Note: I have Professor Costanzo's permission for full use of his article. See bottom of linked page.
How to Change Attitudes About InequalityContinued below..........
by Sam Costanzo
March 22, 2014 at 8:11pm
WHAT IS THE SINGLE MOST EFFECTIVE ACTION THAT THE PRESIDENT COULD TAKE TO ADDRESS THE ISSUE OF RISING INEQUALITY?
No, it’s not increasing the minimum wage, or increased worker training, or infrastructure projects. Those things require Congressional approval, and even if he could somehow get such legislation passed, they would not do much to reduce inequality. Effective action requires a radical change in public attitudes that would bring about real political change opening the door to an equally radical overhaul of the tax system and budget priorities.
And no, a rip roaring FDR type speech tearing into his opponents wouldn’t do the job either.
My suggestion would be a revision in the way the government compiles and presents the GDP economic growth figures that get so much attention in measuring how well the economy is performing. The change could easily be made, and it is totally within his authority as Chief Executive -- no Congressional approval necessary. It would only require changing the presentation format which currently emphasizes GDP or national production, with national income presented in supplementary tables, to a format that reverses the order, emphasizing national income and putting the production data in the background, with one important addition -- the national income data would be broken down by the income levels of the households receiving the income:
Instead of reading or seeing on TV that GDP increased 3.0% so that we can all take satisfaction that the economy is doing well, we would see something like the following (growth data illustrative, income shares as estimated by Thomas Piketty in Capital in the 21st Century):
Income Growth % of Total
Top 1% +10.6% 20%
Next 9% + 4.4% 30%
Middle 40% -0.6% 30%
Bottom 50% -1.3% 20%
National Income (GNP) +3.0% 100%
I am confident that if this data was published and talked about in place of the current GDP number we would see attitudes and the nature of the conversation about the economy change pretty fast.
What I am also doing above is reverting to the GNP number that was headlined prior to 1991. GNP (Gross National Product) includes income derived from foreign sources that is omitted from GDP (Gross Domestic Product) though it is quite significant for the top income groups. All of the data available in the current quarterly releases would continue to be available in the future. The only thing added is the income group breakdowns. The rest of the data would remain unchanged. Only the presentation would change with GNP and the income breakdown headlined over the GDP domestic production data, although the latter would continue to be available.The core data needed for the income distribution are already available on an annual basis from the IRS. Reasonably accurate estimates could be made for the quarterly numbers pending adding some detail to the payroll and other business data collected by the Dept of Labor Statistics on a monthly basis.
I am somewhat reluctant to propose changing the national accounts presentation for political purposes because there are a lot of other politically motivated proposals out there for adding a lot of non-market data about things like pollution, uncompensated homemaker services, commuting time, resource depletion, etc., which if adopted would make the accounts a useless fiction. This change is completely non-distorting, in keeping with the social purpose of the accounts, and I would suggest, important enough to make.