Income Inequality

This rings true to me, and not just because Joe Stiglitz and I were college-mates. In the article he lays out the ways in which our nearly-unprecedented (except for right before the Great Depression) income equality is holding back economic recovery and wiping away what's left, for most people, of The American Dream: hard work allowing anyone to "make it."

Politicians typically talk about rising inequality and the sluggish recovery as separate phenomena, when they are in fact intertwined. Inequality stifles, restrains and holds back our growth. When even the free-market-oriented magazine The Economist argues — as it did in a special feature in October — that the magnitude and nature of the country’s inequality represent a serious threat to America, we should know that something has gone horribly wrong... .

... There are four major reasons inequality is squelching our recovery. The most immediate is that our middle class is too weak to support the consumer spending that has historically driven our economic growth. While the top 1 percent of income earners took home 93 percent of the growth in incomes in 2010, the households in the middle — who are most likely to spend their incomes rather than save them and who are, in a sense, the true job creators — have lower household incomes, adjusted for inflation, than they did in 1996...

Bringing it up, of course, begs responses of Marxism, socialism, communism, hatred of America. But, as ought to be obvious, it's exactly the opposite. To want to address it is to want to see America survive, and, yes, as a capitalist nation.

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Inequality

The arguments -- as usual, reduced to meaningless sound bites -- over "income inequality" are pretty damn annoying, and I think Ds and President Obama are more to blame for the indigestion than the Rs. The latter are framing it -- would you believe? -- entirely dishonestly and cynically; and the Ds -- who could be surprised? -- are doing it with disorganized ineptitude. So the Fox "news" version, the Romnified reductio ad absurdum, is swallowed whole by the right with little or ineffective resistance from the left: Obama wants to end capitalism, envies success, wants to punish success, is waging class warfare.

Shocking stuff, right? Easy to grasp, like straws. Poorly -- because it takes more than five words to get people to understand, and requires a desire to do so -- refuted by progressives. The result, as intended, is that the point is missed entirely. It's not, in my view, about the rich getting richer, per se. It's about the consequences of it, as currently manifested, and what it means for our future.

Let's get this part out of the way: anyone who thinks much about it recognizes that capitalism depends on profits; that employment derives from successful businesses; that hard-working or inventive or creative successful people will -- and ought to -- make more money than others. Not a lot of people begrudge the trappings of success as defined in this country. I have no problem with Bill Gates' money, or Jeff Bezos', or Charles Schwab's. Or A-Rod's. (Okay, that last one...) I'm a little less sanguine about Mitt Romney's; the reasons are significant, but not relevant to the "income inequality" argument. Romney's money was made in the worst way, money for its own sake, money on paper, with no regard for the human substrate, for lack of a better word -- the people at the other end. Buying companies cheap, laying off people to make the bottom line look good, selling them off and raking in profits for himself and his investors, unconcerned for the companies themselves, letting them go bankrupt and walking away with millions. No goods; no services; just a lot of profit from shuffling paper and playing games with lives. Capitalism, sure; but at its worst, with no benefit to anyone but Mitt and his partners. None.

But that's still not the point.

Here's the point about income inequality. Two points, actually. First, it means, in a political system as corrupted by money as our is, that power is increasingly concentrated in the hands of a very few. That's what OWS, when you strip away the fuzz at the edges, is about. The very wealthy, the big corporations, get to write the rules, and the rules they write favor themselves at the expense of everyone else. Banks, big corporations. If shit flows downhill, money flows to the right. And the right, methodically, rapidly, is taking down all the protections against abuse that the left had been able to establish over several decades. Planning much more, while using their propaganda machine to make it look like patriotism, they've managed to convince the likes of teabaggers to act against their own interest. Behind the fog of disinformation and distraction, there's a serious threat to what little remains of our democracy; you'd think any non-corporation type of person would be concerned.

The second -- and, given the political leanings of those with the most money -- the more dire point is that income inequality in the US is leading to the end of civilization. Yeah. I guess that'd be called dire, all right. Is it true? Take a look around.

Start with Romney's announced budget plans (while keeping in mind that his tax plan will drastically redistribute wealth further upward):

In the Washington D.C., speech where he laid out his budget vision, he said “we’ll need to find almost $500 billion in savings a year in 2016.” But Romney has not given many details on what that would entail. ... Perhaps that's because the impact of these cuts would scare the bejeezus out of some people.

Taking half a trillion dollars out of $3.6 trillion works out to a 14 percent reduction. (To be precise, it would be 14.1 percent.) Applied equally to all non-defense spending, that would mean approximately $130 billion less for Social Security and about $90 billion less for Medicare, just in 2016 alone. To give you a sense of context, the Medicare cuts in the Affordable Care Act amount to around $50 billion a year in 2016. And those cuts, unlike Romney's, are largely offset by expanded spending on Medicaid and subsidies for private health insurance, thereby cushioning the blow on the health care system.

Of course, Romney could decide to exempt Medicare and Social Security. But then the cuts for other programs would have to be much higher: 25 percent, on average. And when I say “other programs,” I mean every other non-defense thing the government does: Education, transportation, environmental protection, safety net programs, law enforcement…you get the idea. Can we afford to spend a quarter less on highways? How about the Centers for Disease Control and the FBI? Or Head Start, food stamps, and Pell Grants?

... These cuts would be in addition to the automatic cuts already set to take effect in January, 2013, now that the deficit super-committee has failed to reach a consensus. ...

What’s more, the above calculations – which I ran by several budget experts, just to make sure I had them right – are probably on the generous side. They don’t account for the impact of interest, which (for reasons I can explain in a separate post) are likely to require larger cuts. In addition, this is just a snapshot of 2016. The cuts to the big entitlement programs, particularly Medicare and Medicaid, would become larger in future years.

Still not convinced? Then keep in mind that Romney also supports a balanced budget amendment, which would likely require even steeper cuts than these calculations suggest, particularly if Romney were to cut taxes as promised (and thus reduce federal revenue).

There's the bottom line: the Rs all-but-designated hitter has announced (so have all of them) plans for taxes and budgets so skewed toward dismantling government in order to keep wealth sequestered with the wealthy that, if enacted, they'll effectively end our ability to maintain (let alone improve) our country. That's what this talk of income inequality is about. That's what's really at stake in this election. Willingness to spend money to have a future. It's not about simply taking money from some and handing it over to others (you know, Newt's welfare cheats, his rants against whom get standing ovations from his aggrieved and ill-informed audience.) It's about balancing capitalism and its profits with reasonable commitment to paying for obvious needs.

But the Romneys, the O'Reillys, the Hannitys and Becks, the Limbaughs and the Koch brothers, the Murdochs of the world -- mega-multimillionaires all -- are committed to ensuring that people don't see it that way. That their fodder stand up, waving American flags while shedding patriotic tears and hatefully denouncing the false vision of Barack Obama that's secreted from the propaganda machine, thinking they're giving glory to god, saluting their country, while, in fact, blindly facilitating its demise.

Income Inequality

It's not a good term, because it's too easy for RWS™ and teabaggRs to take the real significance and distort it. Same with "redistribution." Scary. Communiss. Or maybe it's not that it's not a good term; it's that in the US, thanks to purposefully polarizing propaganda, it's become impossible to have a real conversation about important stuff.

The problem with income inequality is not income inequality; and the people who are trying to begin a discussion about it are not (well, maybe one or three are, but not generally) saying it's wrong, per se, that some are more successful than others. Few are arguing that capitalism is inherently wrong. At its most basic, the question is what is a society? What, in the US, does it mean to be part of a community? Are we? Should we be? Can you say "interconnected" and not be ridiculed as a new-age communohippantiamericanchardonnayliberal? Is the party of evolution-denial advocating a purely Darwinian society?

Talk about changing taxation so that the wealthy pay more than they are now, and there's a reflexive response from the right that you're "punishing success." "Taxing the job-creators." A pot-smoking lazy unemployed ingrate, demanding something for nothing.

But it's not about that. It's about a really basic issue, one that has become, like so much else in our politics, a parody of itself: the party of patriotism, of loving America so much it wants you to leave it, cannot think of America as a society; the family-values people don't think of America as a family. They don't, in short, think of America as America.

It's not that some people (many, many people, as it turns out) have to get along with less. I, and most people, I'd say, accept that it's impossible for everyone to be equally successful in a capitalist society. But the corollary of that is that not all people who are barely making it are in that situation because of failure of effort; it's how the system works. Or has come to work. And the question is to what extent those who are making it bigtime have an obligation -- or, to put in another way, have, in order to maintain their status, an empirical need if no moral reason -- to put more money back into the system than they currently are, in order for it to continue to exist and keep their larders larded. It's not morality. It's not ideology.

It's math.

The RWS™ and foxophiles of the world can pretend that it's about income redistribution for its own sake; they can snicker sneeringly and rage righteously and figure you'll buy it. They can simplify and distort, can claim that by definition even raising the issue is a bad thing, while ignoring the biggest income redistribution of all, occurring over the last few decades, ever since Saint Ronnie cut taxes on the wealthy. Their huffing, effective as it is on teabaggers and the rest of the willing self-destroyers, begs the question: what do we need, as a society, to survive? Where will the money come from to pay for it? By now, all parties have agreed that cuts are needed: the Dems on the committee of doom (for, because of R intransigence and cynicism, it is doomed to fail) have come up with trillions in spending reduction. Way more, in my opinion, than is consistent with securing our future, to the extent that that future depends on health care and roads and bridges and dams and colleges and high schools and teachers and cops and consumer safety and environmental protection and research and alternative energy consumption and carbon reduction and gods know what else I'm not thinking of at the moment.

If we choose economic policy that's only about cutting spending (except in defense, of course), and if that means, mathematically, that we'll have to give up on all those things I listed above (because that's where the proposed cuts are), is that a recipe for viability or is it long-term suicide? Can questions be asked without dismissing them as class warfare? Can we talk about it with the best long-term interests of the country, and not political power, in mind?

Rs refuse to increase any taxes at all on the very wealthy, while proposing preposterous tax reform that, without exception, raises taxes on the middle and lower classes, while, because of their huge additional cuts for the wealthy, netting enormously less than the present revenue. Singing the tune of the corporate wealth that pays for their elections, they've never quite answered the question: if cutting taxes on the wealthy creates jobs, where the f*ck are the jobs, in this, the lowest tax climate in decades?

This issue is not, despite what Foxobeckians want you to believe (and have convinced their sheep, like giving candy to a baby), about taking money from the rich and handing it out to the poor, neither as a matter of fact nor of some Beck-dreamt Marxism. (In fact, for Republicans -- unbelievable as it may be, it's quite the opposite.) It's about addressing reality: the country is crumbling. It's losing its edge. We're failing to educate, to innovate, to build. To provide health care. Because, to preserve the imbalance in taxation, services of all sorts are being cut back, painfully, state by state and nationally. Meanwhile the money that might pay to reverse the trend is sequestered among relatively few and, if Rs get their way, will remain there. Because, they believe, that government governs best which governs least. It's gospel, like, well, you know... And, like all R claims and fairy tales, it fits on a bumper sticker.

To the questions what does it mean to live in a society, to depend on and benefit from the work of others; what are the financial responsibilities that derive; what obligations have we to secure the future; can you fix what's wrong without increasing spending in some areas; is our current path of cutting critical spending and not seeking more revenue sustainable (forget about moral) they change the subject. Because they're fine, thanks, and don't need to think about it. It's communism, they say, handing the cue card to Fox "news" and heading for the door.

Giants Among Us

Whether parsecs or googleplex, a trillion dollars or a billion years, the human mind has trouble comprehending big numbers. Analogies can help, if only a little. Here's an interesting take on income disparity:

Jan Pen, a Dutch economist who died last year, came up with a striking way to picture inequality. Imagine people’s height being proportional to their income, so that someone with an average income is of average height. Now imagine that the entire adult population of America is walking past you in a single hour, in ascending order of income.

The first passers-by, the owners of loss-making businesses, are invisible: their heads are below ground. Then come the jobless and the working poor, who are midgets. After half an hour the strollers are still only waist-high, since America’s median income is only half the mean. It takes nearly 45 minutes before normal-sized people appear. But then, in the final minutes, giants thunder by. With six minutes to go they are 12 feet tall. When the 400 highest earners walk by, right at the end, each is more than two miles tall.

Perspective doesn't equate to understanding or to assigning moral significance. But it helps to know what the issue is, anyway.

Watching the O'bama/O'Reilly Super Bowl interview the other day, I wished, when Billo accused the president of being a fervent income redistributer, that Obama had pointed out that the greatest income redistribution in decades occurred with the Bush tax cuts: it's just that it all went upward.

Personally I have no problem with rich people being rich, and I'd say very few liberals do, either. Hard work, quality work, productivity should be incentivized, recognized, and rewarded (a concept which no longer applies to much of medicine nowadays, especially surgery.) Like so many other things, though, it's a matter of finding the fulcrum on which it all turns. Does the guy who invented credit default swaps deserve, say, a thousand times more than a respiratory therapist?

From where I sit typing in obscurity, it seems, as another example, that the current tax rates are out of balance and belong back where they were when the economy was booming, pre-W. Were the rich suffering then, forced to move out of their homes? Was communism rampant, from each/to each? More importantly, was our budget balanced and our debt being paid down? What, I'm trying to understand, is so wrong with that? Even if it means the CDS guy makes only eight hundred times more than the RT?