Inequality, Sin, and Law

Reihan Salam has some very interesting comments on Daniel Gross's review of Robert Frank's Falling Behind. Frank's book (which I have not read) is about inequality in America; he apparently argues that the experience of relative deprivation (owning, for instance, a smaller house than one's neighbors) fuels a kind of inflation of consumption, by which each income bracket, struggling to keep up with the one above it, raises the consumption bar for the brackets below it. In Gross's description, this "societywide arms race for goods" has dangerous effects in the context of ever-deepening American inequality:

But since 1979, gains have flowed disproportionately to top earners. In an economy where the wealthy set the norms for consumption and people at every rung strain to maintain the consumption of those just above them, that spells trouble. In today’s arms race, the top 1 percent are armed to the teeth and everybody else is scavenging for ammunition. Between 1980 and 2001, Frank notes, the median size of new homes in the United States rose from 1,600 to 2,100 square feet, “despite the fact that the median family’s real income had changed little in the intervening years.” The end result? Frank methodically presents data showing that the typical American now works more, saves less, commutes longer and borrows more to maintain what he or she views as an appropriate standard of living.

Frank's proposed remedy is a progressive consumption tax that would slow the arms race from the top down. Salam's response is a very interesting exercise in what you might call neo-traditionalist conservative thinking. In an earlier review of Frank's book, Salam wrote:

But what if the real inequality problem isn’t a technical problem? What if it really is a moral problem? Not moral as in “envy is a corrosive thing, so get over it.” Moral as in no progressive consumption tax will prevent people from building overlarge houses or custom cabinets at the expense of spending time with family and friends. A culture that is plagued by materialist excess won’t be cured by a progressive consumption tax. It can only be cured, if at all, through a revival of postmaterialist – or, if you will, prematerialist – family values. It could be that this eminently “progressive” concern can only be successfully addressed with a “conservative” solution.

Now he expands on this by revisiting the question: "what does this mean for us as political actors?" Salam distinguishes between "right-liberals" (by which I presume he means American "conservatives" of the free market-worshipping variety), who see no problem at all with inequality and the consumption arms race, and "left-liberals," who see a problem of justice and advocate institutional solutions. But neither group, he argues, sees anyone as doing anything "wrong" -- an outlook he questions:

What if there is some kind of wrongdoing, in some meaningful sense? As a nonreligious person, I'm not very conversant in the language of sin, but I have a sense that there are some kinds of consumption, perfectly voluntary, that have a deleterious effect on the moral ecology we share. So what if there is a moral problem, and that it's a problem that is not all that susceptible to an institutional solution? After all, no progressive consumption tax will teach children right from wrong, or prevent them from becoming frankly gluttonous adults. A progressive consumption tax would be a very good thing. But it's clearly not enough to teach a culture, which is to say us, restraint. What if, rather, this moral problem in fact indicates a need for some kind of civic education, or a renewed cultural emphasis on the many ways a fulfilling life is at odds with excessive consumption?

This is very interesting -- very Burke-with-a-human-face, suggesting an emphasis on cultural solutions to problems liberals view through the prism of injustice. Justice, of course, does imply an institutional framework; it implies law, civitas, action in the public sphere.

Just as there are "right-liberals," I think there are "left-conservatives," who themselves are primarily interested in culture and moral judgment as against collective action in the public sphere -- the basis for institutional solutions. If anything, I think the left has, over the past few decades, often been too countercultural in this regard. In any sense, they certainly aren't mutually exclusive paths.

For liberals, inequality is primarily a problem of justice as it relates to income distribution, not consumption. That's why we focus on institutional solutions: we're not naive enough to believe that you can tell economic elites to just be nice and share more. You can't legislate everything, but clearly the very premise of law is that the public welfare requires a set of dispassionate institutions, willing to enforce what we can best determine to be the most just rules by which everyone must live. Again: no reason that the moral and the institutional must be mutually exclusive, but neither is it healthy to let a preoccupation with culture distract us from the age-old pursuit of justice.

Labels: inequality, Reihan Salam, Robert Frank

  ¶ Posted by Paul Curtis 3:24 PM 1 comments

  The Conservative Inequality Dodge

If, as Rick Perlstein says, "there's no such thing as a conservative think tank," there are some pretty accomplished conservative bamboozlement organs. At the top of that dubious heap is the American Enterprise Institute, under whose auspices we find the latest embarassing attempt by right-wing intellectuals to pretend that inequality isn't a serious problem in America. You almost have to stand in awe of an institution devoted to churning out arguments about "The Upside of Income Inequality."

Grounding their analysis in a rather strange comparison between the US and China and India, Gary Becker and Kevin Murphy return to the conservative canard that inequality in America is largely a factor of the increasing value of college education. In fact, they use weasel words to avoid making a solid claim, arguing for instance that "much of the widening gap in incomes reflects the rising payoff for a college education and other skills." Emphasis mine: so, how much?

They don't say. Instead, Becker and Murphy go from comparing the United States to a pair of rapidly-developing Asian economies with mass peasant populations, to pointing out that Americans with college degrees earn more than those without them -- a difference that, as they report, has grown over time:

Politicians and many others in the United States have recently grown concerned that earnings inequality has increased among Americans. But as the example of China—or India, for that matter—illustrates, the rise in inequality does not occur in a vacuum. In the case of China and India, the rise in inequality came along with an acceleration of eco­nomic growth that raised the standard of living for both the rich and the poor. In the United States, the rise in inequality accompanied a rise in the payoff to education and other skills. We believe that the rise in returns on investments in human capital is ben­eficial and desirable, and policies designed to deal with inequality must take account of its cause.

In 1980, an American with a college degree earned about 30 percent more than an American who stopped education at high school. But, in recent years, a person with a college educa­tion earned roughly 70 percent more. Meanwhile, the premium for having a graduate degree increased from roughly 50 percent in 1980 to well over 100 percent today. The labor market is placing a greater emphasis on education, dispensing rapidly rising rewards to those who stay in school the longest.

Convincing! And well beside the point. Again, Becker and Murphy never discuss how education-related income differences compare to income patterns in the wider American economy. Allow me to provide some context:




So a college graduate makes 70 percent more than someone with only a high school diploma. Significantly more, but less than twice as much. By contrast, as the EPI report describes:

The richest 1% of wealth holders had 125 times the wealth of the typical household in 1962; by 2004 they had 190 times as much or $14.8 million in wealth for the upper 1% compared to just $82,000 for the household in the middle fifth of wealth.

Becker and Murphy's paean to the benefits of education is all very nice, but it has nothing to do with the real scandal of inequality in America, which is that the explosive income growth of recent decades has taken place among the richest one percent of Americans. Differences in education have very little to do with the fact that the US is now experiencing income disparities worse than at any time since the 1920s:

Income inequality grew significantly in 2005, with the top 1 percent of Americans -- those with incomes that year of more than $348,000 -- receiving their largest share of national income since 1928, analysis of newly released tax data shows.

The top 10 percent, roughly those earning more than $100,000, also reached a level of income share not seen since before the Depression [...]

The new data also shows that the top 300,000 Americans collectively enjoyed almost as much income as the bottom 150 million Americans. Per person, the top group received 440 times as much as the average person in the bottom half earned, nearly doubling the gap from 1980.

And then of course there's Jacob Hacker's argument that education itself is an increasingly risky investment for Americans:

[P]erhaps more than half of the rise in economic inequality in the United States involves the growing divergence of workers with the same level of education. In other words, people with the same number of years of schooling have much more disparate economic experiences than they used to -- and that means that investing in education, wise as it may be, is also increasingly risky.

Hacker points out that even as education has become vastly more expensive -- the average debt burden for college graduates is now $20,000, and for grad students it's twice that -- "advanced skills nonetheless provide no sure guarantee of economic stability"; people who make specific investments in particular skills or industries are especially vulnerable.

There's no way to dodge the issues: crisis-level inequality in America is real. Economic insecurity is real, and getting worse.

Labels: American Enterprise Institute, inequality

  ¶ Posted by Paul Curtis 10:53 AM 5 comments

  Unequal New York

A little plug for some of my work on another blog: I'm beginning a series at The Albany Project on inequality in New York, which may or may not interest you. The US is suffering from staggering levels of inequality, and the Empire State is the most unequal in the nation.

Labels: inequality, New York, The Albany Project

  ¶ Posted by Paul Curtis 10:59 AM 0 comments

  The Embarassing Question of Inequality

Judging by a number of remarks I heard throughout the weekend at the Conservative Summit, Jim Webb's response to the State of the Union really grinded a lot of conservative gears. One reason for this is that Webb went hard after an issue that conservatives very much don't want to talk about: economic inequality.

When forced to talk about inequality, conservatives will respond with two broad claims:

1. Inequality is not really increasing


2. Even if it is increasing, it doesn't matter.

In a piece at the New Republic a couple of weeks ago, Jonathan Chait examined one of the major promulgators of the first claim: Alan Reynolds, senior fellow at the Cato institute. Reynolds, Chait points out, is essentially an unqualified hack, a wingnut-welfare pundit posing as an economist, despite lacking even a master's degree in the subject. And he uses hacky "skeptic" tactics in precisely the same way as global warming deniers and anti-evolution flat earthers, seeking not to make a defensible claim, but to muddy the waters and convince folks that something clear is in fact something complicated.

There's no serious dispute over whether inequality is increasing in America. Chait cites the work of Thomas Piketty and Emmanuel Saez, which uses tax return data to show that, as Chait describes it, "Since 1980, the share of income accruing to the highest-earning 1 percent of U.S. tax returns doubled, the share of the top one-tenth of 1 percent tripled, and the share of the top one-hundredth of 1 percent quadrupled." Meanwhile, as Paul Krugman recently pointed out, "Median real income was only about 23 percent higher in 2005 than in 1976."

Thus conservatives retreat to their fallback position: Yeah, but so what? Tyler Cowen - drawing on claims by Alan Reynolds - made this argument in a recent New York Times op-ed:

The broader philosophical question is why we should worry about inequality — of any kind — much at all. Life is not a race against fellow human beings, and we should discourage people from treating it as such. Many of the rich have made the mistake of viewing their lives as a game of relative status. So why should economists promote this same zero-sum worldview? Yes, there are corporate scandals, but it remains the case that most American wealth today is produced rather than taken from other people.

What matters most is how well people are doing in absolute terms. We should continue to improve opportunities for lower-income people, but inequality as a major and chronic American problem has been overstated.

Ramesh Ponnuru makes the same argument in the February 12 edition of the National Review, which was published to accompany the Summit:

Conservatives generally think that an unequal distribution of wealth and income is not, per se, a bad thing [...]

We should care about reducing the number of people living in poverty ... But inequality should matter only if it reaches the point where it threatens popular support for a market economy. It is nowhere near that point. [Print only: p. 22]

In other words, inequality is not unjust, so it should only be a concern when it has the practical effect of threatening the system itself.

But, as Bradford Plumer explains in another article at the New Republic, it already is threatening the system: it's undermining American democracy:

Over the last few years, political scientists have been converging on the view that massive disparities in wealth and income really do distort the democratic process--by allowing a tiny segment of the population to wield outsized influence in the political realm.

The wealthy, Plumer points out, vote more (perhaps because they feel the system responds to them), make more political donations (which dramatically increases access to policymakers), and are almost exclusively represented in the ranks of elected officials. The result is a situation in which an activist government actually works for the elites, distributing wealth upwards. This broad imbalance in democratic representation means that some citizens end up being more equal than others. If inequality is left unchecked, "the very idea of 'equal citizenship' will continue its long erosion."

But economic inequality is also unjust in and of itself, independent of its effects on other institutions. Cowen tries to dance around this conclusion, arguing that, inasmuch as inequality has increased, it has been for innocuous reasons:

Much of the measured growth in income inequality has resulted from natural demographic trends. In general, there is more income inequality among older populations than among younger populations, if only because older people have had more time to experience rising or falling fortunes.

Furthermore, more-educated groups show greater income inequality than less-educated groups. Uneducated people are more likely to be clustered in a tight range of relatively low incomes. But the educated will include a greater range of highly motivated breadwinners and relaxed bohemians, and a greater range of winning and losing investors. A result is a greater variety of incomes. Since the United States is growing older and also more educated, income inequality will naturally rise.

Thus, inequality comes about mostly thanks to "relaxed bohemians" in their yurts, and old folks unable to stop buying all that crap on HSN.

The problem for Cowen's argument is that, again, the explosive growth in income has occurred in the top 1 percent of tax filers. Inequality happens most dramatically across the divide between the wealthiest one percent and everyone else. This has nothing to do with the broad segments of the American population that are elderly or educated. Cowen's attempt at bamboozlement is laughable. This is about how a very small number of elites have a massively disproportionate amount of the national wealth compared to the other 99% of us.

For context, let's look at the graph Jerome a Paris posted at Daily Kos:



Now, this graph expands the upper income bracket to the top 10% of the population, but it still makes a striking point, one that can't be dismissed with excuses about the educated or the elderly - and anyway, don't Europeans have educated and elderly folks too?

A very small number of elites in America have wealth in massive disproportion to the rest of America. Even so: Fine, the conservatives say. That's still not inherently unjust, because it's not a zero-sum game. As long as everyone's boats are being lifted, it doesn't matter if some people's boats go a lot higher than everyone else's.

But it is unjust. As productivity has grown, so has inequality. American workers are making the pie larger, but American elites are getting most of the benefit. The Economic Policy Institute recently reported on this phenomenon:

Data from the Bureau of Economic Analysis through the third quarter of 2006 show that a historically high share of corporate income is going into profits and interest (i.e., capital income) rather than employee compensation. And a newly released Congressional Budget Office (CBO) analysis of household incomes shows that a greater share of this capital income goes to the richest households than at any time since the CBO began tracking such trends. In other words, our economy is producing more capital income and that type of income is more likely to go to those at the very top of the income scale.

This, despite what conservatives would like us to believe, is unjust. It is unjust when American workers, the most productive in the world, create additional wealth only for that wealth to be sucked away into corporate profits. If my hard work is rewarded by a situation where my boat rises only a little bit, so that your boat can rise a lot, then an injustice has been done. It is a zero-sum equation.

Conservatives don't want to talk about this, and in recent years liberals have far too often politely obliged. Jim Webb took the gloves off, and it's about time. We have to stop coddling these people.

Labels: Bradford Plumer, conservatives, economics, inequality, Jonathan Chait, The New Republic, Tyler Cowen

  ¶ Posted by Paul Curtis 10:48 AM 2 comments