Tag Archives: Inequality

Selected Reading On The Mess We’re In

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Historian Sean Wilentz makes a forceful argument in favor of Obama invoking the 14th Amendment to protect the world’s economy:

… the president would have done his constitutional duty, saved the country and undoubtedly earned the gratitude of a relieved people. Then the people would find the opportunity to punish those who vandalized the Constitution and brought the country to the brink of ruin.

http://www.nytimes.com/2013/10/08/opinion/obamas-options.html?pagewanted=2&hp

The New York Times editorial board is justifiably outraged that many people living in Republican-run states will still lack health insurance next year — they’ll earn too little to be covered by the Affordable Care Act and too much to be covered by Medicaid:

Their plight is a result of the Supreme Court’s decision last year that struck down the reform law’s mandatory expansion of Medicaid and made expansion optional. Every state in the Deep South except Arkansas has rejected expansion, as have Republican-led states elsewhere, [although] there is no provision in the ACA to provide health insurance subsidies for anyone below the poverty line … those people are supposed to be covered by Medicaid… Eight million Americans who are impoverished and uninsured will be ineligible for help of either kind.

http://www.nytimes.com/2013/10/04/opinion/a-population-betrayed.html?ref=opinion

Of course, Congress could easily fix this problem, but that would require You Know Who to cooperate.

At Jacobin, Shawn Gude writes about the fundamental tension between capitalism and democracy, in the context of living-wage legislation in the District of Columbia:

The controversy throws into sharp relief one of our era’s great unspoken truths: Capitalist democracy, if not an oxymoron, is less a placid pairing than an acrimonious amalgamation. The marriage that Francis Fukuyama famously pronounced eternal is in fact a union of opposites. Inherent to capitalism is inequality, fundamental to democracy is equality. Class stratification, the lifeblood of capitalism, leaves democracy comatose. The economic “base,” to put it in classical Marxian terms, actively undermines the purported values of the political superstructure.

http://jacobinmag.com/2013/08/capitalism-vs-democracy/

And finally, Nobel Prize-winning economist Joseph Stiglitz argues that we can undo the decisions that got us into this mess:

We have become the advanced country with the highest level of inequality, with the greatest divide between the rich and the poor… The central message of my book, The Price of Inequality, is that all of us, rich and poor, are footing the bill for this yawning gap. And that this inequality is not inevitable. It is not … like the weather, something that just happens to us. It is not the result of the laws of nature or the laws of economics. Rather, it is something that we create, by our policies, by what we do.  

We created this inequality—chose it, really—with laws that weakened unions, that eroded our minimum wage to the lowest level, in real terms, since the 1950s, with laws that allowed CEO’s to take a bigger slice of the corporate pie, bankruptcy laws that put Wall Street’s toxic innovations ahead of workers. We made it nearly impossible for student debt to be forgiven. We underinvested in education. We taxed gamblers in the stock market at lower rates than workers, and encouraged investment overseas rather than at home.

http://www.alternet.org/economy/joe-stiglitz-people-who-break-rules-have-raked-huge-profits-and-wealth-and-its-sickening-our

Meanwhile, the Swiss are voting on whether to guarantee everybody a minimum monthly income of $2500 francs ($2800 dollars). They’re also voting on a proposal to limit executive pay to no more than 12 times what the company’s lowest-paid workers earn. Who knew that the businesslike, orderly Swiss were a bunch of commies? Or maybe they’re just fed up with rising inequality, even in Switzerland.

http://www.reuters.com/article/2013/10/04/us-swiss-pay-idUSBRE9930O620131004

Class Warfare Is a Fact – Part 3

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After some discussion in the comments on Part 2 of what has turned into a brief series, I thought it would be a good idea to post the concluding paragraphs of the underlying paper by Emmanuel Saez (winner of the John Bates Clark Medal, periodically awarded to an outstanding young economist).

Here are his conclusions (my emphasis added):

“Interestingly, the income composition pattern at the very top has
changed considerably over the century. The share of wage and salary income
has increased sharply from the 1920s to the present, and especially since the
1970s. Therefore, a significant fraction of the surge in top incomes since 1970
is due to an explosion of top wages and salaries. Indeed, estimates based
purely on wages and salaries show that the share of total wages and salaries
earned by the top 1 percent wage income earners has jumped from 5.1
percent in 1970 to 12.4 percent in 2007.

(Footnote:  this dramatic increase in top wage incomes has not been mitigated by an increase in mobility at the top of the wage distribution.As Wojciech Kopczuk, myself, and JaeSong have shown in a separate paper,the probability of staying in the top 1 percent wage income group from one year to the next has remained remarkably stable since the 1970s.)

Evidence based on the wealth distribution is consistent with those
facts. Estimates of wealth concentration, measured by the share of total
wealth accruing to top 1 percent wealth holders, constructed by Wojciech
Kopczuk and myself from estate tax returns for the 1916-2000 period in the
United States show a precipitous decline in the first part of the century with
only fairly modest increases in recent decades. The evidence suggests that
top incomes earners today are not “rentiers” deriving their incomes from past
wealth but rather are “working rich,” highly paid employees or new
entrepreneurs who have not yet accumulated fortunes comparable to those
accumulated during the Gilded Age. Such a pattern might not last for very
long. The drastic cuts of the federal tax on large estates could certainly
accelerate the path toward the reconstitution of the great wealth concentration
that existed in the U.S. economy before the Great Depression.
The labor market has been creating much more inequality over the
last thirty years, with the very top earners capturing a large fraction of
macroeconomic productivity gains.

A number of factors may help explain this increase in inequality, not only underlying technological changes but also the retreat of institutions developed during the New Deal and World War II – such as progressive tax policies, powerful unions, corporate provision of health and retirement benefits, and changing social norms regarding pay inequality. We need to decide as a society whether this increase in income inequality is efficient and acceptable and, if not, what mix of institutional and tax reforms should be developed to counter it.“

End quote.

By the way, the latest column by Paul Krugman (winner of the Nobel Prize in economics and one of the most astute op-ed columnists writing today) is called “Rich Man’s Recovery”:

“Whatever is causing the growing concentration of income at the top, the effect of that concentration is to undermine all the values that define America. Year by year, we’re diverging from our ideals. Inherited privilege is crowding out equality of opportunity; the power of money is crowding out effective democracy.

So what can be done? For the moment, the kind of transformation that took place under the New Deal — a transformation that created a middle-class society, not just through government programs, but by greatly increasing workers’ bargaining power — seems politically out of reach. But that doesn’t mean we should give up on smaller steps, initiatives that do at least a bit to level the playing field.”

End quote.

This isn’t a war in the usual sense, but the fact remains that the people in this country who have the most money are using their high incomes and wealth to manipulate the political system and other levers of power in order to increase their advantages still more. It’s not a shooting war, but it’s an assault on America as a prosperous and democratic nation.

——————————————————————————————————————-

Professor Saez’s relatively short paper:

http://elsa.berkeley.edu/~saez/saez-UStopincomes-2012.pdf

Professor Krugman’s most recent column:

http://www.nytimes.com/2013/09/13/opinion/krugman-rich-mans-recovery.html?hp

Class Warfare Is a Fact – Part 2

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Paul Krugman makes the important point that the substantial gains in income for the richest Americans has been concentrated in a very small group. It’s not the top 10% or the top 5% or even the top 1% that has prospered the most — it’s the top tenth of 1% and the top hundredth of 1% who have substantially increased their share of the national income:

Of the gains made by the top 10 percent [since 1979], almost none went to the 90-95 group; in fact, the great bulk went to the top 1 percent. The bulk of the gains of the top 1, in turn, went to the top 0.1; and the bulk of those gains went to the top 0.01. We really are talking about the flourishing of a tiny elite.

In other words, income has only increased for the top 5.0% since 1979, and more than half of that increase went to the top 0.1%. It’s as if the bottom 95.0% of Americans haven’t received a raise in 30 years.

http://krugman.blogs.nytimes.com/2013/09/12/good-times-at-the-top/

Class Warfare Is a Fact

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An updated study by economist Emanuel Saez of U.C. Berkeley shows that the the top 1% of earners in the United States received more than 20% of the country’s total income in 2012, while the top 10% of earners received more than half of the country’s income. The share of income going to the wealthiest Americans is now at or near the highest levels on record since the government began keeping the relevant statistics and the federal income tax was created in 1913.

What’s even more remarkable, perhaps, is that the income of the top 1% went up nearly 20% in 2012, while the income of the remaining 99% rose only 1%. Since 2009, the wealthiest 1% have taken 95% of the income gains in our supposedly classless society.

We should remember these statistics when we hear Republican politicians, who pretend to be friends of the middle class, claim that lower taxes for the wealthy benefit everyone. It’s past time to raise taxes on the rich, invest in America’s infrastructure and start creating decent jobs again. Otherwise we’re going to continue to get economically screwed.

Note the year 1980 in this chart, when class warrior and demagogue supreme Ronald Reagan was elected President:

10economix-sub-wealth-blog480

http://takingnote.blogs.nytimes.com/2013/09/11/the-rich-got-richer/

Money Is Wasted On the Rich

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At an art auction on Tuesday night, an anonymous buyer bid $43,800,000.00 (that’s 43.8 million dollars) for this painting (the blue thing with the white stripe, not the gentlemen in suits).

We could draw lots of conclusions from this latest Gilded Age moment. At a minimum, we ought to have a progressive sales tax, one that applies higher rates to more expensive purchases. For this particular purchase, I’d recommend a tax of at least 100%.

http://www.nytimes.com/2013/05/15/arts/design/record-auction-price-for-barnett-newman-at-sothebys.html?hp