For the past three decades, the US has been suffering from a crisis of inequality. The Democrats have not taken this crisis seriously enough. The Republicans seem determined to make it worse.
Evidence of deep and rising economic inequality in the US is quite overwhelming. For thirty years, the incomes of the richest 1% have soared. In 1979, the top 1% earned about 9% of all income; in 2007, they earned 24%. More than half of all economic growth since 1976 has ended up in the pockets of the top 1%. In 1970, CEOs earned about 45 times the pay of their average employee. In 2012, CEOs earn nearly a thousand times more. Meanwhile, the incomes of the middle class have stagnated; the incomes of those with a high school education or less have fallen substantially. One in five kids lives in poverty. Fifty million Americans have no health insurance. This appalling trend has intensified during this current crisis – while most Americans are hurting, corporate profits are at record levels. Among “industrialized countries,” the distribution of wealth and income in the US is the most unequal.
How have we responded to this deeply troubling trend? By cutting taxes for the rich, busting unions, and vilifying the poor! Over the past few decades, tax rates on US corporations and the richest 1% have fallen by about a third! Among the world’s rich countries, US tax rates on the rich and corporations are near the very bottom.
Why should we be concerned about inequality? America is about opportunity, not guarantees -- right? Actually, no. Among the world’s rich countries, the US is tied for last in class mobility; an American’s economic success is highly correlated with his/her parents’ wealth and status. And this is much truer in 2012 than it was in 1970 or 1980. It is harder and harder for a poor or middle class American kid to climb the ladder of success, and it is harder for an unproductive rich kid to fall into the middle class.
Economic inequality inevitably means political inequality. The right-wing Koch brothers, for example, plan to spend $400 million to defeat Obama and the Democrats this fall. Increasingly, legislation is literally being written by corporate lobbyists. The Koch brothers are entitled to their right wing views; they should not be entitled to the kind of outsized influence that $400 million will buy.
There is also compelling evidence that inequality is socially corrosive. In their magnificent book, The Spirit Level, Richard Wilkinson and Kate Pickett show that unequal societies suffer from higher rates of violent crime, incarceration, obesity, infant mortality, mental illness and alcoholism. Inequality is also associated with lower life expectancy, lower levels of educational performance and lower levels of trust. Inequality is bad for all of us.
Those are the facts.
In this context, the Republican Party’s economic proposals are particularly baffling and appalling. The Republican vision – embodied in the “Ryan Plan,” a budget proposal supported by every House Republican and endorsed by Mitt Romney -- calls for still deeper cuts in taxes for corporations and the top 1%. In addition, the Republicans propose that we reduce the “regulatory burden” on oil, coal and gas companies and – believe it or not -- Wall Street!
Sound familiar? The Bush tax cuts for the top 1% totaled nearly a trillion dollars (from 2001-2011); and three decades of financial deregulation brought us the financial meltdown of 2008 and a devastating recession. Under the Ryan Plan, corporations and the top 1% would enjoy tax cuts of nearly $3 trillion over the next decade. In 2014 alone, those with incomes over $1 million would enjoy an average tax cut of $187,000. The plan also calls for deep cuts in spending on education, Head Start, environmental protection, Social Security, Medicare and Medicaid.
Remarkably, the Republicans have concluded – yet again -- that the super-rich are getting too little, while children, the elderly, the middle class and the poor are getting too much!
This is, of course, trickle-down economics. The “logic” here (and I’m being generous) is that the economy will grow if we provide a better “business climate” – lower taxes and fewer regulations will liberate “job creators.” *
The problem is that it doesn’t work. US companies are currently sitting on $2 trillion in accumulated profits. More cash for the rich is not only unfair, it is bad economics. It will not create jobs, and – by busting state and municipal budgets – it will force us to fire more teachers and firefighters, and defer desperately needed investments in infrastructure – both of which would promote job growth. And as a generation endures joblessness and cuts in education, we are wasting precious talent (300,000 teachers have been let go since 2008). And, of course, massive tax cuts do not reduce budget deficits.
Along with this grim, stubborn economic crisis, we are facing a national identity crisis. What kind of country do we want? Do we want a country that recognizes that our well-being is tied to that of our neighbors? Do we want a country in which every kid has a chance to reach her full potential, regardless of her parents’ annual income? Do we want a country that recognizes that investments in education are good for all of us? Or do we want a country in which the “right” of rich people to get richer is our top priority?
*William Blum has it just right: “The 'trickle-down' theory: the principle that the poor, who must subsist on table scraps dropped by the rich, can best be served by giving the rich bigger meals.”
The Rich get Richer
Tim Koechlin is a friend of mine on Facebook, where he originally posted this. I asked Tim if I could post this @ DK and he gave me permission. Tim is a member of econ4.org
We are economists who oppose ideological cleansing in the economics profession. Equally we oppose political cleansing in the vital debate over the causes and consequences of our current economic crisis. We support the efforts of the Occupy Wall Street movement across the country and across the globe to liberate the economy from the short-term greed of the rich and powerful “one percent”.Tim a Senior Lecturer of Urban Studies and Director of International Studies at Vassar College.
We oppose cynical and perverse attempts to misuse our police officers and public servants to expel advocates of the public good from our public spaces. We extend our support to the vision of building an economy that works for the people, for the planet, and for the future, and we declare our solidarity with the Occupiers who are exercising our democratic right to demand economic and social justice.
Tim Koechlin is the Director of Vassar’s International Studies Program, and a Senior Lecturer in International Studies and Urban Studies. Tim earned his Ph. D. in economics from the University of Massachusetts-Amherst in 1989. Before arriving at Vassar in 2001, Tim taught economics at Smith College and Skidmore College, where he was a tenured member of the economics department. In addition to his work in International Studies and Urban Studies at Vassar, Tim is also affiliated with Vassar’s Latin American and Latino/a Studies Program (LALS).
Tim has taught and written about a variety of subjects including globalization, inequality, international investment, NAFTA, urban economics, economic development, macroeconmic policy, and alternative economic theory. His research has been published in scholarly journals and book chapters, he has submitted testimony on trade policy to the US Congress and the New York State Legislature, and his opinion pieces have appeared in the Boston Globe, the Albany Times Union and the Poughkeepsie Journal. Tim is also a member of the editorial board of the Review of Radical Political Economics.
Tim Koechlin is the proud parent of 3 children, and he is a life-long fan of the Boston Red Sox.