Commentary Magazine


Topic: income inequality

A Challenge to Liberals

In his column, the Washington Post’s E.J. Dionne once again issues a “challenge for conservatives.” This time his focus is on income inequality.

According to Dionne, “It’s good that conservatives are finally taking seriously the problems of inequality and declining upward mobility. It’s unfortunate that they often evade the ways in which structural changes in the economy, combined with conservative policies, have made matters worse.” Dionne goes on to praise European nations whose policies are more “’socialist’ or (to be precise) social democratic than ours” and which also have greater social mobility than we find in America today.

Dionne cites several factors for this – guaranteed health insurance, stronger union movements, more generous welfare states, and higher taxes. He then cites William Julius Wilson’s review of Timothy Noah’s book The Great Divergence, which mentions “the increasing importance of a college degree due to the shortage of better-educated workers; trade between the United States and low-wage nations; changes in government policy in labor and finance; and the decline of the labor movement. He also considers the extreme changes in the wage structure of corporations and the financial industry, in which American CEOs typically receive three times the salaries earned by their European counterparts.”

“Most conservatives accept the importance of education,” according to Dionne, “but then choose to ignore all the other forces Noah describes.”

In fact, some of us have written about income inequality in somewhat more detail than Dionne has. This essay in National Affairs, for example, is roughly 10 times longer than Dionne’s column – and is, I think it’s fair to say, less tendentious. (In reading Dionne and some others, I’m reminded of this description: “Like a magnet among iron filings, [his mind] either concentrated acceptable facts in a tight cluster, or repelled them and kept itself clean.”)

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Nothing Fair About Obama’s “Fairness”

Fairness and equality are 2012’s version of 2008’s hope and change. Barack Obama is monopolizing those brands while shirking the business of responsible governance and national purpose. Last week, millions of Americans received an unsolicited email from the White House urging individuals to “Just enter a few pieces of information about your taxes, and see how many millionaires pay a lower effective tax rate than you.” This was no ordinary piece of election year propaganda, but rather a draft notice urging citizens to report to duty and fight the class war declared by the president himself.  With titanic debt and deficit values assuming the ignorable status of imaginary numbers, he is refocusing our anxieties on the tangible fortunes of our neighbors.

Obama’s case for reelection rests on a false choice: America can retain its basic humanity via government intervention or sell its national soul for private profit. The press, as usual, is the megaphone. A new ABC News/Washington Post poll asks: “What do you think is the bigger problem in this country—unfairness in the economic system that favors the wealthy, or over-regulation of the free market that interferes with growth and prosperity?” Fifty-two percent said “unfairness,” and 37 percent said “over-regulation.” Some have pointed out that the poll sample is heavily skewed toward Democrats and the results are therefore meaningless. But that misses the larger point. The question is meaningless. Choosing between over-regulation and unfairness is like choosing between lethargy and obesity. For the past 50 years, federal regulation and income inequality have grown in tandem. See charts here and here.

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Income Inequality and the Buffett Rule

In his post this morning on Liberals, Conservatives, and Tax Fairness, Peter Wehner writes,

Liberals are correct about this: income inequality has increased over recent decades. The task of conservatives is to give a full and fair picture of income gaps in America, to explain what is behind it, and to point out the injustice of the left’s remedies and the degree to which their proposals represent a radical departure from America’s ideals.

I could hardly agree more, and agree that his excellent article in National Affairs, “How to Think About Inequality,” is a great place to start.

I would add one more reason why income inequality has grown in recent decades, and it’s not a small one: technology. Whenever a major new technology develops, it causes a marked and sudden inflorescence of new fortunes that greatly exceed the old fortunes. This happened with railroads (Vanderbilt, Gould, Harriman, Hill, etc.), steel (Carnegie, Phipps, Frick, Schwab, etc.), automobiles (Ford, Dodge, Sloan, Kettering, Mott, etc.), petroleum (Rockefeller, Flagler, Archbold, etc.) For each of those megafortunes, there were hundreds of others whose possessors were merely very rich, not Forbes-400 rich.

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Liberals, Conservatives and Tax Fairness

In defending President Obama’s effort to make as the centerpiece of his campaign the so-called Buffett Rule — which would require anyone earning at least $1 million a year to pay at least 30 percent of his income in taxes — Jason Furman, deputy director of Obama’s National Economic Council, said, “Our goal is to have a progressive tax system.”

Furman added that the tax was never intended “to bring the deficit down and the debt under control” (contradicting a past claim made by the president). The goal, according to Furman, is to establish “a basic issue of tax fairness.”

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Bruce Springsteen’s Brilliant Disguise

Bruce Springsteen is a fantastic musician. But he should stick to music rather than interviews in which he offers social commentary. Take Springsteen’s Rolling Stone interview with Jon Stewart, in which Springsteen complains about the level of greed at the top of the financial industry, lavishes praise on the Occupy Wall Street movement, and laments income inequality in America. “You cannot have a social contract with the enormous income disparity — you’re going to slice the country down the middle. It’s not going to hold.”

Perhaps the first thing to point out is that Springsteen’s estimated to be worth $200 million, meaning The Boss is doing more than his fair share to contribute to income inequality in America. (He probably ranks in the top 100th of the top one percent.)

As for the substantive issues surrounding income inequality, I agree with Springsteen that wide disparities in income and living standards can pose a danger to our social well-being. But the issue is far more complicated than he acknowledges. A National Affairs essay I co-authored points out that (a) income taxes in America are the most progressive among the rich nations in the world; (b) inequality is driven in part by the growing work-force participation rate of women; (c) federal old-age entitlement programs have become less progressive (which argues for means-testing Social Security and Medicare, a policy that is fiercely rejected by liberals); and (d) one of the quickest ways to increased income equality is a severe recession (since severe recessions destroy capital, which hurts top income earners more than average workers).

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Income Inequality in America

In the Spring issue of National Affairs, I’ve co-authored (with Robert Beschel) an essay, “How to Think About Inequality.”

The essay argues that while income inequality has never before been central to American politics, this year the divide between rich and poor promises to be a focal point. From there, the essay looks at the state of income inequality in America; its roots; and the role public policy has played in the gap between the top and bottom income earners in America. The essay concludes with reflections on income inequality and justice and sketches out the broad contours of what an “opportunity society” might look like.

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