Beware of Geese Bearing Gold
The NYT Mag. had a tricky dilemma yesterday: how to devote an issue to rising inequality without spooking the advertisers who hock multi-million-dollar vacation condos with space for “mega-yachts.” An old bromide came to the rescue: don’t kill the goose that lays the golden egg. Echoing Arthur Okun, Roger Lowenstein warns us of a tragic choice: “how can you promote equality without killing off the genie of American prosperity?” He reminds us that the most egalitarian time in American history was that quagmire of stagflation, the seventies:
Remember that while the decade may have been a high-water mark for American egalitarianism, the country was also in its worst economic funk since the Great Depression. Unemployment and inflation were raging, growth was tepid and the stock market was depressed. An economist named Alan Greenspan termed it “the Great Malaise.”
Lowenstein argues that the “cures” for the seventies (deregulation, free trade, and financial speculation) all accelerate inequality. And if we try to look a bit more like a European social democracy, watch out: “the price for being Belgian is steep: [its] median disposable income — what people have left to spend after they pay taxes and collect welfare-type payments — is only 72 percent as high as ours.” But don’t worry–we can educate ourselves out of the gap, since “college grads make more than 40 percent more than high-school grads[, and] those with postgraduate degrees earn twice as much.”
The NYT editorial page, under a bit less pressure to sell ultraluxe adspace, has a more sober view:
New college graduates . . . have been told repeatedly that a college degree is an open sesame to the global economy. But that’s not necessarily so, according to new research by two economists at the Massachusetts Institute of Technology, Frank Levy and Peter Temin. . . . [A] college degree does not ensure a bigger share of the economic pie for many graduates. . . . [Rather,] an outsized share of productivity growth, which expands the nation’s total income, is going to Americans at the top of the income scale. In 2005, the latest year with available data, the top 1 percent of Americans — whose average annual income was $1.1 million — took in 21.8 percent of the nation’s income, their largest share since 1929.
That’s income, not wealth–and the latter measure is far more skewed. Moreover, asset inequality has grown since the housing boom put a chasm between families who bought last century and those who have to face the market now.
I’ve got a few more bones to pick with Lowenstein beneath the fold. . . .
First of all, why blame stagflation in the seventies on equality-promoting policies? Where’s the blame for the “guns” in the “guns and butter” spending spree that laid the foundation for fiscal malaise? Moreover, what is the causal nexus between Belgian egalitarianism and lower disposable income there? I can think of few potential confounding variables off the top of my head: less natural resources, less hours worked overall, a “greener” culture more attuned to “being” rather than than “having.” Why not look at broader measures of well-being than income or GDP (such as net economic welfare)?
Lowenstein also sounds a leitmotif of bien-pensant inequality commentators: it’s absolute, not relative deprivation that matters: “It’s not the rich people pulling away at the top who are the problem; it’s that so many have been stuck for so long at the bottom and in the middle.” That would be a fine analysis if our political system were hermetically sealed off from our economic system. But as Spencer Overton has tirelessly documented, the commodification of political power is de rigeur in today’s America. Consider the campaign against the death tax: funded by a handful of families , it would “save these super wealthy families about $71.6 billion dollars, and cost the federal government $1 trillion over ten years.” There goes a lot of funding for the job training Lowenstein is so crazy about. He might also consult David Cay Johnston’s Perfectly Legal for dozens of such schemes pulled off on the administrative, rather than legislative, level.
In an article in the same issue, Matt Bai suggests that John Edwards’s populist leanings were tempered by a lucrative stint at a hedge fund. It’s not hard to apply the same theory to the Times itself; Ike Behar and Prada ad money make well make one ill-disposed toward “predistribution Democrats,” as Bai terms Robert Reich. It may well be impossible to develop a national platform–be it in politics or journalism–without being reconciled to (and funded by) accelerating inequality.
Photo Credit: Flickr, RandomChu.