Gross Inequality Is Spurring a True Left and a Racist Right: Part 1

Stephen Rockwell • 5 August 2018
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We live in a new gilded age nearly half a century in the making.   Reams of statistics and data visualizations demonstrate the gross and damaging inequality of our times.  One nugget that I like to share is that in 1973, the average CEO made 37 times what the average worker made.  CEO's now make 380-500 times what the average worker makes.  We are not comparing CEO pay to the lowest paid worker, but to the average worker.  The following video offers a more complete visualization of wealth inequality in the United States: 

One More Measure on How Bad Inequality is...Yes It is Really Bad. The Gini coefficient is a number that economists use to determine the amount of inequality in an economy.  Check out the company that the United States keeps:

Data from US Central Intelligence Agency
Data from US Central Intelligence Agency

 

We have a similar economic equality profile of places like Iran and Zimbabwe?  Americans have largely not been honest with themselves. Instead we get caught up in the talk of the stock market or our Silicon Valley tech firms as a substitute for our national economic well being.  At other times, we allow ourselves to be distracted by displays of a thin patriotism that speaks more to militarism as rather than our responsibilities to each other as citizens in forming a functioning democracy. 

Why are we so Unequal?

The reasons for this inequality are extensive, but here are a few of the primary drivers:

  • First and foremost, Tax policy - Tax policy is the primary driver of inequality in an advanced economy like the United States.  The primary question for such economies is not is there enough, but rather how is the pie distributed to ensure that basic needs of families met, that governments can function well in providing basic services, and that  conditions such as legal structures and an educated workforce available for entrepreneurship and business growth, especially small business growth.  
    • What is the top rate?  During WWII and through the Eisenhower years the top marginal rate was above 90%.  Reagan took that top rate from 70% to 50% in 1981 and down to 28% in 1986.  Clinton eventually got the rate back up to 39.6% and that's where they were again when the Obama let the Bush tax cuts expire.  The GOP Tax cuts brough the top rate to 37%.  Of course, for top earners, the marginal income tax rate is rarely the effective rate paid as much of the income is earned through capital gains which has much lower rates.  Wealthy people also can hire folks to work every loophole available.  
    • Why does it matter? The longest period of sustained economic growth in American history that lifted all ships was the post-war period from 1945 to 1973.  When you top the tax rate fairly, government can make investments in infrastructure like the Interstate Highway System, in ensuring a social safety net of Medicare and Medicaid for people's health, and in education like building great public schools and sending folks to free or low cost college like the GI Bill.  When top tax rates are low, you starve the ability of the government to act on basic needs and to serve as a balancing effect within the economy.   
  • The Attack and Decline of Organized Labor -  In the 1950s, about a third of all Americans were in union jobs.  A long-term, consistent attack against labor has whittled the unions ranks to around 10%.  Those attacks came in the form of offshoring jobs, automation from technology, distributing work to the gig economy and direct confrontation through "Right to Work" policies that weaken the ability of workers to act collectively by creating free rider problems. In its Janus decision a few weeks ago,the Supreme Court launched an attack into the last stronghold of unions in the public sector.   
  • An Ethos that Greed is Good Over the Public Good Combined with Attacks on the Poor - Wealthy Presidential candidates like Trump and Romney prided themselves on paying little and perhaps no taxes. Think about this. One party nominates candidates who want to lead a government to which they have contributed little financially, even though they both clearly have the means to do so.  Patriotism starts with paying your dues to ensure that the nation you want to lead can run.  They are symptoms of a narrative that says greed is good, as we first heard in the Reagan years.  The sustained attacks on the government by the Right ignore the preamble of the Constitution, that the government is us, WE THE PEOPLE. 
    • The Right has likewise attacked the poor as morally deficient as opposed to resource deficient.  These attacks have buttressed the ethos of greed as working people are directed to attack a welfare recipient or an economic refugee immigrant as opposed to asking tough questions as to why they are working so hard and not getting ahead.

 The Strains of Inequality are Showing

Friends, greed is not good. When greed is the driving value of government policy, bad things happen.  Indeed, our economy has become so grossly unequal that the strains are showing in our politics across the spectrum.  The Trump movement included a number of economically dislocated folks, many of whom have chosen racism over their own economic well-being.  On the left, millenials and older Gen Xers are realizing that the economic cards are stacked against them and are looking for different solutions and ideologies than their parents.  We'll get into these political consequences of gross inequality in my next post.