“Why Inequality Matters”: Rising Inequality Is By Far The Most Important Single Factor Behind Lagging Middle-Class Incomes
Rising inequality isn’t a new concern. Oliver Stone’s movie “Wall Street,” with its portrayal of a rising plutocracy insisting that greed is good, was released in 1987. But politicians, intimidated by cries of “class warfare,” have shied away from making a major issue out of the ever-growing gap between the rich and the rest.
That may, however, be changing. We can argue about the significance of Bill de Blasio’s victory in the New York mayoral race or of Elizabeth Warren’s endorsement of Social Security expansion. And we have yet to see whether President Obama’s declaration that inequality is “the defining challenge of our age” will translate into policy changes. Still, the discussion has shifted enough to produce a backlash from pundits arguing that inequality isn’t that big a deal.
They’re wrong.
The best argument for putting inequality on the back burner is the depressed state of the economy. Isn’t it more important to restore economic growth than to worry about how the gains from growth are distributed?
Well, no. First of all, even if you look only at the direct impact of rising inequality on middle-class Americans, it is indeed a very big deal. Beyond that, inequality probably played an important role in creating our economic mess, and has played a crucial role in our failure to clean it up.
Start with the numbers. On average, Americans remain a lot poorer today than they were before the economic crisis. For the bottom 90 percent of families, this impoverishment reflects both a shrinking economic pie and a declining share of that pie. Which mattered more? The answer, amazingly, is that they’re more or less comparable — that is, inequality is rising so fast that over the past six years it has been as big a drag on ordinary American incomes as poor economic performance, even though those years include the worst economic slump since the 1930s.
And if you take a longer perspective, rising inequality becomes by far the most important single factor behind lagging middle-class incomes.
Beyond that, when you try to understand both the Great Recession and the not-so-great recovery that followed, the economic and above all political impacts of inequality loom large.
It’s now widely accepted that rising household debt helped set the stage for our economic crisis; this debt surge coincided with rising inequality, and the two are probably related (although the case isn’t ironclad). After the crisis struck, the continuing shift of income away from the middle class toward a small elite was a drag on consumer demand, so that inequality is linked to both the economic crisis and the weakness of the recovery that followed.
In my view, however, the really crucial role of inequality in economic calamity has been political.
In the years before the crisis, there was a remarkable bipartisan consensus in Washington in favor of financial deregulation — a consensus justified by neither theory nor history. When crisis struck, there was a rush to rescue the banks. But as soon as that was done, a new consensus emerged, one that involved turning away from job creation and focusing on the alleged threat from budget deficits.
What do the pre- and postcrisis consensuses have in common? Both were economically destructive: Deregulation helped make the crisis possible, and the premature turn to fiscal austerity has done more than anything else to hobble recovery. Both consensuses, however, corresponded to the interests and prejudices of an economic elite whose political influence had surged along with its wealth.
This is especially clear if we try to understand why Washington, in the midst of a continuing jobs crisis, somehow became obsessed with the supposed need for cuts in Social Security and Medicare. This obsession never made economic sense: In a depressed economy with record low interest rates, the government should be spending more, not less, and an era of mass unemployment is no time to be focusing on potential fiscal problems decades in the future. Nor did the attack on these programs reflect public demands.
Surveys of the very wealthy have, however, shown that they — unlike the general public — consider budget deficits a crucial issue and favor big cuts in safety-net programs. And sure enough, those elite priorities took over our policy discourse.
Which brings me to my final point. Underlying some of the backlash against inequality talk, I believe, is the desire of some pundits to depoliticize our economic discourse, to make it technocratic and nonpartisan. But that’s a pipe dream. Even on what may look like purely technocratic issues, class and inequality end up shaping — and distorting — the debate.
So the president was right. Inequality is, indeed, the defining challenge of our time. Will we do anything to meet that challenge?
By: Paul Krugman, Op-Ed Contributor, The New York Times, December 15, 2013
“What Would Jesus Cut?”: Republicans Should Listen To Pope Francis’ Economic Message
Usually poverty gets less attention from the media than global warming, which gets very little. Now the problem is on the front pages and trending on Twitter. Two weeks ago, Pope Francis issued a plea for income equality, and it was President Obama’s turn to discuss poverty last week. Underpaid workers are mounting protests against Wal-Mart and the fast food industry. New Jersey, the District of Columbia and many municipalities have recently increased the minimum wage within their jurisdictions.
Middle-class families are mired in debt because their incomes haven’t increased in the last 20 years while college, energy and health care costs have skyrocketed. Meanwhile, economic royalists are reaping the benefits of trickle-down economics as they harvest the lion’s share of income growth.
The concentration of wealth has become such a problem that wealth is even concentrated among the wealthy. In the recent Forbes list of top earners, 6 of the richest 10 Americans were either Kochs or Waltons. You will find a family portrait of the Waltons beside the word selfish in the dictionary. The Walton family makes billions of dollars every year, but they can’t reach deep enough into their pockets to pay the employees at Wal-Mart a living wage.
Two weeks ago, the pope made a strong statement about the evils of poverty. Pope Francis said “trickle down” economics is a “crude naïve belief in the goodness of those wielding economic power.” Francis wasn’t the first pope to weigh in on poverty. In the shade of economic abuses during the industrial age, Pope Pius VIII called for a “living wage” in his 1891 message “Rerum Novarum,” which roughly translates from Latin into English as “On the New World.” The economic deprivations of our time resemble the abuses of that era. Modern conservatives might note that the abuses of the industrial age led to the progressive populist presidencies of Teddy Roosevelt and Woodrow Wilson. The policies of those two presidents were the foundation of Franklin Roosevelt’s New Deal.
Pope Francis’s pronouncement was strong enough to generate an attack from Rush Limbaugh, who described the pontiff’s statement as “Marxist dogma.” Limbaugh should be more careful about calling people names, because if the pope is a Marxist so is Jesus. I don’t know if Rush ever reads the Bible, but he might want to check out the Sermon on the Mount in the Gospel of St. Matthew. In the sermon, Jesus said, “Blessed are the poor in spirit; for theirs is the Kingdom of Heaven”.
I went to Holy Cross High School in Flushing, Queens, in New York City. Flushing was the home of the famous blue collar fictional TV conservative, Archie Bunker. If Archie had had a talk radio show, he would have been Rush Limbaugh. Many of my schoolmates were from families like Archie’s and had the same conservative beliefs.
One of my teachers was Brother Anthony Pepe. Brother Anthony was not preaching to the choir when he taught that the Gospel of St. Matthew was the gospel of social justice. I don’t know if the good brother had an impact on my conservative classmates, but he made a strong impression on me. Jesus made it pretty clear the only people going to heaven were those who cared for the sick, hungry and infirm.
If tea partiers like Rep. Paul Ryan, R-Wis., want to accuse Jesus of waging class warfare, so be it. The flip side of the Gospel of St. Matthew is Ryan’s path to poverty budget. The Ryan budget would decimate social programs crucial to the lives of middle-class families and the survival of poor families. Ryan says his opposition to abortion is based is based on his Catholic faith but he completely ignores his church’s teaching on poverty. I hope he paid attention to his spiritual leader when he spoke about the dangers of “unfettered capitalism” last month.
By: Brad Bannon, U. S. News and World Report, December 9, 2013
“Obama Gets Real”: A Growing Deficit Of Opportunity Is A Bigger Threat To Our Future Than Our Rapidly Shrinking Fiscal Deficit
Much of the media commentary on President Obama’s big inequality speech was cynical. You know the drill: it’s yet another “reboot” that will go nowhere; none of it will have any effect on policy, and so on. But before we talk about the speech’s possible political impact or lack thereof, shouldn’t we look at the substance? Was what the president said true? Was it new? If the answer to these questions is yes — and it is — then what he said deserves a serious hearing.
And once you realize that, you also realize that the speech may matter a lot more than the cynics imagine.
First, about those truths: Mr. Obama laid out a disturbing — and, unfortunately, all too accurate — vision of an America losing touch with its own ideals, an erstwhile land of opportunity becoming a class-ridden society. Not only do we have an ever-growing gap between a wealthy minority and the rest of the nation; we also, he declared, have declining mobility, as it becomes harder and harder for the poor and even the middle class to move up the economic ladder. And he linked rising inequality with falling mobility, asserting that Horatio Alger stories are becoming rare precisely because the rich and the rest are now so far apart.
This isn’t entirely new terrain for Mr. Obama. What struck me about this speech, however, was what he had to say about the sources of rising inequality. Much of our political and pundit class remains devoted to the notion that rising inequality, to the extent that it’s an issue at all, is all about workers lacking the right skills and education. But the president now seems to accept progressive arguments that education is at best one of a number of concerns, that America’s growing class inequality largely reflects political choices, like the failure to raise the minimum wage along with inflation and productivity.
And because the president was willing to assign much of the blame for rising inequality to bad policy, he was also more forthcoming than in the past about ways to change the nation’s trajectory, including a rise in the minimum wage, restoring labor’s bargaining power, and strengthening, not weakening, the safety net.
And there was this: “When it comes to our budget, we should not be stuck in a stale debate from two years ago or three years ago. A relentlessly growing deficit of opportunity is a bigger threat to our future than our rapidly shrinking fiscal deficit.” Finally! Our political class has spent years obsessed with a fake problem — worrying about debt and deficits that never posed any threat to the nation’s future — while showing no interest in unemployment and stagnating wages. Mr. Obama, I’m sorry to say, bought into that diversion. Now, however, he’s moving on.
Still, does any of this matter? The conventional pundit wisdom of the moment is that Mr. Obama’s presidency has run aground, even that he has become irrelevant. But this is silly. In fact, it’s silly in at least three ways.
First, much of the current conventional wisdom involves extrapolating from Obamacare’s shambolic start, and assuming that things will be like that for the next three years. They won’t. HealthCare.gov is working much better, people are signing up in growing numbers, and the whole mess is already receding in the rear-view mirror.
Second, Mr. Obama isn’t running for re-election. At this point, he needs to be measured not by his poll numbers but by his achievements, and his health reform, which represents a major strengthening of America’s social safety net, is a huge achievement. He’ll be considered one of our most important presidents as long as he can defend that achievement and fend off attempts to tear down other parts of the safety net, like food stamps. And by making a powerful, cogent case that we need a stronger safety net to preserve opportunity in an age of soaring inequality, he’s setting himself up for exactly such a defense.
Finally, ideas matter, even if they can’t be turned into legislation overnight. The wrong turn we’ve taken in economic policy — our obsession with debt and “entitlements,” when we should have been focused on jobs and opportunity — was, of course, driven in part by the power of wealthy vested interests. But it wasn’t just raw power. The fiscal scolds also benefited from a sort of ideological monopoly: for several years you just weren’t considered serious in Washington unless you worshipped at the altar of Simpson and Bowles.
Now, however, we have the president of the United States breaking ranks, finally sounding like the progressive many of his supporters thought they were backing in 2008. This is going to change the discourse — and, eventually, I believe, actual policy.
So don’t believe the cynics. This was an important speech by a president who can still make a very big difference.
By: Paul Krugman, Op-Ed Columnist, The New York Times, December 5, 2013
“Why Republicans Can’t Address Rising Inequality”: Even In The Face Of Reality, They Cannot Confess That They Aren’t Troubled At All
So far, the Republican response to President Obama’s historic address on economic inequality has not veered from the predictable clichés of Tea Party rhetoric. It was appropriately summarized in a tweet from House Speaker John Boehner, complaining that the Democrat in the White House wants “more government rather than more freedom” – and ignoring his challenge to Republicans to present solutions of their own.
But for Republicans to promote real remedies – the kind that would require more than 140 characters of text – they first would have to believe that inequality is a real problem. And there is no evidence that they do, despite fitful attempts by GOP leaders on Capitol Hill to display their “empathy” for the struggling, shrinking middle class.
Back when Occupy Wall Street briefly shook up the national conversation, House Majority Leader Eric Cantor and Budget Committee chair Paul Ryan both professed concern over the nation’s growing disparities of wealth and income. But their promises of proof that they care – and more important, of policy proposals to address what Cantor admits are “big challenges” – simply never materialized.
Meanwhile, working Americans learned what rich Republicans say in private about these sensitive topics when the “47 percent” video surfaced the following summer, in the final months of the 2012 presidential campaign. In Mitt Romney’s unguarded remarks to an audience of super-rich Florida financiers, the contempt for anyone who has benefited from public programs (other than banking bailouts) was palpable. Whether that sorry episode turned the election is arguable, but the Republican brand has never recovered – and the perception that Republicans like Romney and Ryan are hostile to the interests of working people remains indelible.
Of course, the House Republicans have done nothing to diminish that impression and everything to reinforce it. They have set about cutting food stamps, killing extended unemployment benefits, rejecting Medicaid expansion, as if competing in demonstrations of callous indifference. They complain about the lack of jobs – so long as they can blame Obama – but undermine every program designed to relieve the suffering of the jobless.
Callous or not, they are certainly indifferent to the injuries of inequality. In a party consumed by right-wing ideology and market idolatry, the further enrichment of the super-rich at the expense of everyone else is a feature of capitalism, not a bug. Whenever they bray about “getting government out of the way,” that means removing the last defenses against that process.
With Pope Francis and President Obama — a pair of the world’s most powerful voices — warning against the dangers of social exclusion and excessive greed, we can expect to hear expressions of remorse as well as rage from all the usual right-wing suspects. But what we shouldn’t expect is honesty. Republicans know that worsening inequality disturbs the great majority of Americans, so they cannot confess that they aren’t troubled at all.
Congress could begin to address the income gap, which conservative policies have exacerbated for three decades. Raising the minimum wage significantly would be a first step toward restoring fairness. Rebuilding the nation’s infrastructure and school systems, rather than letting them continuously decay, would raise employment substantially and improve incomes. Removing obstacles to unionization would begin to level the gross disparities in economic power between the 1 percent and the rest of us.
Now the president has vowed to fight inequality for the rest of his days in office. He is taking that fight directly to the Republicans who have frustrated so many of his initiatives. He will have to cast aside the last illusions of bipartisanship.
No matter what he does or says, he may not be able to win a higher minimum wage or a serious jobs program or universal pre-school with the other party controlling Congress. But if he consistently challenges us — and his adversaries — to restore an American dream that includes everyone, he may yet fashion a legacy worthy of his transformative ambitions.
By: Joe Conason, Featured Post, The National Memo, December 5, 2013
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