Income inequality is bad for everybody

It’s not exactly a newsflash at this point to mention that income inequality in the United States is increasing, has been increasing noticeably for the last 30 years, and the trend shows no sign of moderating.

Even conservatives don’t dispute it anymore, merely asserting that it’s the result of people who don’t work hard.

The real questions that we need to face as a society are as follows:  what does it mean to our society, and what should we do about it (if anything)?

There are some who think that income inequality doesn’t really have an impact on our society.  They believe that in a capitalist society, it’s OK for there to be sharp divisions between winners and losers — and even more to the point, that the “winners” should be given preferential treatment for they are the ones responsible for the prosperity of the others.

It matters little that the others have provided great productivity gains since WW2, but have not received a correpsonding share of income over that time (graph from Urbanomics).

In fact, over recent years, all of the gains in the economy have gone to those at the top of the scale, while the bottom 90% have seen their share of the pie decrease.

The problem with income inequality, though, can’t be resolved or ignored by having the wealthy retreat into gated communities and leaving the poor to fend for themselves.  Increasingly, there’s data that shows that income inequality — even in a country like the United States where our poor are better off than most citizens in other parts of the world — causes massive disruption and problems that you wouldn’t expect, such as lower health and increased crime.

Of particular note are studies by Kate Pickett of the University of York in the United Kingdom released in 2009.  The United States leads the world in income per capita, and among developed countries also has the largest income disparity.

But we also have the worst cumulative results across an idenx of social indicators, including life expectancy, infant mortality, crime, and mental illness.

While wealthy Americans have longer life expectancy than poorer Americans, they have life expectancy equal to (or frequently worse) than the average citizen of other developed countries.  Why is that?  Researchers have found that Americans (and citizens of other unequal societies) tend to feel less valued, feel less “in control” of their work and home lives, and tend to have lower levels of civic engagement.

We can see the symptoms of these conditions in our political system today.  The Tea Party movement, the dismally low levels of approval for Congress, and low voter turnouts are indications that as a society great chunks of our population are feeling disconnected from what’s going on around them.  Increased corporate involvement in our political process (thanks to the Citizens United decision) additionally makes the voice of the individual harder to hear in the current political environment.

On critical economic issues, both parties have largely turned their back on middle class citizens. Democrats promised robust initiatives to boost the nation’s economy following the 2008 elections, but followed it up with tepid measures that only served to mildly soften the economy’s landing from the recession.  Republicans elected in 2010 have failed – in Washington and in St. Paul — to deliver on their campaign jobs agenda.

And most people don’t understand how severe the inequality issue has become.  A 2010 Harvard University study shows that most Americans dramatically underestimate how much wealth has become concentrated in the hands of the wealthy.  84% of the country’s wealth is actually controlled by the top 20% of income earners — but Americans thought the number was only 59%.  And, when asked what their ideal distribution of wealth for the top 20% would be, the average figure was 32%.

The relatively modest steps that have been proposed by Democratic politicians to protect priorities like education, health care, and infrastructure wouldn’t turn any of these trends on their ears.  Even under the higher tax rates of the Clinton era, wealthy people did better than everyone else — it’s just that everyone else also saw some real improvement in their situation as opposed to watching all the profit from their hard work go to someone else.

Under Mark Dayton’s proposed plan to increase taxes on the wealthiest Minnesotans, the top 10% of income earners would still have paid the lowest aggregate tax rate of any group of Minnesota citizens.  These proposals won’t suddenly change the U.S. income distribution into that of Japan or Finland.

What these proposal would do, though, is protect vital priorities that give people at the bottom of the scale a chance to climb the ladder.  It’s instructive to note that many Congressional Republicans were ready to bail on the debt ceiling deal over Pell Grant funding — a program vital to giving low-income students the opportunity to go to college.  The Republican budget here in Minnesota takes higher education funding back to 1990s levels.  These policies are like pulling up the ladder once you’ve safely climbed to higher ground.

We need a truly balanced approach to rebuilding our nation’s economy and our state’s economy.  It’s not too much to ask that the wealthy — who have benefited the most from the economic policies and tax cuts of the last decade — to chip in a little bit so that society can meet its obligations.  Continued growth in inequality threatens the fabric of our society and calls the values that we hold dear into question.  Former Republican Congressman Joe Scarborough calls a spade a spade:

Since 1970, executive pay has increased 430 percent while workers’ wages have crept up at a pace that barely kept up with inflation. The average executive’s pay has jumped over that time period to 158 times that of the average worker’s pay in those companies. It’s no wonder that the top 0.1 percent of income earners get richer by the day while millions of Americans are seeing their situations get worse.

This is not John Wayne’s America. This is Gordon Gekko’s America.

In fact, I’m pretty sure that if the Duke faced one of these CEOs in a John Ford film, he’d kick some ass and force the leech to start treating his workers fair.

Who’s going to stand up and fight for the working families of our country?  If we want our economy to reach its full potential, we need to start valuing the middle class ahead of the elites.



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