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“Inequality Is Natural”: The Big, Long, 30-Year Conservative Lie

First came Occupy Wall Street, and its pitch-perfect slogan on inequality: “We are the 99 percent.” After that movement fizzled, Thomas Piketty, the handsomely ruffled French professor, released a 685-page book explaining that we really were living in a new Gilded Age in which the wealth gap was as wide as it had ever been. Finally, in June, one of the plutocrats sitting atop the piles of money he made in the digital revolution, Nick Hanauer, wrote an article in Politico magazine—it’s the most-shared story ever on Politico’s Facebook page—warning that the pitchforks were coming, and rich people like him should advocate for a healthier middle class and a higher minimum wage.

The debate over inequality is now raging, and most Americans are unhappy about the widening divide between the haves and have-nots. Hanauer has been making the same case for years, drawing heaps of both praise and scorn. Forbes magazine has alternately called Hanauer insane and ignorant. His TED University presentation calling for a $15-minimum wage was left off the organization’s website because it was deemed too “political.” That’s nothing next to Piketty’s detractors, who at their most extreme accused him of twisting his data.

Hanauer and Piketty inspire these broadsides because they are challenging, in a far more aggressive way than plutocrats and economists usually do, the conservative economic orthodoxy that has reigned since at least the 1980s. Under Ronald Reagan, we called it trickle-down economics, the idea that the men who can afford their own private jets—they’re usually men—deserve gobs of money because they provide some special entrepreneurial or innovative talent that drives the American economy.

That’s well known. Far less often discussed is the flipside of this belief: that helping the less well off will dampen the American money-generating engine—that it will hurt growth, because the only thing that inspires the “job creators” to work so hard is the promise of insanely vast financial rewards. Poverty is a necessary evil in this worldview, and helping the less well off creates a “culture of dependency,” which discourages work. “The United States thrives because of a culture of opportunity that encourages work and disdains relying on handouts,” Matthew Spalding of The Heritage Foundation wrote in 2012, neatly summing up the conservative ethos.

Conservatives have dominated discussions of poverty for a generation with arguments like this one. It’s completely wrong. It’s more than that—it’s just a lie, concocted as cover for policies that overwhelmingly favored the rich. But it took the worst economic crisis since the Great Depression for many economists, liberal or not, to finally say publicly what many had long argued: Inequality is bad for the economy.

The latest to say so is the rating agency Standard and Poor’s, not exactly a bastion of lefty propaganda. An S&P report released August 5 says that rising inequality—gaps in both income and wealth—between the very rich and the rest of us is hurting economic growth. The agency downgraded its forecast for the economy in the coming years because of the record level of inequality and the lack of policy changes to correct for it. The report’s authors argue against the notion that caring about equality necessarily involves a trade-off with “efficiency”—that is, a well-functioning economy.

To be sure, they’re not making a case for a massive government intervention to help low-income Americans. They discuss the benefits of current policy proposals—like raising the federal minimum wage to $10.10 per hour—with the caveats that such changes could have potential negative consequences—like dampening job growth. (Most economists agree that such a small hike wouldn’t have that impact.)

At its core, though, the S&P report does argue that pulling people out of poverty and closing the gap between the 1 percent and the 99 percent will increase economic growth. The authors argue for some redistributive policies, like increased financial aid for post-secondary education. “The challenge now is to find a path toward more sustainable growth, an essential part of which, in our view, is pulling more Americans out of poverty and bolstering the purchasing power of the middle class,” the authors write. “A rising tide lifts all boats…but a lifeboat carrying a few, surrounded by many treading water, risks capsizing.”

It’s an important moment for such a debate. The Great Recession was a great equalizer, a crisis in which many in the middle class, and even upper-middle class, fell all the way to the bottom and relied on the government safety net. They learned what anyone who cared to look at the data already knew: The vast majority of people relying on government benefits are suffering a temporary setback that they will recover from, as long as they have a helping hand. The holes in the safety net also became more apparent. Even Paul Ryan, the Republican congressman from Wisconsin who has set his blue eyes on higher office, adequately diagnosed many of the problems with anti-poverty programs when he introduced a new plan last month. (Whether he would actually want to pay for the changes he calls for is debatable.)

Closing the gap by lifting low-income families out of poverty could do more to help the economy than any number of tax credits for “job creators” might, which is what Hanauer argued in Politico. And the S&P report puts more support in his corner.

On the question of what to do, there is widespread agreement on boosting educational attainment and increasing salaries at the bottom end. Policymakers have had a lot of time to think about how to help the middle class, since real wages began declining in the mid-1970s. Many of the problems of inequality have policy solutions ready to go, spelled out in a white paper stuffed in someone’s desk drawer. Why has it taken so long to think about addressing it? Was the political might of the right so overwhelming that they couldn’t speak up until people like Hanauer saw, as he warned in his essay, that the pitchforks would be coming for them?

 

By: Monica Potts, The Daily Beast, August 8, 2014

August 10, 2014 Posted by | Economic Inequality, Plutocrats, Poverty | , , , , , , , | 1 Comment

“On Inequality Denial”: Good Ideas Don’t Need To Be Sold On False Pretenses

A while back I published an article titled “The Rich, the Right, and the Facts,” in which I described politically motivated efforts to deny the obvious — the sharp rise in U.S. inequality, especially at the very top of the income scale. It probably won’t surprise you to hear that I found a lot of statistical malpractice in high places.

Nor will it surprise you to learn that nothing much has changed. Not only do the usual suspects continue to deny the obvious, but they keep rolling out the same discredited arguments: Inequality isn’t really rising; O.K., it’s rising, but it doesn’t matter because we have so much social mobility; anyway, it’s a good thing, and anyone who suggests that it’s a problem is a Marxist.

What may surprise you is the year in which I published that article: 1992.

Which brings me to the latest intellectual scuffle, set off by an article by Chris Giles, the economics editor of The Financial Times, attacking the credibility of Thomas Piketty’s best-selling “Capital in the Twenty-First Century.” Mr. Giles claimed that Mr. Piketty’s work made “a series of errors that skew his findings,” and that there is in fact no clear evidence of rising concentration of wealth. And like just about everyone who has followed such controversies over the years, I thought, “Here we go again.”

Sure enough, the subsequent discussion has not gone well for Mr. Giles. The alleged errors were actually the kinds of data adjustments that are normal in any research that relies on a variety of sources. And the crucial assertion that there is no clear trend toward increased concentration of wealth rested on a known fallacy, an apples-to-oranges comparison that experts have long warned about — and that I identified in that 1992 article.

At the risk of giving too much information, here’s the issue. We have two sources of evidence on both income and wealth: surveys, in which people are asked about their finances, and tax data. Survey data, while useful for tracking the poor and the middle class, notoriously understate top incomes and wealth — loosely speaking, because it’s hard to interview enough billionaires. So studies of the 1 percent, the 0.1 percent, and so on rely mainly on tax data. The Financial Times critique, however, compared older estimates of wealth concentration based on tax data with more recent estimates based on surveys; this produced an automatic bias against finding an upward trend.

In short, this latest attempt to debunk the notion that we’ve become a vastly more unequal society has itself been debunked. And you should have expected that. There are so many independent indicators pointing to sharply rising inequality, from the soaring prices of high-end real estate to the booming markets for luxury goods, that any claim that inequality isn’t rising almost has to be based on faulty data analysis.

Yet inequality denial persists, for pretty much the same reasons that climate change denial persists: there are powerful groups with a strong interest in rejecting the facts, or at least creating a fog of doubt. Indeed, you can be sure that the claim “The Piketty numbers are all wrong” will be endlessly repeated even though that claim quickly collapsed under scrutiny.

By the way, I’m not accusing Mr. Giles of being a hired gun for the plutocracy, although there are some self-proclaimed experts who fit that description. And nobody’s work should be considered above criticism. But on politically charged issues, critics of the consensus need to be self-aware; they need to ask whether they’re really seeking intellectual honesty, or are effectively acting as concern trolls, professional debunkers of liberal pieties. (Strange to say, there are no trolls on the right debunking conservative pieties. Funny how that works.)

So here’s what you need to know: Yes, the concentration of both income and wealth in the hands of a few people has increased greatly over the past few decades. No, the people receiving that income and owning that wealth aren’t an ever-shifting group: People move fairly often from the bottom of the 1 percent to the top of the next percentile and vice versa, but both rags to riches and riches to rags stories are rare — inequality in average incomes over multiple years isn’t much less than inequality in a given year. No, taxes and benefits don’t greatly change the picture — in fact, since the 1970s big tax cuts at the top have caused after-tax inequality to rise faster than inequality before taxes.

This picture makes some people uncomfortable, because it plays into populist demands for higher taxes on the rich. But good ideas don’t need to be sold on false pretenses. If the argument against populism rests on bogus claims about inequality, you should consider the possibility that the populists are right.

 

By: Paul Krugman, Op-Ed Columnist, The New York Times, June 1, 2014

June 2, 2014 Posted by | Economic Inequality, Populism | , , , , , , , | 1 Comment

“How To Really Rein In The Super Rich”: Giving Everyday People Equal Input With Business And The Rich In Policy Deals

Thomas Piketty, meet Bobby Tolbert.

Piketty is the French economist who rocked the worlds of social and economic policy with his new book, Capital in the Twenty-First Century. In it, Piketty documents with meticulous detail—and data—how we are returning to an era of extreme inequality where a few dynasties amass great fortunes through inheritance and everyone else withers and suffers.  Such gross inequality, Piketty argues, is not an accident but inherent in capitalism and can only be addressed through government intervention.

All of which is plainly true.  As Paul Krugman has pointed out, conservatives chomping at the purse to refute Piketty have come up with nothing more than name-calling.

Pretty much everyone else agrees gaping inequality is a massive problem in the world and that something has to be done about it.  Heck, even the Pope tweeted, “Inequality is the root of social evil.”  Not the devil.  Inequality!

What the vast majority, who agree inequality is a crisis, do not agree on is what to do about it.  Piketty proposes a global wealth tax as well as a progressive income tax that approaches rates, at the top end, closer to what the United States had in place when prosperity was more broadly shared during the ’50s and ’60s.  They’re good ideas, but only a start.  What they’re missing is a Bobby Tolbert.

Bobby Tolbert is member of the community organization VOCAL NY—a grassroots organization that builds political power among New Yorkers affected by HIV/AIDS, drug use and mass incarceration.  Tolbert was in Washington, D.C., this weekend to speak at the annual meeting of National People’s Action, a network of community organizations made up of groups like VOCAL.

Tolbert spoke eloquently about how gross inequality is destroying communities across America.  [Full disclosure: I was at the event to help Tolbert and other grassroots leaders practice and deliver their speeches.]  Tolbert shared his own story, one only made possible by state-funded HIV medications that are constantly threatened by budget cuts.  Tolbert works as a peer health educator but is paid so little that he qualifies for public support.  Recently, even those few public benefits were taken away because Tolbert transitioned from supportive housing to independent living—a move you would think everyone would be in favor of, but which meant Tolbert’s government health benefits being jeopardized.  He’s currently fighting to have them reinstated.

“Big corporations and the rich are fine with people like me dying,” said Tolbert.  “The only problem with that is I’m not ready to die.”

And while for Bobby Tolbert, public supports literally make the difference between life and death, the situation is pretty much as dire for millions of Americans who increasingly rely on food stamps and Medicaid and housing assistance to survive. At the same time our deliberately and aggressively unequal economy has pushed millions more Americans toward poverty and they need more help than ever, conservative corporate elites are pushing for public assistance to be slashed. Tolbert agrees with Piketty—and the majority of American voters—about taxing the wealthy to spread assistance and opportunity to the poor and working class.

But Tolbert argues for something that Piketty and most of the academic and political debate about inequality seem to miss—that the nature of our economy, the rules of the game that currently incentivize unequal distribution, will never change unless the people making those rules, the people seated at the tables of power, change as well. In other words, as long as economic policy decisions are made by Wall Street and their proxies (see, e.g., Treasury Secretaries Robert Rubin, Henry Paulson and Timothy Geithner) then Thomas Piketty’s ideas won’t be included in the discussion, let alone Bobby Tolbert’s.

“We need a new political system,” Tolbert said, “one that takes money out and puts people in.”  Yes, that means campaign finance reform and reducing the barriers to voting, rather than increasing them.  That would help get more everyday Americans into positions of power.  But Tolbert’s vision also includes participatory budgeting in which communities, not special interests, set the government funding agenda—which is already happening in New York. And it means people’s organizations commanding and being given equal input with business interests and the rich in the smoke-filled rooms where policy deals are cut.  It means that when the Federal Reserve is weighing interest rates and the Senate Budget Committee is evaluating banking regulations, they should as a matter of habit meet with economists and CEOs and the everyday Americans whom their decisions affect most.

In his speech, Tolbert pointed to the diversity of the thousand-plus community leaders from around the country gathered in the auditorium in front of him.  “We represent every race, every gender, every sexual orientation—in fact, we represent America better than the people who are running it.”  In front of Tolbert were family farmers and immigrants and folks on welfare and small-business leaders—all of whom have stories to share about the ravages of inequality and solutions to offer.  Academic debates and data are useful and important, but until Bobby Tolbert and other everyday people like him are included in the discussion and political process, nothing will ever truly change.

 

By: Sally Kohn, The Daily Beast, April 29, 2014

 

 

April 30, 2014 Posted by | Businesses, Economic Inequality, Wall Street | , , , , , , , | Leave a comment

“Now We Know”: Economic Inequality Is A Malady — Not A Cure

It has been a long, long time since Americans accepted the advice of a French intellectual about anything important, let alone the future of democracy and the economy. But the furor over Thomas Piketty’s stunning bestseller, Capital in the 21st Century – and especially the outraged reaction from the Republican right – suggests that this fresh import from la belle France has struck an exposed nerve.

What Monsieur Piketty proves, with his massive data set and complex analytical tools, is something that many of us – including Pope Francis — have understood both intuitively and intellectually: namely that human society, both here and globally, has long been grossly inequitable and is steadily becoming more so, to our moral detriment.

What Piketty strongly suggests is that the structures of capitalism not only regenerate worsening inequality, but now drive us toward a system of economic peonage and political autocracy.

The underlying equation he derives is simple enough: r > g, meaning the return on capital (property, stock, and other forms of ownership) is consistently higher than economic growth. How much higher? Since the early 1800s, financiers and landowners have enjoyed returns of roughly five percent annually, while economic growth benefiting everyone has lagged, averaging closer to 1 or 2 percent. This formula has held fairly steady across time and space. While other respectable economists may dispute his methodology and even his conclusions, they cannot dismiss his conclusions.

As a work of history and social science, Capital in the 21st Century outlines a fundamental issue while providing little in policy terms. Piketty mildly suggests that nations might someday cooperate in a progressive and global taxation of capital gains, with shared proceeds. There isn’t much reason to hope for any such happy solution. But then it isn’t up to Piketty to solve the problem.

He has already done America and the world a profound service by demolishing the enormous shibboleth that has long stood as an obstacle to almost every attempt at economic reform, from raising the minimum wage to restoring progressive taxation: Only if we coddle the very wealthy – and protect them from taxation and regulation — can we hope to restore growth, employment, and prosperity. Only if we meekly accept the revolting displays of power and consumption by the very fortunate few can we expect them to bestow any blessing, however small, on the toiling many.

If you read Piketty – whose translation into English by Arthur Goldhammer makes macro-economics a literary pleasure – you will quickly realize that we’ve been told a big lie about this most basic social bargain. The stratospheric accumulation of rewards accruing to the top 0.01 percent of owners, at the expense of society and everyone else, is not only unnecessary to promote growth; in fact, that unfair dispensation retards growth.

Rather than argue honestly with Piketty’s findings, right-wing responses have varied from old-fashioned redbaiting, although he is plainly no communist, to juvenile misrepresentation of a book that at least one critic admits she didn’t bother to read! The boneheaded Tea Party reaction is to accuse him of demanding that sanitation workers earn the same salary as surgeons – although he explicitly agrees that a degree of inequality is important to encourage innovation, enterprise, and industry.

“I have no interest in denouncing inequality or capitalism per se,” he notes early in the book. But then the wing-nuts and trolls attacking him have no interest in debate, let alone knowledge. They hate social science just as much as they hate plain old science.

For the rest of us, Piketty’s opus poses an epochal challenge. Confronted with the truth about exacerbating inequality and the costs imposed on democratic society, what are we going to do about it? History provides a few clues if not a blueprint. The highest level of economic equality and social strength in the West arrived during the postwar era – back when unions were strong, taxes restrained the rich, minimum wages were higher, and redistribution was not a dirty word.

It will be the task of the next generation to restore decency and democracy – and save the planet — against the ferocious political resistance of the super-rich. They can now begin by discarding the ideological illusions that Piketty has so neatly dispatched.

 

By: Joe Conason, Editor in Chief of NationalMemo.com; Cross-Posted in TruthDig, The National Memo, April 25, 2014

April 28, 2014 Posted by | Capitalism, Economic Inequality | , , , , , , , | Leave a comment

“The Piketty Panic”: Out Of Ideas, Conservatives Are Terrified

“Capital in the Twenty-First Century,” the new book by the French economist Thomas Piketty, is a bona fide phenomenon. Other books on economics have been best sellers, but Mr. Piketty’s contribution is serious, discourse-changing scholarship in a way most best sellers aren’t. And conservatives are terrified. Thus James Pethokoukis of the American Enterprise Institute warns in National Review that Mr. Piketty’s work must be refuted, because otherwise it “will spread among the clerisy and reshape the political economic landscape on which all future policy battles will be waged.”

Well, good luck with that. The really striking thing about the debate so far is that the right seems unable to mount any kind of substantive counterattack to Mr. Piketty’s thesis. Instead, the response has been all about name-calling — in particular, claims that Mr. Piketty is a Marxist, and so is anyone who considers inequality of income and wealth an important issue.

I’ll come back to the name-calling in a moment. First, let’s talk about why “Capital” is having such an impact.

Mr. Piketty is hardly the first economist to point out that we are experiencing a sharp rise in inequality, or even to emphasize the contrast between slow income growth for most of the population and soaring incomes at the top. It’s true that Mr. Piketty and his colleagues have added a great deal of historical depth to our knowledge, demonstrating that we really are living in a new Gilded Age. But we’ve known that for a while.

No, what’s really new about “Capital” is the way it demolishes that most cherished of conservative myths, the insistence that we’re living in a meritocracy in which great wealth is earned and deserved.

For the past couple of decades, the conservative response to attempts to make soaring incomes at the top into a political issue has involved two lines of defense: first, denial that the rich are actually doing as well and the rest as badly as they are, but when denial fails, claims that those soaring incomes at the top are a justified reward for services rendered. Don’t call them the 1 percent, or the wealthy; call them “job creators.”

But how do you make that defense if the rich derive much of their income not from the work they do but from the assets they own? And what if great wealth comes increasingly not from enterprise but from inheritance?

What Mr. Piketty shows is that these are not idle questions. Western societies before World War I were indeed dominated by an oligarchy of inherited wealth — and his book makes a compelling case that we’re well on our way back toward that state.

So what’s a conservative, fearing that this diagnosis might be used to justify higher taxes on the wealthy, to do? He could try to refute Mr. Piketty in a substantive way, but, so far, I’ve seen no sign of that happening. Instead, as I said, it has been all about name-calling.

I guess this shouldn’t be surprising. I’ve been involved in debates over inequality for more than two decades, and have yet to see conservative “experts” manage to dispute the numbers without tripping over their own intellectual shoelaces. Why, it’s almost as if the facts are fundamentally not on their side. At the same time, red-baiting anyone who questions any aspect of free-market dogma has been standard right-wing operating procedure ever since the likes of William F. Buckley tried to block the teaching of Keynesian economics, not by showing that it was wrong, but by denouncing it as “collectivist.”

Still, it has been amazing to watch conservatives, one after another, denounce Mr. Piketty as a Marxist. Even Mr. Pethokoukis, who is more sophisticated than the rest, calls “Capital” a work of “soft Marxism,” which only makes sense if the mere mention of unequal wealth makes you a Marxist. (And maybe that’s how they see it: recently former Senator Rick Santorum denounced the term “middle class” as “Marxism talk,” because, you see, we don’t have classes in America.)

And The Wall Street Journal’s review, predictably, goes the whole distance, somehow segueing from Mr. Piketty’s call for progressive taxation as a way to limit the concentration of wealth — a remedy as American as apple pie, once advocated not just by leading economists but by mainstream politicians, up to and including Teddy Roosevelt — to the evils of Stalinism. Is that really the best The Journal can do? The answer, apparently, is yes.

Now, the fact that apologists for America’s oligarchs are evidently at a loss for coherent arguments doesn’t mean that they are on the run politically. Money still talks — indeed, thanks in part to the Roberts court, it talks louder than ever. Still, ideas matter too, shaping both how we talk about society and, eventually, what we do. And the Piketty panic shows that the right has run out of ideas.

By: Paul Krugman, Op-Ed Columnist, The New York Times, April 24, 2014

April 26, 2014 Posted by | Economic Inequality, Income Gap | , , , , , , , , | Leave a comment

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