- Politics and Social Issues
Inequality of Income and Wealth Continues to Grow
Growing Inequality of Income and Wealth is Undermining Many Americans' Faith in Our Democratic, Free Enterprise System
The lingering deep recession combined with a marked growth in inequality of income and wealth in this country over the past thirty years or so and practices perceived as unethical or contrary to the public interest by Wall Street banks, health insurance companies, pharmaceutical companies and oil, coal and utility companies is undermining the faith of many Americans in our democratic, free enterprise system. This is reflected both in the Tea Party and the Occupy Wall Street movements.
Compensation of corporate CEOs has risen from 25 to 250 times that of the average worker. Tax rates on high income Americans and corporations have decreased, and loopholes have proliferated. Ordinary, garden variety CEOs who worked their way up in corporate bureaucracies without ever having contributed a new idea pay themselves as if they were Henry Ford, Bill Gates or Steve Jobs. They hire consultants to justify huge pay for performance compensation packages and generous lifetime perks. And when performance falters some cook the books or re-price their stock options. Greed rules.
The failure to regulate the banking industry allowed Goldman Sachs, CitiBank, Bank of America and other giant Wall Street banks as well as Fannie Mae and Freddie Mac to pursue risky, dishonest practices which contributed to our current worldwide recession. They were bailed out by the government to prevent a complete meltdown. Most have returned to profitability and are now lobbying to undermine government regulations designed to prevent another financial catastrophe.
The U.S. Supreme Court decision in Citizens United, possibly the worst decision since Dred Scott or Plessy v. Ferguson, has compounded the situation by allowing unlimited anonymous corporate and union political contributions. The domination of the Republican primaries by SuperPacs has turned American presidential politics into a billionaire's game.
Linked below are a number of articles documenting the great redistribution of income from the middle class and poor to the super rich, yet tax increase proposals are met with cries of "redistributionist class warfare."
9-1-13 Fortune Magazine reports and editorializes in an article entitled "The Income Gap" that liberal and conservative economists agree that income inequality has increased since the 1970s. Between 1979 and 2007 overall average real household after-tax income grew 62%. But for the top 1% of earners, income grew 275%, and for the bottom20% of earners, household income grew only 18%. The share of income from capital gains and dividend income has increased, while the share coming from labor income has decreased. Andy Serwer, Fortune's managing editor concludes that "I'm sure thata widening income gap is a negative...Big income disparities lead to fragmentation of a society, from gated communities with increasing security to, at the extreme, civil unrest and worse. How could they not? Look at history...It's time to acknowledge that growing income inequality is a trend we need to reverse, and that we need to find ways to make that happen. The super-rich should realize that decades of outpacing the mean their income growth will revert to it at some point. How that happens is the biggest question of them all."
3-11-14NYTimes "A Relentless Widening of Disparity in Wealth" Eduardo Porter
- Log In - The New York Times
"The economic forces concentrating more and more wealth into the hands of the fortunate few are almost sure to prevail for a very long time."
11-3-13NYTimes "High Earnings, Low Taxes and Never a Bad Year"
- High Income, Low Taxes and Never a Bad Year - NYTimes.com
Even in 2009, when the global economy hit the wall, the richest Americans were able to cash in thanks to regressively low rates on capital gains.
"9 out of 10 Americans Are Completely Wrong About This Mind-Blowing Fact"
- 9 Out Of 10 Americans Are Completely Wrong About This Mind-Blowing Fact
Graphic depiction of inequality of wealth and income in America.
10-20-13NYTimesOpinionater "Questions for Free Market Moralists"
- Questions for Free Market Moralists
Rawls proposed that the structure of a just society was the one that a group of rational actors would come up with if they were operating behind a “veil of ignorance” — that is, provided they had no prior knowledge what their gender, age, wealth, tal
10-6-13NYTimes OP-ed "Rich People Just Care Less" by Daniel Goleman
- Rich People Just Care Less
A growing body of recent research shows that people with the most social power pay scant attention to those with little such power.
913-13NYTimes OP-ED "Rich Man's Recovery" Paul Krugman
- Rich Man’s Recovery - NYTimes.com
While the great majority of Americans are still living in a depressed economy, the rich at the very top are doing just fine...Some pundits are already suggesting that Mr. de Blasio’s unexpected rise is the leading edge of a new economic populism that
9-11-13NYTimes "Can and Should the Government do Anything about Inequality?" Thomas Edsall
- Can the Government Actually do Anything about Inequality?
4 political scientists – Adam Bonica of Stanford, Nolan McCarty of Princeton, Keith T. Poole of the University of Ga. & Howard Rosenthal of NYU – take this issue head on in their paper, “Why Hasn’t Democracy Slowed Rising Inequality?"
9-10-13NYTimes "The Rich Get Richer Through the Recovery"
The top 1% of earners took more than 1/5 of the country’s total income in 2012, one of the highest levels recorded in the century the government has collected the data. The top 10% of earners took more than half of of all income, the highest ever.
7-27-13NYTimes--President Obama Says Income Gap Is Fraying Social Fabric
- Obama Says Income Gap Is Fraying U.S. Social Fabric - NYTimes.com
Widening income inequality and the weak recovery have undermined Americans’ belief in opportunity, President Obama said in an interview.
6-27-13NYTimes Opinionator--"What if We're Looking at Inequality the Wrong Way" Professor Thomas B. Edsall
Wealth trends since the 2008 crash show an extraordinary growth in inequality, suggesting Burkhauser’s findings are fatally flawed as an instrument to assess the current real-world position of the poor and middle class compared with the very rich.
4-30-13NYTimes OPINION--Wealth Inequality and Political Inequality Increasing
- Bruce Bartlett: Wealth Inequality and Political Inequality - NYTimes.com
The wealthy have disproportionate political influence, and those pursuing a liberal economic agenda might do well to emphasize social issues that divide the wealthy from other Republicans, an economist writes.
4-27-13NYTimes "Wage Disparity Continues to Grow" Floyd Norris
- Wage Disparity Continues to Grow - NYTimes.com
When adjusted for inflation, the wages of low-paid workers have declined while wages for better-paid workers have outpaced inflation.
1-30-13Wall Street Journal--"Jefferies Chief is Pay King Again With $45.2 million Package"
- A $45.2 Million Payday for Jefferies CEO - WSJ.com
Richard Handler's compensation for 2012 pushes him ahead of some top executives at larger Wall Street rivals. Richard Handler has the biggest package with $45.2 million.
1-20-13NYTimes "Inequality is holding back the recovery" Joseph Stiglitz
- Inequality Is Holding Back The Recovery - NYTimes.com
Our economy won't come back strong unless it also becomes more fair.
11-26-12NYTimes Opinion--Warren Buffett Proposes a Minimum Tax for the Wealthy
- A Minimum Tax for the Wealthy - NYTimes.com
Millionaires and billionaires shouldn’t be able to lobby their way out of paying their share of America’s bills.
DailyMail UK--U.S. Income Inequality Near the Top
- US income inequality one of the highest among world's rich countries | Mail Online
According to data released by the World Bank the US has seen a widening of the gap between high and low earners and currently has a higher level of inequality than Europe, Canada, Australia and South Korea.
11-19-12NYTimes--"The Twinkie Manifesto" Paul Krugman
- The Twinkie Manifesto - NYTimes.com
We can learn a lot from the 195os.
11-19-12NYTimes-"To Reduce Inequality Tax Wealth Not Income" Daniel Altman
- To Reduce Inequality, Tax Wealth, Not Income - NYTimes.com
The real threat to our long-term prosperity is wealth inequality, so we need a progressive wealth tax.
10-12-12 10-17-12 Global Viewpoint--The Price of Inequality--Joe Stiglitz Interview
- The price of inequality: Q&A with Nobel economics winner Joseph Stiglitz - CSMonitor.com
Joseph Stiglitz, author of the new book 'The Price of Inequality,' argues that the wealth gap in the United States 'is holding us back' because it weakens consumer demand. 'If we want to restore growth, and therefore full employment and greater tax r
10-17-12NYTimes--Income Inequality Taking a Toll on Economic Growth
- Income Inequality May Take Toll on Growth - NYTimes.com
The concentration of income in a few hands might mean, many economists say, a less vigorous economy.
Un-aired Fox Video Interview with Occupy Wall Street Representative
6-20-12Truthout--"The Price of Inequality" Joseph Stiglitz
- Joseph E. Stiglitz | The Price of Inequality
Nowadays, these numbers show that the American dream is a myth. There is less equality of opportunity in the United States today than there is in Europe – or, indeed, in any advanced industrial country for which there are data.
6-10-12Slate.com--"The American Dream is Dying" by Joseph Stiglitz
- The American Dream is dying. Here’s how we can fix it. - Slate Magazine
America likes to think of itself as a land of opportunity, and others view it in much the same light. But, while we can all think of examples of Americans who rose to the top on their own, what really matters are the statistics: To what extent do an
4-18-12NYTimes--CityGroup Shareholders Revolt--Reject Too Rich Executive Pay Plan
- Citigroup Shareholders Reject Executive Pay Plan - NYTimes.com
Citigroup's shareholders voted down an endorsement of the bank's plan to award its chief executive, Vikram Pandit, $15 million in compensation, in a show of frustration about Wall Street pay.
4-17-12NYTimes--For Two Economists the Buffett Rule is Just a Start
- For Economists Saez and Piketty, the Buffett Rule Is Just a Start - NYTimes.com
Research by 2 economists provides subtext to the battle over tax fairness. Their work shows top earners in the US have taken a bigger and bigger share of income over the last 3 decades, with inequality nearly as acute as before the Great Depression.
4-16-12NYTimes--Senate Republicans Block Debate of Buffett Rule
- ‘Buffett Rule’ Debate Blocked by Republicans - NYTimes.com
GOP opposition ensured that a measure pressed by President Obama and Senate Dems to raise tax rates for the superrich would not come to a decisive vote. Mr. Romney paid an effective tax rate of 13.9 percent on $21.7 million income in 2010, the only y
1-28-12NYTimes OP-ED "Higher Taxes Help the Rich, Too" Robert H. Frank
- Higher Taxes Help the Richest, Too - Economic View - NYTimes.com
Letting tax cuts expire would have little effect on the wealthiest Americans’ spending but would give them better roads and cleaner air. Wwhen the anti-tax wealthy make campaign contributions, they're buying only the deeper potholes and dirtier air.
1-26-11NYTimes OP-ED "Don't Mind the Gap" Andrew Kohut
- Power and Influence of banks and Financial Institutions Believed to Represent a Threat to the Countr
Polls find Americans less upset by income inequality than by the perception that policies unfairly favor the rich...In a recent poll , 56% said the power and influence of banks & other financial institutions represent a major threat to the count
1-25-12NYTimes--At Davos World Economic Forum a Big Issue is "Haves vs. Have Nots"
- Davos Attendees Confront a New Wave of Anger - NYTimes.com
The growing income inequality between the ultrarich and the middle class is now debated in arenas where the primacy of laissez-faire capitalism was once taken for granted. [This article is worth reading!]
The Rise and Consequences of Inequality in America Alan Krueger, Chairman of the President's Council of Economic Advisers
1-14-12CommonDreams Video--Bill Moyers on Winner-Take-All Politics
- Moyers & Company: On Winner-Take-All Politics | Common Dreams
"It's the have-it-alls versus the rest of Americans. Incomes of the top 1% have increased more than 250% in the past 30 years. Incomes of the rest have been flat.
1-15-12NYtimes--Who are the 1%??
- The 1 Percent Paint a More Nuanced Portrait of the Rich - NYTimes.com
While the 1 percent has become a catch-all to describe the very wealthy, the members of this group are diverse, especially in where they live, what they believe politically and just how rich they are.
1-2-12Daily Beast--McKesson's CE0 John Hammergren Champion CEO HOG
- He’s One of the Nation’s Highest-Paid CEOs—and You’ve Never Heard of Him - The Daily Beast
John Hammergren is one of the nation’s highest-paid CEOs. Gary Rivlin on the 1 percenter you’ve never heard of.
12-19-11NYTimes OP-ED "Don't Tax the Rich, Tax Inequality" Ian Ayres and Aaron Edlin
- Don’t Tax the Rich. Tax Inequality Itself. - NYTimes.com
To keep inequality in check, tax the wealthiest 1 percent when their income gets out of proportion with median income.
12-10-11NYTimes OP-ED--"What Latin America Can Teach Us" Jorge Castaneda
- On the Middle Class, Lessons From Latin America - NYTimes.com
The United States — that epitome of the middle-class society, of the egalitarian dream that pulled millions of immigrants away from Latin America — has begun to go Latin American.
11-15-10 Highest Paid CEOs (Daily Beast and Wall Street Journal)
The Highest-Paid CEOs
Whither the Wall Street CEOs? Gregory Maffei, the CEO of Liberty Media, was the highest-paid CEO in the U.S., enjoying an $87.1 million paycheck. Larry Ellison, the founder of Oracle, was number two with $68.6 million, and Occidental Petroleum’s Ray Irani was number three. The Wall Street Journal surveyed CEO pay a the 456 biggest U.S. companies during the past fiscal year. Larry Ellison, the founder of Oracle, was number two with a $68.6 million paycheck, and Occidental Petroleum’s Ray Irani was number three. Overall, CEO pay has risen 3 percent during the past fiscal year.
11-6-2010 NYTimes Op-ED "Has America become a banana republic?" Nicholas Kristof
- Our Banana Republic by Nicholas Kristof
The richest 1 percent of Americans now take home 24 percent of income, up from 9 percent in 1976. the United States now arguably has a more unequal distribution of wealth than traditional banana republics like Nicaragua, Venezuela and Guyana.
2-18-10 Joe Conason in Salon--Top 400 Earnings Way Up, Taxes Way Way Down
- The rich get richer and pay less taxes
Between 2006 and 2007, the income of the top 400 taxpayers rose by 31 percent -- from an average of $263.3 million to an average of $344.8 million per year. Meanwhile, their effective income tax rate fell to 16.62 percent, down more than half a point
2-19-10 NYTimes--TOP EARNING CEOs
- Highest Earning CEOs
The winner: Sanjay Jha Motorola CEO $104 Million
HuffPost 12-3-09 Elizabeth Warren--America Without a Middle Class
- Elizabeth Warren: America Without a Middle Class
Can you imagine an America without a strong middle class? If you can, would it still be America as we know it?
11-28-09 NYTimes--Pay at the Top
10-5-09 NY Times Editorial--A Billion Here, a Billion There
- Richest Americans Lose $300 Billion but Still have $1.2 Trillion
It is reassuring that the super-rich can lose money too $300 billion in the last year, according to Forbes, bringing their total down to $1.27 trillion. Its about the same % that was lost by Americans private pensions, whose assets dropped 19%.
8-20-09 Leonhardt & Fabricant in the NYTimes The Rise of the Rich Hits a Wall
- The Super Rich Hit a Wall
Economists say — and data is beginning to show — that a significant change may in fact be under way. The rich, as a group, are no longer getting richer. Over the last two years, they have become poorer. And many may not return to their old levels.
7-31-09 Wall Street Banksters Bonuses Up With Government Aid
- Banksters Profits Down, Bonuses Up With a Little Help From Taxpayers
Nine of the financial firms that were among the largest recipients of federal bailout money paid about 5,000 of their traders and bankers bonuses of more than $1 million apiece for 2008.
6-30-09 Executive Compensation 2007-2008
- Latest on CEO Compensation
The Pay at the Top The compensation research firm Equilar compiled data reflecting pay for 200 chief executives at 198 public companies that filed their annual proxies by March 27 and had revenue of at least $6.3 billion.
1-30-09--400 Richest Americans Averaged $263 Million in 2006
Lynnley Browning of the NY Times reported today that the income of the 400 richest Americans soared nearly 23 percent from the previous year to an average of $263 million, according to Internal Revenue Service data. Since 1996 this group has nearly doubled its share of all income earned in the United States.
The top 400 paid just mmore than $18 billion in federal income taxes in 206, or an average o0f $45 million, on a record $105 billion in total income--the lowest effective tax rate in the 15 years since the agency began releasing such data. That compares with nearly $1 trillion paid by all other individual taxpayers in 2006.
Here's a link to the NYT article
10-26-08 WSJ Reports Decrease in Income Disparity
Economist Robert Frank reported in today's Wall Street Journal that income/wealth disparity has actually decreased this year thanks to the credit/hedge fund/Wall Street/stock market meltdown.
Unequal America by Elizabeth Gudrais, Harvard Magazine
Causes and consequences
of the wide-and growing-gap
between rich and poor
by Elizabeth Gudrais
When Majid Ezzati thinks about declining life expectancy, he says, "I think of an epidemic like HIV, or I think of the collapse of a social system, like in the former Soviet Union."
But such a decline is happening right now in some parts of the United States. Between 1983 and 1999, men's life expectancy decreased in more than 50 U.S. counties, according to a recent study by Ezzati, associate professor of international health at the Harvard School of Public Health (HSPH), and colleagues. For women, the news was even worse: life expectancy decreased in more than 900 counties-more than a quarter of the total. This means 4 percent of American men and 19 percent of American women can expect their lives to be shorter than or, at best, the same length as those of people in their home counties two decades ago.
The United States no longer boasts anywhere near the world's longest life expectancy. It doesn't even make the top 40. In this and many other ways, the richest nation on earth is not the healthiest. Ezzati's finding is unsettling on its face, but scholars find further cause for concern in the pattern of health disparities. Poor health is not distributed evenly across the population, but concentrated among the disadvantaged.
Disparities in health tend to fall along income lines everywhere: the poor generally get sicker and die sooner than the rich. But in the United States, the gap between the rich and the poor is far wider than in most other developed democracies, and it is getting wider. That is true both before and after taxes: the United States also does less than most other rich democracies to redistribute income from the rich to the poor.
Americans, on average, have a higher tolerance for income inequality than their European counterparts. American attitudes focus on equality of opportunity, while Europeans tend to see fairness in equal outcomes. Among Americans, differences of opinion about inequality can easily degenerate into partisan disputes over whether poor people deserve help and sympathy or should instead pull themselves up by their bootstraps. The study of inequality attempts to test inequality's effects on society, and it is delivering findings that command both sides' attention.
Ezzati's results are one example. There is also evidence that living in a society with wide disparities-in health, in wealth, in education-is worse for all the society's members, even the well off. Life-expectancy statistics hint at this.
People at the top of the U.S. income spectrum "live a very long time," says Cabot professor of public policy and epidemiology Lisa Berkman, "but people at the top in some other countries live a lot longer."
Much is still unknown in this dynamic field, where Harvard is home to pioneers who first recognized income inequality as worthy of study and younger scholars at the forefront of its study today. The variety of disciplines featured in presentations of the University's Multidisciplinary Program on Inequality and Social Policy-economics, sociology, political science, public policy, health, medicine, education, law, and business-highlights the field's broad importance.
Because of the subject's complexity and the scarcity of consistent data that would allow comparison between countries and across wide timespans, research findings are often highly specific or framed in the language of interesting coincidences, rather than as definitive conclusions. Even when discernable patterns exist, there tend to be counter-examples; for instance, the United States, with high inequality, has low life expectancy compared to Denmark and Finland, with very low inequality-but in Spain and Italy, with inequality somewhere in between, life expectancy is even longer.
But the coincidences are intriguing indeed. Research indicates that high inequality reverberates through societies on multiple levels, correlating with, if not causing, more crime, less happiness, poorer mental and physical health, less racial harmony, and less civic and political participation.
Tax policy and social-welfare programs, then, take on importance far beyond determining how much income people hold onto. The level of inequality we allow represents our answer to "a very important question," says Nancy Krieger, professor of society, human development, and health at HSPH: "What kind of society do we want to live in?"
Keeping Up With The Joneses
The United States is becoming even more unequal as income becomes more concentrated among the most affluent Americans. Income inequality has been rising since the late 1970s, and now rests at a level not seen since the Gilded Age-roughly 1870 to 1900, a period in U.S. history defined by the contrast between the excesses of the super-rich and the squalor of the poor.
Early in the twentieth century, the share of total national income drawn by the top 1 percent of U.S. earners hovered around 18 percent. That share hit an all-time high in 1928-when top earners took home 21.1 percent of all income, including capital gains-then dropped steadily through the next three decades. Amid the post-World War II boom in higher education, and overall economic growth, the American middle class swelled and prospered, and the top 1 percent of earners took home less than 10 percent of all income through the 1960s and 1970s. Since then, the topmost 1 percent have seen their share rise again: it shot past 15 percent in 1996 and crested at 20.3 percent in 2006, the most recent year for which numbers are available.
To describe the distribution of income inequality in the United States, Allison professor of economics Lawrence F. Katz likes to use the analogy of an apartment building. "Over the last 25 years," he says, "the penthouse has gotten really, really nice. All sorts of new gadgets have been put in. The units just below the penthouse have also improved a lot. The units in the middle have stayed about the same. The basement apartment used to be OK, but now it's gotten infested with cockroaches and it's been flooding." (See graph, page 26.)
The argument that none of this matters as long as the overall economy is growing-that a rising tide lifts all boats, as President John F. Kennedy famously said-is the subject of vigorous academic review, with mixed results, but it may not be the most important question. Picture a buoyant luxury cruise ship surrounded by dilapidated dinghies, full of holes and on the verge of sinking. The fact that the tide has lifted them does not mean they are doing well.
This is a concept social scientists call relative deprivation. The idea is that, even when we have enough money to cover basic needs, it may harm us psychologically to see that other people have more. When British economist Peter Townsend developed his relative deprivation index in 1979, the concept was not new. Seneca wrote that to be poor in e midst of riches is the worst of poverties; Karl Marx wrote, "A house may be large or small; as long as the neighboring houses are likewise small, it satisfies all social requirement for a residence. But let there arise next to the little house a palace, and the little house shrinks to a hut."Investigating whether relative deprivation and the negative emotions it engenders help explain why the poor have worse health than the rich in most societies began with epidemiologist Michael Marmot's study of British civil servants in the 1960s and 1970s. Marmot found that the lower-ranking bureaucrats had elevated levels of stress hormones compared to their high-status coworkers, even though the low-ranking workers still had job security, a living wage, decent hours, and benefits.
Others have found similar links. Examining health outcomes for identical twins raised together-pairs that shared genes and environment-Nancy Krieger found that when the twins became adults, if one was working class and the other professional, the working-class twin's health was, on average, worse. There is little question that it is bad for one's health to be poor. Americans at the 95th income percentile or higher can expect to live nine years longer than those at the 10th percentile or lower. The poor are more likely to develop illnesses such as diabetes, hypertension, heart disease, and cancer, and there is evidence that relative deprivation and the stress it engenders are involved. When high inequality and rising top incomes shift society's accepted tandards of living upward, it seems that people experience deprivation even when they have adequate food, clothing, and shelter. The official U.S. poverty rate-12.3 percent in 2006-is relatively low, but scholars agree that number is essentially meaningless.
The poverty threshold was developed in 1965 based on the cost of a grocery budget "for temporary or emergency use when funds are low," multiplied by three. It was "arbitrary," says Wiener professor of social policy Christopher Jencks, "but once it was adopted, it was politically impossible to change it." That threshold has been adjusted for inflation, but does not take into account the fact that housing prices, energy prices, and certain other costs have grown faster than the consumer price index (CPI). "Going to movies, eating out at restaurants, going on occasional vacations, having Internet access and a cell phone-none of these things are in the federal poverty level," says Ichiro Kawachi, professor of social epidemiology at HSPH and associate professor of medicine at Harvard Medical School (HMS). "What matters for functioning in society is what the average person is able to do." During the same period, the Gallup Poll definition of the poverty line-based on asking people how much income they need not to feel deprived-has risen much more steeply than the PI. Kawachi, who grew up in Japan, believes a predominant consumption culture in the United States exacerbates relative deprivation. "The Japanese have a very strong culture against conspicuous displays of affluence," he says. "When I was a child growing up in suburban Tokyo, it was very difficult to distinguish, by dress or anything else, rich kids from poor kids-whereas in America, bring it on!"
As further evidence of a correlation between inequality nd consumption culture, he points to national spending on advertising as a percentage of gross domestic product (GDP). The top-ranked countries on this measure, according to United Nations (UN) data, are Colombia, Brazil, and Venezuela-countries with inequality levels among the highest in the world-but also Australia, New Zealand, the United Kingdom (U.K.), and the United States, countries with higher inequality than similarly prosperous peers. Japan comes second only to Denmark in terms of equal-income distribution among its inhabitants, according to United Nations data. And life expectancy at birth for the Japanese is 82.3 years, compared to Americans' 77.9 years, even though per-capita GDP in the United States is about $10,000 more than in Japan. "It's pretty clear that an egalitarian ethos runs along with the idea of having strong safety nets and protecting the health of the most vulnerable," says Kawachi, who also directs HSPH's Center for Society and Health. "And that's reflected in national health statistics."
The United States ranks twenty-first among the 30 nations in the Organization for Economic Cooperation and Development (OECD) in terms of life pectancy, and twenty-fifth in terms of infant mortality. Kawachi and others have found that the U.S. counties with the most income inequality stack up poorly on health measures, and as mortality rates have fallen nationwide, they have fallen most slowly in states where income inequality increased the most-a cause for concern, whatever the explanation.
One widely used measure of inequality is the Gini coefficient, named for Italian statistician Corrado Gini, who first articulated the concept in 1912. The coefficient measures income distribution on a scale from zero (where income is perfectly equally distributed among all members of a society) to one (where a single person possesses all the income). For the United States, the Gini coefficient has risen from .35 in 1965 to .44 today. On the per-capita GDP scale, our neighbors are Sweden, Switzerland, and the U.K.; on the Gini scale, our neighbors include Sri Lanka, Mali, and Russia. (Even with this basic measure of inequality, it is difficult to get comparable data for all countries, and some other sources find a much wider gap between the United States and Russia. For instance, the Luxembourg Income Study ranks Russia at .43 and the United States at .37, and does not even list Sri Lanka and Mali.)
Source: United Nations Human Development Report, 2007/08
The recent increase in inequality reflects a migration of money upward as salaries have ballooned at the top. In 1965, the average salary for a CEO of a major U.S. company was 25 times the salary of the average worker. Today, the average CEO's pay is more than 250 times the average worker's. At the same time, the government is doing less to redistribute income than it has at times in the past. The current top marginal tax rate-35 percent-is not the lowest it's been-there was no federal income tax at all until 1913-but it is far lower than the 91-percent tax levied on top earners from 1951 to 1963. Meanwhile, forces such as immigration and trade policy have put pressure on wages at the bottom.
"The Race Between Education and Technology"
by Lawrence F. Katz and Claudia Goldin (Harvard University
Tax policies and employer-pay practices affect income distribution directly. But what governs these pay practices, and why have American voters and politicians chosen the tax policies they have? One answer lies in Americans' unique attitudes toward inequality. Asked by the International Social Survey Programme whether they agreed or disagreed with the statement that income
differences in their home country are "too large," 62 percent of Americans agreed; the median response for all 43 countries surveyed-some with a much lower degree of inequality-was 85 percent. Americans and Europeans also tend to disagree about the causes of poverty. In a different survey-the World Values Survey, including 40 countries-American respondents were much more likely than European respondents (71 percent versus 40 percent) to agree with the statement that the poor could escape poverty if they worked hard enough.
Conversely, 54 percent of European respondents, but only 30 percent of American respondents, agreed with the statement that luck determines income.It makes intuitive sense that those who view poverty as a personal failing don't feel compelled to redistribute money from the rich to the poor. Indeed, Ropes professor of political economy Alberto Alesina and Glimp professor of economics Edward L. Glaeser find a strong link between beliefs and tax policy: they find that a 10-percent increase in he share of the population that believes luck determines income is associated with a 3.5-percent increase in the share of GDP a given nation's government spends on redistribution (see "Down and Out in Paris and Boston,"
January-February 2005, page 14).
These attitudes, in turn, are rooted in U.S. history, says Christopher Jencks, whose 1973 book Inequality examined social mobility in the United States. Jencks has been studying inequality and social class since the 1960s, and has written dozens of journal articles, essays, and book chapters, as well as four more books, on the subject. He looks back to the Constitution's framers, who enshrined property rights as sacred and checked the government's ability to control the national economy. "The founding fathers didn't want the government to do that much," he says. The Constitution is structured in such a way that it is harder to change than the constitutions of Europe's welfare states, where left-leaning groups have succeeded at writing in change. By and large, Alesina and Glaeser write, the U.S. Constitution "is still the same document approved by a minority of wealthy white men in 1776." And the "vestiges of feudalism" in European society make leftist arguments ppealing there, whereas American politicians' rhetoric has emphasized individual agency since the time of George Washington (who wrote in 1783 that if citizens "should not be completely free and happy, the fault will be intirely their own"). The authors cite a 1980s history curriculum for public schools in California ("hardly the most right-wing of states," they note) that instructed, "A course should assess the role of optimism and opportunity in a land of work: the belief that energy, initiative, and inventiveness will continue to provide a promising future."
An alternative, and possibly complementary, explanation points to the United States's particular place in geography and history. Jencks also finds this persuasive. "The highest levels of inequality are found in the New World and not the Old, for reasons we don't understand," he says (see chart above). Societies with higher inequality also tend to have higher crime rates, although it's not clear which way the causal arrow runs, or if it exists. "These are societies built on conquest, many of them on slavery," Jencks adds. "A lot of the inequality may just be the legacy of those things."
Former colonies such as Haiti and Namibia inhabit the top end of the Gini scale, with coefficients of .59 and .74, respectively. But there are exceptions to the pattern: the low end of the scale includes transitional economies that re far from rich (Belarus and Moldova, with coefficients of .30 and .33), and former colonies (Ethiopia and Laos, with coefficients of .30 and .35). For all the scholarly study, consensus on whether the Gini coefficient can, in and of itself, say something good or something bad about a country is still lacking. Still, scholars are using what evidence does exist to ask, and test, whether the United States has things in common with Sri Lanka, Mali, and Russia, as it undoubtedly does with Sweden, Switzerland, and the U.K.
The excesses of the Gilded Age led, in the decades that followed, to a backlash in the form of the minimum wage and other labor laws to protect workers, business and financial-market regulation to protect consumers, social safety-net programs-Social Security, Medicare, Medicaid-and infrastructure investment to benefit all. But as the United States moves from a period of relatively balanced income distribution back into higher inequality, it remains to be seen whether these twentieth-century developments will enable the country to escape the problems that often accompany high inequality.
Left Out At The Bottom
An argument commonly made in inequality's defense is that it serves to motivate. Here, Kawachi cites evidence from the sports world. A 1990 study of golfers found that they performed best in professional tournaments, where
the spread in the size of the prize money is widest. Similarly, a study of professional auto racers found that performance improved as the spread in the size of the various prizes widened. So inequality may act on the human psyche to elicit hard work and high achievement-but it also may make us more individualistic. In a study of baseball players, teams with wider pay dispersion performed more poorly-and so did individual players within those teams. "In a world in which each individual is looking out for themselves, players will tend to concentrate on improving their own performance to the exclusion of team goals, since their own performance is what matters for moving up the pay scale," Kawachi and ruce P. Kennedy (a former HSPH professor who passed away this year) wrote in The Health of Nations: Why Inequality Is Harmful to Your Health. "Concentrating on trying to hit more home runs or improving one's own hitting average are not necessarily the tactics that lift team performance-as opposed to, say, practicing great defense."
This gets at the ways inequality may affect the fabric of society. Perhaps motivated by inequality and the prospect of getting ahead, Americans work longer hours than their European counterparts-about 200 more hours per year, on average, than the British, and 400 more hours per year than the Swedes. Again, there are counter-examples (the Japanese work almost as much as Americans do, just 50 hours less a year), but in any case, time spent at work is time not spent with friends or family, and this has its own implications for health.
As an outreach worker in San Francisco in the 1970s, Lisa Berkman noticed that her clients in the North Beach and Chinatown neighborhoods-poor or working-class, but with the strong social connections typical of immigrant communities-had far better health than her clients in the gritty Tenderloin district, who were much more socially isolated and disconnected from one another. The link between social integration and mortality risk became the subject of Berkman's dissertation at Berkeley, where she earned her Ph.D. in 1977. At the time, the idea that social ties could protect health was radical. Now it is accepted wisdom-and a factor that, Berkman believes, helps to explain the extraordinarily high life expectancy in Spain and Italy. But the danger of disconnectedness may go beyond being less happy or even less healthy. Kawachi and Kennedy cited a wealth of evidence that increasing income inequality oes hand in hand with a decrease in "social capital," a concept akin to community involvement that incorporates, among other things, social relationships, trust, reciprocity among friends and neighbors, and civic engagement. (Malkin professor of public policy Robert Putnam made a similar argument in his seminal 2000 book "Bowling Alone".)
Letting social capital atrophy means a less cohesive populace that, at the extreme, leaves entire classes of people disadvantaged and excluded. "The big worry," says Lawrence Katz, "is creating something like a caste society."As American neighborhoods have become more integrated along racial lines, they have become more segregated along income lines and, some research indicates, with regard to all manner of other factors, including political and religious beliefs. (The Big Sort, a new book by journalist Bill Bishop, examines this evidence.) What's more, even along racial lines, American society is still far from integrated.
Sociologist David R. Williams, Norman professor of public health and professor of African and African American studies, has examined racial discrimination and health in the United States and elsewhere, including South Africa, where in 1991, under apartheid, the "segregation index" was 90, meaning that 90 percent of blacks would have had to move to make the distribution even. "In the year 2000," says Williams, in most of America's larger cities-New York City, Detroit,
Chicago, Milwaukee-the segregation index was over 80." Only slightly lower, that is, than under legally sanctioned apartheid. When a society is starkly divided along racial or ethnic lines, the affluent are less likely to take care of the poor, Glaeser and Alesina have found. Internationally, welfare systems are least generous in countries that are the most ethnically heterogeneous. Those U.S. states with the largest black populations have the least generous welfare systems. And in a nationwide study of people's preferences for redistribution, Erzo F.P. Luttmer, associate professor of public policy at the Harvard Kennedy School (HKS), found strong evidence for racial loyalty: people who lived near poor people of the same race were likely to support redistribution, and people who lived near poor people of a different race were less likely to do so. Differences in skin color seem to encourage the wealthy to view the poor as fundamentally different, serving as a visual cue against thinking, "There but for the grace of God go I."
Alesina's work investigates this cognitive process as an explanation for the high crime rates in less equal societies. Rather than following the common-sense explanation that the poor see what the rich have and covet it, leading to urglary and violent crime, Alesina argues that as the incomes of the rich and poor diverge, so do their interests.
Members of a relatively equal society find it relatively easy to reach agreement about what the purpose and priorities of a legal system should be. But if the rich favor protecting property, while the poor care more about preventing and punishing interpersonal violent crime, the lack of consensus will produce a weak system that fails to meet the desires of either group. In one essay, his colleague Glaeser offers this apocalyptic prediction: "Great gaps between rich and poor may...hurt democracy and rule of law if elites prefer dictators who will protect their interests, or if the disadvantaged turn to a dictator who promises to ignore property rights."
This doesn't seem possible in a democracy such as the United States, where each citizen's vote carries the same weight regardless of income (the electoral-college system notwithstanding). In fact, given the shape of the income distribution, it seems that Americans would elect leaders whose policies favor the poor and middle class. Mean household income in 2004 was $60,528, but median household income was only $43,389. More than half of households make less money than average, so, broadly speaking, more than half of voters should favor policies that redistribute income from the top down. Instead, though, nations-and individual states-with high inequality levels tend to favor policies that allow the affluent to hang onto their money.
Filipe R. Campante, an assistant professor of public policy at HKS and a former student of Alesina's, thinks he's discovered why. After investigating what drives candidates' platforms and policy decisions, Campante has concluded that donations are at least as influential a mode of political participation as votes are. Previous research has shown that voter turnout is low, particularly at the low end of the income spectrum, in societies with high inequality. Again, this is counterintuitive: in unequal places, poor people unhappy with government policies might be expected to turn out en masse to vote, but instead they stay home. Campaign contributions may provide the missing link.
Candidates, naturally, target voters with money because they need funds for their campaigns. And since the poor gravitate toward parties that favor redistribution and the wealthy align themselves with parties that do not, campaign contributions end up benefiting primarily parties and candidates whose platforms do not include redistribution. By the time the election comes around, the only candidates left in the race are those who've shaped their platforms to maximize fundraising; poor voters, says Campante, have already been left out. In a study of campaign contributions in the 2000 U.S. presidential election, he found that higher income inequality at the county level was associated with fewer people contributing to campaigns, but contributing a larger amount on average-so the haves participated, and the have-nots did not.
The solution, he says, is not to scrap the system altogether in favor of full public financing, but to enact contribution limits strict enough to level the playing field. He views contributions not as bribery or buying policy, but as a legitimate form of civic engagement. "The ideal system," he says, "would be a system where you have a really broad base of contributors that are contributing relatively small amounts....You want parties to be responsive to voters. Donations are a way in which parties are made responsive to voters."
Buffers Against Inequality
The effects of relative deprivation can come in a form more tangible than stress or low self-esteem. Krieger uses the example of a job interview. In a society where the average person has a cell phone, it can hurt one's job chances not to have one. Wearing old clothes to a job interview might be interpreted as a sign of not taking the interview seriously, when in fact the problem is inability to afford a new outfit.
Bad teeth, which require money to fix, can trigger disgust in prospective employers and even hold people back from making friends. "Your income," Krieger says, "can decline to a point where you're no longer able to participate meaningfully in society." Stress can also make people behave in ways they otherwise wouldn't. David Williams believes that the "hierarchy of needs" framework helps explain why, the poorer people are, the less likely they are to take care of their health. The framework, developed in 1943 by psychologist Abraham Maslow, defines the needs that motivate human behavior and the priority people assign to those needs. Physiological needs (eating, sleeping, breathing) form the foundation; not until those needs are met can people pursue needs in the higher categories (in succession: safety, love/belonging, esteem, and self-actualization). "If people are worried about their basic needs of survival and security and food and shelter," says Williams, "they cannot worry about the fact that a cigarette, which is providing relief from stress now, is going to cause lung cancer 20 years from now. If you can address the basic needs so people are no longer worried about them, you free them to consider those larger, higher-level needs that have long-term consequences for their well-being."
Lisa Berkman's latest project aims to let low-wage workers focus on such higher-order needs. In a study of nursing-home employees, Berkman found that nursing assistants, janitors, and kitchen workers had far less flexibility than higher-status workers in terms of being able to leave work if a family member fell ill, and that this lack of flexibility was related to increased risk of heart disease and chronic sleep problems. Now she is following nursing homes and retail establishments to see what happens when they implement more flexible policies. If workers in high-demand, low-wage jobs can spend more time with their families and stop worrying about getting fired if they need to handle an emergency, she says, "workplace policies may have a profound effect on health."
Improving living conditions in poor neighborhoods is another way to alleviate poverty's ill effects even in the absence of income redistribution, says Williams. The poor are more likely to smoke, to eat poorly, and to lead sedentary lives. These are personal choices-but every choice is made in context, and one's surroundings affect the choices one makes. "When people live in areas where there aren't supermarkets that sell fresh fruits and vegetables, their intake of fresh fruits and vegetables is dramatically lower," he says. "If people live in areas where there aren't sidewalks, where there aren't safe bike paths and places to walk and playgrounds, or where the rate of crime is so high that it's not safe to go outside, then their level of exercise is much lower and their rates of obesity are higher." Building parks and sidewalks and bringing farmers' markets to poor neighborhoods, then, makes it easier for residents to make healthy choices.
Another category of initiatives aims at improving living conditions for poor people by giving them vouchers to move to better neighborhoods, but the details are important, says Dolores Acevedo-Garcia, an HSPH associate professor of society, human development, and health. She is helping design the public-health component of one such program. Stemming from a landmark 2005 desegregation court case, it has already enabled about 1,300 former tenants of Baltimore public housing to move to suburban communities. "What people are expecting," she says, "is that if people move to a new neighborhood, they're automatically going to do better. Well, in fact, a lot of this is about connecting people to resources": for example, helping them find landlords who will rent to them-not the easiest thing in an unfamiliar neighborhood.
The aid doesn't stop there. Many doctors in affluent communities don't accept Medicaid; Acevedo-Garcia's proposal would have case workers help clients find doctors who do, and in some cases persuade doctors to start.
"People may be used to doing their shopping at a convenience store or a liquor store," she says; case workers will tell them which grocery store has good produce at low prices, and where to catch the bus that will take them there. Something as simple as taking the new residents to a park can make a difference, she says: "They may not be used to the idea of exercising outside if they came from a neighborhood that was not safe."
"Adults' economic status is positively correlated with their parents' economic status in every society for which we have data," write Christopher Jencks and Laura Tach, a doctoral student in sociology and social policy, "but no democratic society is entirely comfortable with this fact."
The prospect of upward mobility forms the very bedrock of the American dream, but analyses indicate that intergenerational mobility is no higher in the United States than in other developed democracies. In fact, a recent Brookings Institution report cites findings that intergenerational mobility is actually significantly higher in Norway, Finland, and Denmark-low-inequality countries where birth should be destiny if inequality, as some argue, fuels mobility.
In the United States, the correlation between parents' income and children's income is higher than chance: 42 percent of children born to parents in the bottom income quintile were still in the bottom quintile as adults, and 39 percent of children born to parents in the top quintile remained in the top quintile as adults, according to the Brookings analysis. But it is difficult to see whether mobility is increasing or decreasing, because it would require comparing specific individuals' incomes to their parents' incomes, against the wider backdrop of income distribution across society at that time. Because data with that level of detail do not exist for earlier periods, scholars can't say with certainty whether the results represent an increase or a decrease in mobility from other periods in American history.
Americans' steadfast belief in mobility probably stems from increases in absolute, rather than relative, mobility. As the overall economy mushroomed throughout the nation's history, the majority of people exceeded their parents' income. Recall Katz's apartment building analogy; rather than tenants moving from one floor to another, the entire building was shifting ever higher on a hill. But "if anything,"
Alesina and Glaeser write, "the American poor seem to be much more ‘trapped' than their European counterparts," in the sense that fewer people who start life in the bottom quintile ever make it out. This is puzzling given American society's emphasis on fairness and openness. Lee professor of economics Claudia Goldin and Katz detect an explanation in the increasing cost of college tuition. In 1950, the average tuition price at a private college was roughly 14 percent of the U.S. median family income; public college tuition was even lower (only 4 percent). Percentages for both types of institutions fell further in the ensuing decades, bottoming out around 1980, but then rising steeply ever since. In 2005, the cost of attending the average public college was 11 percent of median family income; for private colleges, the average was 45 percent. There is financial aid, but not enough, and the system "can be harder to crack than Fort Knox," Katz and Goldin write in their new book,
The Race Between Education and Technology
For most of the twentieth century, the average American exceeded his parents' education level by a significant margin: between 1900 and 1975, the average American's educational attainment grew by 6.2 years, or about 10 months per decade. Then, between 1975 and 1990, the authors find that there was "almost no increase at all"; from 1990 to 2000, there was a gain of just six months.
Although college graduation rates for women are still rising steadily, for men they have barely increased since the days of the Vietnam draft. At the same time, the "college wage premium" has also increased. In 1975, the average college graduate's hourly wage was 24 percent higher than the average high-school graduate's. By 2002, that number had risen to 43 percent. Katz and Goldin say this increase indicates higher demand for workers with college degrees, even as computers have eliminated the type of jobs a high-school-diploma recipient or mediocre college graduate would have done 25 years ago: clerical work, basic accounting, middle management. Technology has exerted downward pressure on those workers' pay, explaining stagnating wages at the middle and bottom of the income distribution.
The United States once led the world in the rate at which its citizens finished college; it now falls in the middle of the OECD pack. It could lead again if Americans made a decision to fund higher education the way they chose to fund universal public high-school education early in the last century. "If you had made people borrow money to go to high school in the early twentieth century," says Katz, "you wouldn't have seen the same sort of expansion." But as technology continues to advance, if Americans do not break down barriers to higher education, the authors foresee an even more acute shortage of highly trained workers-and, other things being equal, a further increase in inequality.
Elizabeth Gudrais '01 is associate editor of this magazine.
12-4-11NYTimes--"The Eternal Question of Fairness--The Ajax Dilemma" Paul Woodruff
- The Ajax Dilemma: Justice, Fairness and Rewards by Paul Woodruff
THE growing gap between the top earners and everyone else is agitating our society in newly public ways. The Occupy Wall Street movement is one example. The anger spilling out over deficit reduction — or lack thereof — in Congress is another.
INEQUALITIES by Larry M. Bartels NYT Magazine 4-27-08
By LARRY M. BARTELS Published: April 27, 2008
The past three decades have seen a momentous shift: The
rich became vastly richer while working-class wages
stagnated. Economists say 80 percent of net income gains
since 1980 went to people in the top 1 percent of the
income distribution, boosting their share of total income
to levels unseen since before the Great Depression.
Despite the historic magnitude of this shift, inequality
has thus far had little traction as a political issue. Many
Americans seem to accept the conservative view that
escalating inequality reflects "free market" forces immune
to amelioration through public policy. As Treasury Secretary
Henry Paulson put it, perhaps a bit defensively, the growing
income gap "is simply an economic reality, and it is neither
fair nor useful to blame any political party." Paulson's
assertion, however, is strongly contradicted by the
historical record. While technology, demographic trends and
globalization are clearly important, purely economic
accounts ignore what may be the most important influence on
changing U.S. income distribution - the contrasting policy
choices of Republican and Democratic presidents.
The Census Bureau has tracked the economic fortunes of
affluent, middle-class and poor American families for six
decades. According to my analysis, these tabulations reveal
a wide partisan disparity in income growth. The real
incomes of middle-class families grew more than twice as
fast under Democratic presidents as they did under
Republican presidents. Even more remarkable, the real
incomes of working-poor families (at the 20th percentile of
the income distribution) grew six times as fast when
Democrats held the White House. Only the incomes of
affluent families were relatively impervious to partisan
politics, growing robustly under Democrats and Republicans
The cumulative effect of these partisan differences
is enormous. If the pattern of income growth under postwar
Republican presidents had matched the pattern under
Democrats, incomes would be more equal now than they were
in 1950 - a far cry from the contemporary reality of what
some observers are calling a New Gilded Age.
It might be tempting to suppose that these partisan
differences in income growth are a coincidence of timing,
merely reflecting the fact that Republicans held the White
House through most of the past three decades of slow,
unequal growth. The partisan pattern, however, is remarkably
consistent throughout the postwar period. Every Republican
president since Dwight Eisenhower presided over increasing
economic inequality, while only one Democrat - Jimmy Carter-
did so. (I allow one year for each president's economic
policies to take effect, so the recession of 2001 is counted
against Clinton, not Bush.)
If middle-class and poor people do so much better under
Democratic presidents than under Republican presidents,
why do so many of them vote for Republicans? One popular
answer, advanced by Thomas Frank and others, is that they
are alienated by Democratic liberalism on cultural issues
like abortion, gay marriage and gender roles. This does not
appear to be the case. In recent presidential elections,
affluent voters, who tend to be liberal on cultural matters,
are about twice as likely as middle-class and poor voters to
make their decisions on the basis of their cultural concerns.
A better explanation for Republican electoral successes may
be that while most voters, rich and poor alike, do vote with
their economic interests in mind, they construe those interests
in a curiously myopic way. Their choices at the polls are
strongly influenced by election-year income growth but only
weakly related to economic performance earlier in the president's
term. And while Republicans have presided over dismal income
growth for middle-class and poor families in most years, they
have, remarkably enough, produced robust growth in election years.
Why have Republican administrations typically presided over
strong election-year growth? The pattern probably reflects
the fact that presidents have more clout early in their
terms than at election time. Republicans have often used
that clout to rein in inflation and social spending,
producing or prolonging economic contractions that then
wear off by the time of the next election. New or newly
re-elected Democrats, for their part, have frequently
stimulated the economy and expanded employment, producing
economic booms that raise all boats in their second and
third years but trail off as the next election approaches.
As a result, even working-poor families have experienced
stronger income growth under Republicans (1.8 percent) than
under Democrats (1 percent) in election years.
This year looks unusual in this respect, with slow growth
likely despite the infusion of substantial tax rebates from
an election-year stimulus plan. If that slow growth
produces a Republican defeat in November, it will be a rare
instance of economic accountability for a party with a
long history of delivering meager income gains for most
Larry M. Bartels, a professor of politics at Princeton, is
the author of "Unequal Democracy: The Political Economy of
the New Gilded Age."
4-16-08 Some Hedge Fund Managers Clean Up
Jenny Anderson reports in today's NYT that several hedge fund managers hit the jackpot last year with big bets against mortgage-backed securities. Here are the three top money makers:
John Paulson--$3.7 billion
George Soros--$2.9 billion
Philip Falcone--$1.7 billion
Combined, the top 50 hedge fund managers made $29 billion. These earnings are not subject to normal tax rates on earnings. Thanks to a loophole big enough for a Mack truck, they are taxed at the much more favorable capital gains tax rate of 15 %. Warren Buffett supported closing the loophole recently, pointing out that his tax rate is lower than that of his secretary.
U.S. Median Income Declines for First Time in Recent History --David Leonhafdt in the NY T 4-9-08
David Leohardt economics writer for the NY Times reports that for the first time in recent years median U.S. income decreased in 2007. Median income was $61,000 in 2000 and $60,500 in 2007.
Paul Krugman on Growing Income Disparity
By PAUL KRUGMAN Published: April 2, 2007
I have a theory about the Bush administration abuses of power that are now, finally, coming to light. Ultimately, I believe, they were driven by rising income inequality.
Paul Krugman takes readers' questions about economics and international finance.
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Let me explain.
In 1980, when Ronald Reagan won the White House, conservative ideas appealed to many, even most, Americans. At the time, we were truly a middle-class nation. To white voters, at least, the vast inequalities and social injustices of the past, which were what originally gave liberalism its appeal, seemed like ancient history. It was easy, in that nation, to convince many voters that Big Government was their enemy, that they were being taxed to provide social programs for other people.
Since then, however, we have once again become a deeply unequal society. Median income has risen only 17 percent since 1980, while the income of the richest 0.1 percent of the population has quadrupled. The gap between the rich and the middle class is as wide now as it was in the 1920s, when the political coalition that would eventually become the New Deal was taking shape.
And voters realize that society has changed. They may not pore over income distribution tables, but they do know that today's rich are building themselves mansions bigger than those of the robber barons. They may not read labor statistics, but they know that wages aren't going anywhere: according to the Pew Research Center, 59 percent of workers believe that it's harder to earn a decent living today than it was 20 or 30 years ago.
You know that perceptions of rising inequality have become a political issue when even President Bush admits, as he did in January, that "some of our citizens worry about the fact that our dynamic economy is leaving working people behind."
But today's Republicans can't respond in any meaningful way to rising inequality, because their activists won't let them. You could see the dilemma just this past Friday and Saturday, when almost all the G.O.P. presidential hopefuls traveled to Palm Beach to make obeisance to the Club for Growth, a supply-side pressure group dedicated to tax cuts and privatization.
The Republican Party's adherence to an outdated ideology leaves it with big problems. It can't offer domestic policies that respond to the public's real needs. So how can it win elections?
The answer, for a while, was a combination of distraction and disenfranchisement.
The terrorist attacks on 9/11 were themselves a massive, providential distraction; until then the public, realizing that Mr. Bush wasn't the moderate he played in the 2000 election, was growing increasingly unhappy with his administration. And they offered many opportunities for further distractions. Rather than debating Democrats on the issues, the G.O.P. could denounce them as soft on terror. And do you remember the terror alert, based on old and questionable information, that was declared right after the 2004 Democratic National Convention?
But distraction can only go so far. So the other tool was disenfranchisement: finding ways to keep poor people, who tend to vote for the party that might actually do something about inequality, out of the voting booth.
Remember that disenfranchisement in the form of the 2000 Florida "felon purge," which struck many legitimate voters from the rolls, put Mr. Bush in the White House in the first place. And disenfranchisement seems to be what much of the politicization of the Justice Department was about.
Several of the fired U.S. attorneys were under pressure to pursue allegations of voter fraud - a phrase that has become almost synonymous with "voting while black." Former staff members of the Justice Department's civil rights division say that they were repeatedly overruled when they objected to Republican actions, ranging from Georgia's voter ID law to Tom DeLay's Texas redistricting, that they believed would effectively disenfranchise African-American voters.
The good news is that all the G.O.P.'s abuses of power weren't enough to win the 2006 elections. And 2008 may be even harder for the Republicans, because the Democrats - who spent most of the Clinton years trying to reassure rich people and corporations that they weren't really populists - seem to be realizing that times have changed.
A week before the Republican candidates trooped to Palm Beach to declare their allegiance to tax cuts, the Democrats met to declare their commitment to universal health care. And it's hard to see what the G.O.P. can offer in response.
Krugman 12-24-07 NYT
State of the Unions
By PAUL KRUGMAN Published: December 24, 2007
Once upon a time, back when America had a strong middle class, it also had a strong union movement.
These two facts were connected. Unions negotiated good wages and benefits for their workers, gains that often ended up being matched even by nonunion employers. They also provided an important counterbalance to the political influence of corporations and the economic elite.
Today, however, the American union movement is a shadow of its former self, except among government workers. In 1973, almost a quarter of private-sector employees were union members, but last year the figure was down to a mere 7.4 percent.
Yet unions still matter politically. And right now they're at the heart of a nasty political scuffle among Democrats. Before I get to that, however, let's talk about what happened to American labor over the last 35 years.
It's often assumed that the U.S. labor movement died a natural death, that it was made obsolete by globalization and technological change. But what really happened is that beginning in the 1970s, corporate America, which had previously had a largely cooperative relationship with unions, in effect declared war on organized labor.
Don't take my word for it; read Business Week, which published an article in 2002 titled "How Wal-Mart Keeps Unions at Bay." The article explained that "over the past two decades, Corporate America has perfected its ability to fend off labor groups." It then described the tactics - some legal, some illegal, all involving a healthy dose of intimidation - that Wal-Mart and other giant firms use to block organizing drives.
These hardball tactics have been enabled by a political environment that has been deeply hostile to organized labor, both because politicians favored employers' interests and because conservatives sought to weaken the Democratic Party. "We're going to crush labor as a political entity," Grover Norquist, the anti-tax activist, once declared.
But the times may be changing. A newly energized progressive movement seems to be on the ascendant, and unions are a key part of that movement. Most notably, the Service Employees International Union has played a key role in pushing for health care reform. And unions will be an important force in the Democrats' favor in next year's election.
Or maybe not - which brings us to the latest from Iowa.
Whoever receives the Democratic presidential nomination will receive labor's support in the general election. Meanwhile, however, unions are supporting favored candidates. Hillary Clinton - who for a time seemed the clear front-runner - has received the most union support. John Edwards, whose populist message resonates with labor, has also received considerable labor support.
But Barack Obama, though he has a solid pro-labor voting record, has not - in part, perhaps, because his message of "a new kind of politics" that will transcend bitter partisanship doesn't make much sense to union leaders who know, from the experience of confronting corporations and their political allies head on, that partisanship isn't going away anytime soon.
O.K., that's politics. But now Mr. Obama has lashed out at Mr. Edwards because two 527s - independent groups that are allowed to support candidates, but are legally forbidden from coordinating directly with their campaigns - are running ads on his rival's behalf. They are, Mr. Obama says, representative of the kind of "special interests" that "have too much influence in Washington."
The thing, though, is that both of these 527s represent union groups - in the case of the larger group, local branches of the S.E.I.U. who consider Mr. Edwards the strongest candidate on health reform. So Mr. Obama's attack raises a couple of questions.
First, does it make sense, in the current political and economic environment, for Democrats to lump unions in with corporate groups as examples of the special interests we need to stand up to?
Second, is Mr. Obama saying that if nominated, he'd be willing to run without support from labor 527s, which might be crucial to the Democrats? If not, how does he avoid having his own current words used against him by the Republican nominee?
Part of what happened here, I think, is that Mr. Obama, looking for a stick with which to beat an opponent who has lately acquired some momentum, either carelessly or cynically failed to think about how his rhetoric would affect the eventual ability of the Democratic nominee, whoever he or she is, to campaign effectively. In this sense, his latest gambit resembles his previous echoing of G.O.P. talking points on Social Security.
Beyond that, the episode illustrates what's wrong with campaigning on generalities about political transformation and trying to avoid sounding partisan.
It may be partisan to say that a 527 run by labor unions supporting health care reform isn't the same thing as a 527 run by insurance companies opposing it. But it's also the simple truth.
Income Gap Grows, Top 1% Makes Out Big Time Under Bush
According to an article in the 3-29-07 NY Times by David Cay Johnston ,income inequality grew significantly in 2005 with the top 1 percent of Americans--those with incomes that year of more than $348,000--RECEIVING THE LARGEST SHARE OF NATIONAL INCOME SINCE 1928.
The top 10 percent, roughly those earning more than $100,000, also reached a level of income share not seen since before the Depression.
While total reported income in the U.S. increased almost 9 percent in 2005, the most recent year for which such data are available, AVERAGE INCOMES FOR THOSE IN THE BOTTOM 10 PERCENT DIPPED SLIGHTLY COMPARED WITH THE YEAR BEFORE, DROPPING .6 PERCENT.
The gains went largely to the top 1 percent, whose incomes rose to an average of more than $1.1 million each, an increase of more than $139,000 or about 14 percent.
The new data also show that THE TOP 300,000 AMERICANS COLLECTIVELY ENJOYED ALMOST AS MUCH INCOME AS THE BOTTOM 150 MILLION AMERICANS.
The new data raise the question about continuing to provide tax cuts averaging over $150,000 a year to people making more than a million dollars a year, while saying we do not have enough money to provide health insurance to 47 million Americans and cutting education benefits.
Here's a link to the article:
Why Doesn't Everybody Come to the Tea Party?
All Men are Created Equal in the Toilet
- All Men are Created Equal in Riverside, California, Toilets
Jennifer Steinhauer reports in today's (5-8-09) NY Times on a dust-up in California's Riverside County government over differences in the quality of toilet paper provided for the county's 10 elected officials...
4-3-11NYTimes--"Gauging the Pain of the Middle Class" Robert H. Frank
- Rising Income Inequality Takes a Hidden Toll - NYTimes.com
The toil index measures the real cost of the income gap by analyzing the context in which families consume.