Economist Joseph Stiglitz: Rent-Seeking
One Dollar, One Vote
According to Nobel laureate Joseph Stiglitz, the principle of “one man, one vote” has been replaced. The new equation, "one dollar, one vote" more accurately reflects our true values.
When dollars scream for attention in our convoluted system, power goes to the already fiscally almighty.
Stiglitz, a former chair of Bill Clinton's Council of Economic Advisors is currently a professor at Columbia University. He spoke at New York City’s New School last Wednesday, October 4. The title of his presentation, and the title of his new book, was The Price of Inequality: How Today’s Divided Society Endangers our Future.
There is no Big Trade-Off
Stiglitz was on very friendly turf at the New School--much of the ground that he covered during his one-hour presentation has been tamped down by other big thinkers. His new book, which grew out of an article he’d penned for Vanity Fair, is not a trail-blazer. It's a cornerstone, intended to displace Arthur Okun’s influential ‘Econ 101’ standard text, Equality and Efficiency: The Big Trade-Off.
Stiglitz claims that there is no trade off. There’s just a big plastic siphon that is running against gravity, sucking the economic lifeblood out of the foundational middle-class.
Stiglitz calls this valueless hand-to-hand economy “rent seeking-- and he claims it has come to dominate markets. People who have been successful in getting a larger share of the pie rather than increasing the size of the pie, are rent-seekers.
Credit card companies, for example, used predatory lending practices to take money from people on the bottom and middle and redeposit wealth where it is most at home: with the wealthy.
“Rent seeking” has allowed members of the 1% to pay 14% (or less) of their un-repatriated, non-offshore income in Federal taxes, when an American who earns $35,350 in year 2012 shells out 25% in Federal taxes.
Our bankruptcy laws give priority to derivatives: in this form of rent seeking, Stiglitz explains, victims and workers stand in line behind the financial sector. Rewarding bad risks with unearned profit is like giving candy to a nine-year old after he’s stuck pins in his kid sister’s toy. The system is so skewed that, even in bankruptcy, the average American, or (shudder) the parents of a dead college student, are forever liable for student loans.
All of these examples illustrate the migration of existing wealth, not innovation or job creation.
You Can't Take it With You--But Your Heirs Can Take it Tax-Free
Stiglitz, during his presentation at the New School, went into some detail regarding the federal estate tax, which, polls show, most Americans oppose. The federal estate tax comes into effect when the deceased’s accumulated wealth amounts to over $10 million. Stiglitz is particularly incensed that deferred capital gains can, on a step-up basis, go COMPLETELY UNTAXED. (I think most Americans would approve of an estate tax if it was exclusively for unearned income).
Economic Inequality is Bad...for the Economy
Stiglitz is not all doom and gloom. We have pulled ourselves back from extreme inequality during other times in our Nation’s history. He points to the Gilded Age and the Roaring Twenties, when infrastructure technology and education, much of it publicly funded, served as the foundation for America’s greatness for generations that followed.
This two-time Nobel laureate claims that the consequences of inequality can wind up being just as bad for the oppressors as for the oppressed. He’s got company. “The ‘Enlightened Rich Want to be Taxed,” according to the New York Times http://www.nytimes.com/2011/09/10/opinion/the-enlightened-rich-want-to-be-taxed.html?_r=0. Investments in quality education and open-bid public infrastructure can help to establish a solid bedrock for future generations.
The American Dream is not for sale, and it's not for rent. We need to revive the potential for everyone to succeed.
We need to hold the rent-seeking enablers accountable and invest in America for ourselves.