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“The Populist Imperative”: Like It Or Not, The Simple Fact Is That Americans “Get” Inequality

“The outstanding faults of the economic society in which we live are its failure to provide for full employment and its arbitrary and inequitable distribution of wealth and incomes.”

John Maynard Keynes wrote that in 1936, but it applies to our own time, too. And, in a better world, our leaders would be doing all they could to address both faults.

Unfortunately, the world we actually live in falls far short of that ideal. In fact, we should count ourselves lucky when leaders confront even one of our two great economic failures. If, as has been widely reported, President Obama devotes much of his State of the Union address to inequality, everyone should be cheering him on.

They won’t, of course. Instead, he will face two kinds of sniping. The usual suspects on the right will, as always when questions of income distribution comes up, shriek “Class warfare!” But there will also be seemingly more sober voices arguing that he has picked the wrong target, that jobs, not inequality, should be at the top of his agenda.

Here’s why they’re wrong.

First of all, jobs and inequality are closely linked if not identical issues. There’s a pretty good although not ironclad case that soaring inequality helped set the stage for our economic crisis, and that the highly unequal distribution of income since the crisis has perpetuated the slump, especially by making it hard for families in debt to work their way out.

Moreover, there’s an even stronger case to be made that high unemployment — by destroying workers’ bargaining power — has become a major source of rising inequality and stagnating incomes even for those lucky enough to have jobs.

Beyond that, as a political matter, inequality and macroeconomic policy are already inseparably linked. It has been obvious for a long time that the deficit obsession that has exerted such a destructive effect on policy these past few years isn’t really driven by worries about the federal debt. It is, instead, mainly an effort to use debt fears to scare and bully the nation into slashing social programs — especially programs that help the poor. For example, two-thirds of the spending cuts proposed last year by Representative Paul Ryan, the chairman of the House Budget Committee, would have come at the expense of lower-income families.

The flip side of this attempt to use fiscal scare tactics to worsen inequality is that highlighting concerns about inequality can translate into pushback against job-destroying austerity, too.

But the most important reason for Mr. Obama to focus on inequality is political realism. Like it or not, the simple fact is that Americans “get” inequality; macroeconomics, not so much.

There’s an enduring myth among the punditocracy that populism doesn’t sell, that Americans don’t care about the gap between the rich and everyone else. It’s not true. Yes, we’re a nation that admires rather than resents success, but most people are nonetheless disturbed by the extreme disparities of our Second Gilded Age. A new Pew poll finds an overwhelming majority of Americans — and 45 percent of Republicans! — supporting government action to reduce inequality, with a smaller but still substantial majority favoring taxing the rich to aid the poor. And this is true even though most Americans don’t realize just how unequally wealth really is distributed.

By contrast, it’s very hard to communicate even the most basic truths of macroeconomics, like the need to run deficits to support employment in bad times. You can argue that Mr. Obama should have tried harder to get these ideas across; many economists cringed when he began echoing Republican rhetoric about the need for the federal government to tighten its belt along with America’s families. But, even if he had tried, it’s doubtful that he would have succeeded.

Consider what happened in 1936. F.D.R. had just won a smashing re-election victory, largely because of the success of his deficit-spending policies. It’s often forgotten now, but his first term was marked by rapid economic recovery and sharply falling unemployment. But the public remained wedded to economic orthodoxy: by a more than 2-to-1 majority, voters surveyed by Gallup just after the election called for a balanced budget. And F.D.R., unfortunately, listened; his attempt to balance the budget soon plunged America back into recession.

The point is that of the two great problems facing the U.S. economy, inequality is the one on which Mr. Obama is most likely to connect with voters. And he should seek that connection with a clear conscience: There’s no shame in acknowledging political reality, as long as you’re trying to do the right thing.

So I hope we’ll hear something about jobs Tuesday night, and some pushback against deficit hysteria. But if we mainly hear about inequality and social justice, that’s O.K.

 

By: Paul Krugman, Op-Ed Columnist, The New York Times, January 23, 2014

January 25, 2014 Posted by | Economic Inequality, Income Gap | , , , , , , , | 2 Comments

“Isolated From The Rest Of The Public”: The Tea Party And The Hammock Theory Of Poverty

The increased focus on inequality has shifted the conversation away from deficit/austerity mania and towards a discussion of what government should be doing to boost the economy and protect people from economic harm. And it’s also prompted good new polling that goes deep into public views of the economy, the safety net, inequality, and what government should do about it.

On these topics, this week brought two new polls from Pew Research and CBS News.

I’ve asked both firms for a detailed breakdown of their data, and here’s a striking finding: The ideas and assumptions underlying the GOP economic and poverty agenda are far and away more reflective of the preoccupations of Tea Party Republicans. Meanwhile, non-Tea Party Republicans are much more in line with the rest of the public on these matters.

In short, the Tea Party economic worldview, if such a thing exists, is isolated from the rest of the public, and even to some degree from non-Tea Party Republicans – yet it has an outsized role in shaping the GOP’s overall agenda.

Both the Pew and CBS polls find large majorities believe the income gap is growing, and both find that more Americans want government to do something about it. Both also find solid majority support for raising the minimum wage, extending unemployment benefits, and (in Pew’s case) taxing the rich to help the poor.

Both polls also find that far larger numbers of Republicans don’t think government should act to reduce inequality. This is reflected in the GOP economic agenda. As Jonathan Chait explains, this agenda continues to be premised on the ideas that there is, if anything, too much downward redistribution of wealth, that government shouldn’t interfere in the market by, say, raising the minimum wage, and that safety net programs lull people into dependency (Paul Ryan’s Hammock Theory of Poverty).

But here’s the thing. That basic set of assumptions — and the resulting positions on some of the individual policies being discussed – are held overwhelmingly by Tea Party Republicans; and not nearly as much by non-tea party Republicans. Key findings:

On government action to combat inequality:

* The Pew poll finds Republicans divided on whether government should do a lot or some to reduce inequality, versus doing little or nothing, by 49-46. But tea party Republicans overwhelmingly tilt against  government doing something by 66-28, while non-tea party Republicans overwhelmingly favor doing something by 60-35.

* The CBS poll is less pronounced, but even here, Tea Party Republicans overwhelmingly oppose government acting to reduce the gap between rich and poor by 82-17, while non-Tea Party Republicans believe this by 66-29 (so nearly a third of non-Tea party Republicans believe it).

On unemployment benefits:

* The Pew poll finds Republicans oppose extending unemployment benefits by 53-44. But Tea Party Republicans overwhelmingly oppose this by 70-29, while non-Tea Party Republicans support it by 52-44.

* Similarly, the CBS poll finds that Republicans oppose extending unemployment benefits by 49-40. But Tea Party Republicans overwhelmingly oppose it by 58-31. Non-Tea Party Republicans favor extending them by 46-43.

On the Hammock Theory of Poverty:

* The CBS poll finds that Republicans believe unemployment benefits make people less motivated to look for a job by 57-40. But Tea Party Republicans overwhelmingly believe this by 67-32. By contrast, only a minority of non-tea party Republicans believe this (47-51).

* The Pew poll has a similar finding: Republicans believe government aid to the poor does more harm than good by making people dependent on government, rather than doing more good than harm, by 67-27. But Tea Party Republicans overwhelmingly believe this by 84-11, while non-tea party Republicans are somewhat more closely divided, 59-35.

On the minimum wage:

* The Pew poll finds that Republicans favor raising the minimum wage to $10.10 an hour by 54-44. But Tea Party Republicans overwhelmingly oppose this by 65-33. Non-Tea Party Republicans overwhelmingly support it by 65-33. (All the above Pew numbers include Republicans and GOP-leaners).

* The CBS poll is less pronounced, but even here, Tea Party Republicans tilt against a minimum wage hike by 52-47, while non-tea party Republicans favor it by 50-48.

A number of conservative reform types, such as Michael Gerson and Peter Wehner, and Michael Strain, have written at length about the need to break from tea party orthodoxy on economic matters, and to begin to envision an affirmative government role when it comes to strengthening (and reforming) the safety net, and even spending government money to combat the near term jobs emergency. I don’t know if non-tea party Republicans can be reached and split off from the tea party on these matters or not, but it does seem at least plausible, if the above numbers are an accurate picture of things.

Meanwhile, some Republican lawmakers do seem sincere about charting a new course on poverty. But the party agenda remains in thrall to a set of ideas that remain largely the province of a small tea party minority, and are not nearly as widely held among Republicans overall.

 

By: Greg Sargent, The Plum Line, The Washington Post, January 24, 2014

January 25, 2014 Posted by | Economic Inequality, Income Gap, Tea Party | , , , , , , | Leave a comment

“Raising The Minimum Is The Bare Minimum”: What America Needs Is To Shift Income From Capital To Labor

In 1995, when John Sweeney ran the first and as-yet-only insurgent campaign for the presidency of the AFL-CIO, his platform took the form of a book entitled America Needs a Raise. If that title rang true in 1995, it clangs with deafening authority today.

Which leads us to the only problem with the current campaigns to raise the minimum wage: It’s not just workers at the low end of the wage scale who need a raise. It’s not just the work of the bottom 9 percent of labor force that is undervalued. It’s the work of the bottom 90 percent.

Conservatives who oppose raising the minimum wage argue that we need to address the decline of the family and the failure of the schools if we are to arrest the income decline at the bottom of the economic ladder. But how then to explain the income stagnation of those who are, say, on the 85th rung of a 100-rung ladder? How does the decline of the family explain why all gains in productivity now go to the richest 10 percent of Americans only? And are teachers unions really to blame for the fact that wages now constitute the lowest share of Gross Domestic Product since the government started measuring shares, and that corporate profits now constitute the highest share?

We need to raise the minimum wage, but that’s only the start. Even more fundamentally, we must reverse the deeper and more profound redistribution of wealth that has now plagued the nation for several decades: that from capital to labor.

For as income from work declines for the nation as a whole—inflation-adjusted median hourly wages are now more than $1.50 lower than they were in 1972—income from investment soars. The stock markets are hitting record highs, and major corporations are using the $1.5 trillion they have lying around to raise not wages but dividends. They are also using some of that cash to buy back their own stock, which raises the value of the outstanding shares, to which, happily, most CEO’s compensation packages are linked.

The institutions that once ensured that American workers actually got their share of the pie—unions—have been so thoroughly battered down that they can no longer effectively bargain for raises. That leaves that other instrument of the popular will— the state—as the sole remaining institution that can bargain for workers. That’s why the minimum wage, the living wage and the Earned Income Tax Credit have taken on a greater significance than they previously held: They not only raise the incomes of the poor, but are the last remaining vehicles for raising wages.

That’s why just stopping with raising the minimum, important though that be to the nation’s economic and moral health, is nowhere near enough. Making it safe again for workers to try to join unions is a necessity, too, but that’s a fight that labor has been waging for half-a-century with nothing to show for it. The left needs to battle on other fronts as well.

We could begin by shifting the tax burden from labor to capital—after all, income in America has long been shifted from labor to capital.  We could abolish the payroll tax on the first $25,000 that people make, substituting for it a higher threshold on taxable income. We could raise the tax rates on capital gains and dividends not just to the same levels as income derived from work but higher still. And we could explicitly designate some of the revenue from capital income to go to a much expanded Earned Income Tax Credit—expanded not just by making the payments more generous, but also by raising the criterion for eligibility well above the government’s poverty threshold.

By explicitly taking back from capital some of the wealth it has taken from labor, government would begin to address the root causes of economic inequality. Not all of them, to be sure: The stratospheric salaries that top corporate executives and Wall Street traders command aren’t capital income as such. One way to rein in executive pay might be to set corporate tax rates by the size of the gap between top executives’ and median workers’ pay, the data on which the Securities and Exchange Commission is supposed to make public under the terms of Dodd-Frank. Or it might be to set corporate tax rates based whether the corporation has a stakeholder or a shareholder board. In Germany, corporations are required to have equal numbers of employee and management representatives on their boards, which has effectively reduced CEO pay at most German companies to a multiple of 10 or 12 times that of its median employee, not the 200 or 300 times that’s the norm in the U.S.

If we want to address economic equality, we need to follow the money. In recent decades, as a result not just of globalization and technology but also of the decline of unions and the rising political power of the rich, the money has almost entirely gone to the rich—in the current recovery, fully 95 percent of income growth to the top 1 percent. So by all means, raise the minimum wage. But don’t stop there.

 

By: Harold Meyerson, The American Prospect, January 22, 2014

January 24, 2014 Posted by | Economic Inequality, Minimum Wage | , , , , , , , | 2 Comments

“Rendering Unions Toothless: Supreme Court Aligns Against The Have-Nots

Among the causes most frequently cited for the dizzying rise in American inequality in recent decades — globalization, technology, de-unionization — one culprit is generally left off the list: the Supreme Court. But the justices (more precisely, the conservative justices) must be given their due. In cases ranging from Buckley v. Valeo in 1976 to Citizens United v. Federal Election Commission in 2010, they have greatly increased the wealthy’s sway over elections — which, in turn, has led to public policies that have reduced taxes on the rich, curtailed regulation of Wall Street and kept workers from forming unions.

On Tuesday, the justices were presented with a golden opportunity to further increase inequality. The court heard arguments in Harris v. Quinn , a case testing whether home-care providers who work under a union contract with the state of Illinois can avoid paying dues that support the union’s collective-bargaining work. (Under the law, they already can decline to pay the share of dues that goes to the union’s political work.)

Home-care workers are hired by aging or disabled individuals and their families, some of whom are eligible to have the expense picked up by Medicaid. That arrangement means the home-care workers’ pay levels are set by the states — making both the state and the individual a worker’s employer of record.

Over the past two decades, an increasing number of states, acting as employers, have given home-care workers the right to vote on whether they wish to form a union. Home care costs states one-third the amount they spend for comparable care in nursing homes or long-term-care facilities. The wages won by those workers’ unions ensure less employee churn and better care, which is why disability advocacy groups such as the American Association of People With Disabilities have submitted amicus briefs in Harris supporting the union.

It’s no mystery why a majority of home-care workers in Illinois and many other states have voted to form unions. In 2012, the median hourly wage for direct-care workers hired out by agencies was $10.21. Such workers covered by union contracts in Illinois are paid $13 an hour and get health insurance. In Washington state, according to an American Federation of State, County & Municipal Employees official, the unionized workers make $14.34; in Oregon, $13; in California, $12.20.

The eight workers who brought the lawsuit the court heard Tuesday don’t want to pay dues to the union that won them their raises, though I’ve seen no reports suggesting they’ve volunteered to give back this additional money and forgo health insurance. In the 1977 case Abood v. Detroit Board of Education , the court ruled that members of public-sector unions were required to pay the portion of union dues that went toward bargaining and administering their contracts. Two years ago, however, an opinion by Justice Samuel A. Alito Jr., joined by the court’s four other Republican appointees, suggested that the court should reconsider Abood.

The effects of such a reconsideration could be far-reaching. If workers can benefit from contracts without paying even what it costs the unions to secure those contracts, those unions would suffer revenue declines that could render them toothless. Once their unions lost power, home-care givers — a group that is overwhelmingly female, disproportionately minority and almost universally poor — would be highly unlikely to get any more raises. Turnover rates within the care-provider workforce would surely rise.

Such a reconsideration could be of even greater consequence if Alito & Co. go further and rule that no member of a public-employee union should be required to pay the dues that go to securing his or her contract. With the decline of private-sector unions, ­public-employee unions have become the preeminent organizers of voter mobilization campaigns in working-class and minority communities, the leading advocates of immigration reform, the foremost lobby for raising the minimum wage and the all-around linchpin of the modern Democratic Party. A sweeping, party-line ruling by the five conservative justices in Harris could significantly damage the Democrats.

Whatever its effect on the nation’s partisan balance, a ruling that neuters the organizations that poor, working women have joined to win a few dollars an hour more would put a judicial seal of approval on the United States’ towering economic inequality. Well into the New Deal, the Supreme Court consistently overturned laws that enabled workers to win higher wages, helping to delay the advent of the middle-class majority that emerged after World War II. It now has the option to speed that middle class’s demise.

 

By: Harold Meyerson, Opinion Writer, The Washington Post, January 21, 2014

January 23, 2014 Posted by | Economic Inequality, Supreme Court, Union Busting | , , , , , , | 1 Comment

“The Undeserving Rich”: Capitalism As Currently Constituted Is Undermining The Foundations Of Middle-Class Society

The reality of rising American inequality is stark. Since the late 1970s real wages for the bottom half of the work force have stagnated or fallen, while the incomes of the top 1 percent have nearly quadrupled (and the incomes of the top 0.1 percent have risen even more). While we can and should have a serious debate about what to do about this situation, the simple fact — American capitalism as currently constituted is undermining the foundations of middle-class society — shouldn’t be up for argument.

But it is, of course. Partly this reflects Upton Sinclair’s famous dictum: It is difficult to get a man to understand something when his salary depends on his not understanding it. But it also, I think, reflects distaste for the implications of the numbers, which seem almost like an open invitation to class warfare — or, if you prefer, a demonstration that class warfare is already underway, with the plutocrats on offense.

The result has been a determined campaign of statistical obfuscation. At its cruder end this campaign comes close to outright falsification; at its more sophisticated end it involves using fancy footwork to propagate what I think of as the myth of the deserving rich.

For an example of de facto falsification, one need look no further than a recent column by Bret Stephens of The Wall Street Journal, which first accused President Obama (wrongly) of making a factual error, then proceeded to assert that rising inequality was no big deal, because everyone has been making big gains. Why, incomes for the bottom fifth of the U.S. population have risen 186 percent since 1979!

If this sounds wrong to you, it should: that’s a nominal number, not corrected for inflation. You can find the inflation-corrected number in the same Census Bureau table; it shows incomes for the bottom fifth actually falling. Oh, and for the record, at the time of writing this elementary error had not been corrected on The Journal’s website.

O.K., that’s what crude obfuscation looks like. What about the fancier version?

I’ve noted before that conservatives seem fixated on the notion that poverty is basically the result of character problems among the poor. This may once have had a grain of truth to it, but for the past three decades and more the main obstacle facing the poor has been the lack of jobs paying decent wages. But the myth of the undeserving poor persists, and so does a counterpart myth, that of the deserving rich.

The story goes like this: America’s affluent are affluent because they made the right lifestyle choices. They got themselves good educations, they got and stayed married, and so on. Basically, affluence is a reward for adhering to the Victorian virtues.

What’s wrong with this story? Even on its own terms, it postulates opportunities that don’t exist. For example, how are children of the poor, or even the working class, supposed to get a good education in an era of declining support for and sharply rising tuition at public universities? Even social indicators like family stability are, to an important extent, economic phenomena: nothing takes a toll on family values like lack of employment opportunities.

But the main thing about this myth is that it misidentifies the winners from growing inequality. White-collar professionals, even if married to each other, are only doing O.K. The big winners are a much smaller group. The Occupy movement popularized the concept of the “1 percent,” which is a good shorthand for the rising elite, but if anything includes too many people: most of the gains of the top 1 percent have in fact gone to an even tinier elite, the top 0.1 percent.

And who are these lucky few? Mainly they’re executives of some kind, especially, although not only, in finance. You can argue about whether these people deserve to be paid so well, but one thing is clear: They didn’t get where they are simply by being prudent, clean and sober.

So how can the myth of the deserving rich be sustained? Mainly through a strategy of distortion by dilution. You almost never see apologists for inequality willing to talk about the 1 percent, let alone the really big winners. Instead, they talk about the top 20 percent, or at best the top 5 percent. These may sound like innocent choices, but they’re not, because they involve lumping in married lawyers with the wolves of Wall Street. The DiCaprio movie of that name, by the way, is wildly popular with finance types, who cheer on the title character — another clue to the realities of our new Gilded Age.

Again, I know that these realities make some people, not all of them hired guns for the plutocracy, uncomfortable, and they’d prefer to paint a different picture. But even if the facts have a well-known populist bias, they’re still the facts — and they must be faced.

 

By: Paul Krugman, Op-Ed Columnist, The New York Times, January 19, 2014

January 21, 2014 Posted by | Capitalism, Economic Inequality | , , , , , , , | 1 Comment

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