures are shifted from the corporate books into the pocketbooks and wallets of ordinary people . it's a disaster. the average 401(k) balance today is $18,000. the median 401(k) balance for people on the verge of retirement after 20 years in the 401(k), is only $85,000. the corporations saved enormous amounts of money and the people are having to spend a lot more money and not saving enough.

>> we have to have you back again and again. this is great stuff. a lot of our progressive viewers don't know the details. thank you so much. they know the squeeze is real. rick smith , the book is called "who spoel the american dream ." thanks for joining us. when we return, let me finish with whether president obama will reach for greatness in his second term. you're watching "hardball," the place for politics. t, dad,