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Inequality’s Inconvenient Truths

Pop quiz: which Tea Party fiscal conservative said the following: “If you want to live in a more equal community, it might mean living in a more moribund economy.” Since this is obviously a trick question, here’s the answer: Annie Lowrey, the economics writer for the New York Times. Lowrey was offering a bit of common sense and basic economics. As such, the Times is a strange place for it: this sort of talk is usually the province of conservatives trying to explain how market economies work.

Lowrey’s piece was occasioned by the release of a study on inequality in American cities by the left-leaning Brookings Institution. To be sure, the study’s author, Alan Berube, does not think a city with high inequality is in the clear: “It may struggle to maintain mixed-income school environments that produce better outcomes for low-income kids. It may have too narrow a tax base from which to sustainably raise the revenues necessary for essential city services. And it may fail to produce housing and neighborhoods accessible to middle-class workers and families, so that those who move up or down the income ladder ultimately have no choice but to move out.”

But the causes of that inequality, the conditions that foster it, and the surest means to reduce it all throw cold water on President Obama’s inequality rhetoric and the class-warfare battle lines the Democrats have drawn. Contrary to the rich-getting-richer rhetoric the president relies on, Berube found that between 2007 and 2012, of the cities that saw dramatic increases in inequality, “most were not places where the rich made astronomical gains, but where low-income households suffered most from the recession and weak recovery…. Inequality increased across cities despite the fact that rich households were less rich in 2012 than in 2007.”

What they need most, then, is job creation. The Brookings study finds that cities with high inequality are better at producing wealth–and for good reason. The job market in such cities tends more toward growth industries. Lowrey’s follow-up on the report includes comments from Berube on the desirability of some of the causes of inequality, even if some of its effects are undesirable:

But in some cases, higher income inequality might go hand in hand with economic vibrancy, the study found. “These more equal cities — they’re not home to the sectors driving economic growth, like technology and finance,” said its author, Alan Berube. “These are places that are home to sectors like transportation, logistics, warehousing.”

He added, “In terms of actual per capita income growth, these are not places that would be high up the list.”

Lowrey is of course not far behind with the caveats and qualifications. “That does not mean that measures intended to mitigate inequality will necessarily reduce the vibrancy of a local community,” she chimes in. But she leaves it at that. It’s not much of a defense of efforts to combat inequality. It basically amounts to: Efforts to reduce inequality will very likely pose a threat to economic growth and employment, but it’s possible, certainly, that not every attempt to mitigate inequality will crush the poor and unemployed under the counterproductive weight of liberals’ good intentions.

Roundabout rhetoric on this issue is necessary for the left because they can’t just come out and say what they mean without losing elections. Namely, that their desire to feel morally superior to others is more important than the actual welfare of their intended beneficiaries.

In fairness, elsewhere in the Times piece we do get a suggestion for reducing urban inequality without confiscating the wealth of others or destroying economic growth: “But New York and many other cities have promised to tackle inequality, in part by shifting the tax burden, but also through initiatives aimed at attracting middle-class families with cheaper housing and better schools.”

How do you cut inequality without destroying the economy? You simply import people who aren’t rich and aren’t poor! But what does this tell us about the concentration on income inequality? That it’s a case of misplaced priorities. Importing not-rich-but-not-poor residents doesn’t make any structural change to the city’s economy so much as it papers over the causes of inequality by gaming the numbers.

Democrats and the president make the case that the key to fighting inequality is making the poor un-poor. Importing middle-class folks from the suburbs doesn’t do that, does it? Sure, it may have peripheral benefits for the less well-off. But it doesn’t rescue others from poverty. It simply makes it look like poverty is less endemic. It’s a cosmetic façade, in other words. Which is what may make it so attractive to liberal policymakers.