Building Economic Inequality — What Will We Do?

Mark ThomaOver at The Fiscal Times, Mark Thoma wrote a really interesting article, The Politics of Income Inequality. He noted that, “The calls to cut government spending to avoid disastrous, though largely imagined consequences, and the push to cut taxes to avoid harmful economic distortions that supposedly lower economic growth are, in the end, about the desire to reclaim income lost to taxes.” In other words, all the claims about improving the economy and balancing the budget are just about the rich wanting to lower their taxes. That should come as no surprise to anyone around here. By and large, the rich are rich because they don’t care about anyone but themselves.

But a really big question remains, “Why do so many non-rich people go along with this?” After all, there are very few people who are rich. Clearly they are not supporting these policies out of a sense of greed. One big way that we are seeing in the Republican presidential nomination is immigration. More immigration is certainly to the benefit of the rich. But it isn’t that big a deal. They can easily bypass it if they can use immigrants as the reason why this generation of American workers is not doing as well as the last. “It’s not that the rich are taking all the productivity gains; it’s that immigrants are mowing laws for cheap!”

Thoma put it well:

The incomes of working class households have been stagnant for decades while those at the top have soared. These households struggle to pay the bills each month, to send their kids to college, and provide the healthcare their families need. They sense rising economic insecurity due to globalization, digital technology, and the constant chatter about robots taking their jobs. Something has gone wrong. Their children are supposed to do better than they did, incomes are supposed to rise over time as we become more productive, but that isn’t happening. They want someone to blame.

So people blame the poor and the immigrants. Of course, it is nonsense. The truth is that the middle class and the rich get huge largess from the government. It is just, as I have discussed many, many times before, that our system is set up so that the richer you are, the less the help you get looks like welfare. The poor get special cards that they use in public so that their government assistance comes with a big dose shaming. The rich get billions in bank bailouts, set up so that they can say they were forced to take them and didn’t actually need them. The middle class, of course, don’t see the thousands of dollars they get from the government to pay their mortgages as welfare — it is just a tax deduction! (Uber-conservative Milton Friedman would disagree.)

The question is whether conservative policy would actually improve the lots of the working class. “Republicans will close the borders, slash spending that requires the redistribution of income to the undeserving, and when all is said and done the belief is that there will be more income and opportunity available to hard-working, upstanding, moral households.” I think the answer to that should be obvious. This isn’t an ideological conclusion of mine. It is empirical. The Republicans made this claim under Reagan, and not only did the working class do no better — they ended up paying higher taxes. The same policies were pushed under George W Bush and again, the working class got nothing. It’s kind of funny, actually, because the Republicans run around saying the Democrats have no new ideas, but the Republicans are pushing the exact same policies they’ve been pushing for 40 years. But there is an extra irony: those policies clearly haven’t worked, but they still push them.

Thoma’s argument is that we must do something about income inequality. Currently, it is just getting worse. And the worse it gets, the more pressure builds to do something about it. It would be nice to think that the economists are busy working on solutions. And I know that the so called liberal economists are working on it. The conservative economists are too busy giving well paid talks to groups of hedge fund managers. But ultimately, I think we will need to reevaluate the entire idea of capitalism.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

6 thoughts on “Building Economic Inequality — What Will We Do?

  1. Also we need to remember that many calls for “reduced government spending” involve selling off government services. If you sell parking meters to a private company, you don’t spend on parking meters anymore so you’ve “cut the budget.” But rather than meter fees going into spending on other services, or being kept low enough to simply pay for the cost of upkeep, meter fees go to private profit, which will not be reinvested in anything likely useful. And what people pay to park will increase. (Which could be a good thing to reduce congestion and encourage other transit options, but a private interest won’t have those concerns in mind.)

    • Right. Local governments are especially good at this kind of short term thinking. But why not? The politicians will only be in office for the short term. On the other hand, as Dean Baker likes to point out, if we really are so concerned about the budget deficit, we have hundreds of trillions of dollars in land that we could sell.

  2. I have a dear friend who is a businesswoman who works insane hours to ensure her business is successful.

    She recently had a medical issue that required her to do something pointless and stupid (which is, after I checked, the fault of the legislature. One that is filled with a bunch of right wing Republicans who delight in inflicting as much misery as possible on people.) Where did she direct her rage? The people who are on Medicaid. Why? Because they have to do the same pointless and stupid thing but unlike them, she has to pay for the privilege. In vain I tried to point out her ire was being directed not at the people requiring her to do this pointless and stupid thing like it should be but the ones who are so broke they need public assistance. But she was having none of it. The poor get something for free and therefore regardless of who is actually making her suffer, they get the blame.

    Taking away their benefits would not change her need to do this pointless and stupid thing. That will still be there because the very people who would do as she wants-take away this poor person benefit-still are going to force her to do this thing. So oddly enough, the fact we have these bedrock programs that keep things from being totally desperate, is the reason we have such problems with the right wing in this country. It is still the old “they are getting something and I am not” problem the Republicans love to exploit to ensure that they can give money to the rich and screw over the middle class.

    • It’s amazing. But I would never underestimate the conservatives. If they didn’t have abortion (for example) to get people to support them, they would find something else. They really are amazing in that way.

      • They are adept at finding out what people really hate and using it to get their way.
        It is marketing, pure and simple and Democrats are terrible at it (well except Howard Dean but we all saw what happened there.) Which is why we only win when either the person is one of the best politicians of all time (Bill Clinton) or the country is about to go completely tits up and voters remember that they should put grown ups in charge for a while.

        • I always go with the economics, and it has never been wrong since Nixon: if the economy is improving (unemployment going down) in the first 9 months of the election year, the incumbent party wins; otherwise, it loses. But if we had nominated Howard Dean in 2004 (who I’m not fond of), we might have won that election because he would have made it about the Iraq War. That’s the one way to win against the economic fundamentals.

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