The United States is, by every reasonable measure, the most
unequal of the world’s rich countries. And this is not new development.
For more than three decades, the US has been suffering from a crisis of
inequality. The Democrats have not taken this crisis seriously enough.
The Republicans seem hell-bent on making it worse.
Evidence of extreme and rising economic inequality in the US is quite
overwhelming. In 1979, the top 1% earned about 9% of all income; in
2013, they earned 24%. The incomes of the top 0.1% have grown even
faster. More than half of all economic growth since 1976 has ended up in
the pockets of the top 1%. Meanwhile, the incomes of the shrinking
middle class have stagnated, and the incomes of those with a high school
education or less have fallen substantially. The purchasing power of
the minimum wage has fallen by about 15% since 1979. One in five kids
lives in poverty.
How have we responded to all of this? By cutting taxes for the rich,
busting unions and vilifying the poor! Over the past few decades,
effective 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 are near the very bottom. Since 1970, the percentage of private
sector workers in unions has fallen from 29% to 7%.
It has not always been this way. Between 1948 and 1975, the income of
the median US household doubled. The incomes of the bottom 20% actually
grew a little faster than the incomes of the top 20% over this period.
Between 1928 and 1950, the distribution of income in the US actually
became dramatically more equal.
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 in fact highly correlated with his/her parents’
wealth and status. Richard Wilkinson captures this sad reality
perfectly: “If you want the American Dream, you’ll have to go to
Denmark.”
Economic inequality inevitably means political inequality. The
right-wing Koch brothers, for example, spent more than $50 million
aiming to defeat Obama and the Democrats in 2012. Right-wing casino
magnate Sheldon Adelson spent over $100 million. 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 $50 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
especially appalling. The Republican vision – embodied in the “Ryan
Plan,” a budget proposal supported by virtually every Republican
legislator -- calls for still deeper cuts in taxes for corporations and
the top 1%, and further reductions in the “regulatory burden” on oil,
coal and gas companies (including “frackers”) and – believe it or not --
Wall Street! And further still, Republicans advocate 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!
Sound familiar? After thirty years, it should. This is 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 corporations to create jobs.
The problem is that it doesn’t work. Three decades of lower taxes and
reckless deregulation have saddled us with slow growth, soaring
inequality, the financial meltdown of 2008, a devastating recession,
rising tuition at our public universities, and diminishing opportunities
for millions of Americans. And yet -- like a zombie that will not die –
trickle-down economics is alive and well in the US, despite its long
record of failure.** Ask any Republican about the economy, and he (or
she) will tell you that we need more of this toxic concoction.
The US remains a very rich country. It has the capacity to do much
better; it has the capacity to produce equitable, sustainable growth. A
detailed discussion of how this might go is more than I can do here, but
this process would surely include higher taxes on the wealthy, a more
serious effort to regulate the financial sector, greater corporate
accountability, and increases in public investment. It would also
require a shift in priorities - a political transformation. It would
require a discourse and a policy agenda that prioritizes the needs of
working class and poor people: affordable education and health care,
enhanced worker bargaining power, and a commitment to full employment.
Along with a grim, stubborn economic crisis, we face a national
identity crisis. Do we want to recognize that our well-being is tied to
that of our neighbors? Do we want to prioritize shared prosperity and
economic security? Do we want a country in which every kid has a chance
to reach her full potential? Or do we want a country that prioritizes
the “right” of rich people to get richer?
This work is licensed under a Creative Commons Attribution-Share Alike 3.0 License.
Tim Koechlin holds a Ph. D. in economics. He is the Director of
the International Studies Program at Vassar College, where he has an
appointment in International Studies and Urban Studies. Professor
Koechlin has taught and written about a variety of subjects including
economic, political and racial inequality; globalization; macroeconomic
policy, and urban political economy.
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