Thursday, June 05, 2014

Inequality, Poverty, and People Like Us

-- Posted by Neil H. Buchanan

The recent national rediscovery of economic inequality, and the apparent desire on the part of many Democrats finally to take it seriously, necessarily means that we will be going over a lot of very old ground.  The fact is that concerns about inequality have been around for millennia, and there are long scholarly traditions in philosophy, economics, and other fields dealing with the many aspects of the problem.

Those arguments have certainly not led to consensus, even among those who genuinely wish to deal with persistent inequality (and especially with poverty).  In good faith, people can disagree about how to address inequality (taxes, spending, property redistribution, and so on), and even individual theorists can puzzle over how much is enough.  There are, in other words, some very useful discussions that we could be having, trying to figure out how to proceed in the face of high and rising inequality.

Unsurprisingly, however, we are not having those discussions.  We are, instead, listening to the same old litany of evasions and false claims from the political right.  In my new Verdict column today, I initiate a two-part series in which I try to debunk one of the more egregious arguments that conservatives regularly trot out: Inequality is unimportant, because there is a lot of income mobility, with the rich becoming poor and the poor pulling themselves up by their bootstraps.  Of course, there is actually not much income mobility in the U.S.  In fact, the latest studies show that the U.S. is not only much more unequal in its wealth and income distributions than our European economic peers, with much higher levels of poverty, but we also have much less income mobility over time than we now see in those countries.

In my column, I point to a recent op-ed in the Sunday Times of April 20, in which a professor of social welfare tries to show that there is a lot of income mobility in the U.S.  He reports on co-authored research that claims to show that people can expect, over the space of a decade or so, to experience one-year jumps in income that put them temporarily into higher income categories.  As I describe on Verdict, the op-ed contradicts itself by explaining that these income jumps are truly temporary (one-time bonuses, for example) yet somehow claiming that "this information casts serious doubt on the notion of a rigid class structure in the United States based on income."

The author further argues that "America is a place where a large majority of people will experience either wealth or poverty — or both — during their lifetimes."  Of course, even if this is literally true, what is the point?  That a large majority of Americans really will experience either poverty, or wealth, or both does not tell us anything about inequality.  Maybe his underlying research proves something interesting along those lines, but all he has told us in the op-ed is that some people who are stuck in their income classes have occasional better-than-average years.  How that supports the supposed "fact that Americans are likely to be exposed to both prosperity and poverty during their lives" is anyone's guess.

The op-ed sets up a false dichotomy by claiming that others create a false dichotomy: "The picture drawn of the 1 percent has been that of a static population, just as the 99 percent is often portrayed as unchanging. There is a line drawn between these two groups, and never the two shall cross.  But is it the case that the top 1 percent of the income distribution are the same people year in and year out?"  As I point out in my column, it should hardly be surprising that there is movement across arbitrary income (or wealth) borderlines over time.

Even though people talk about "the 1%" and "the 99%" as categories, it should surprise no one that those groups are not perfectly fixed forevermore.  That, however, does not prove that there is income mobility in the sense that really matters, which is sufficient income mobility to make it no longer a matter of concern that people are stuck in poverty, or that other people can permanently enjoy enormous advantages from being rich.  It only proves that there is income mobility in the sense that there is not perfectly static categorization over time.  "America is not totally immobile" is hardly the same thing as "America has enough income mobility that inequality and poverty can be taken off of the public policy agenda."

To his credit, the author of the op-ed is at least not engaging in the most silly kind of mobility argument, which is that we should do nothing while allowing the "blender" of a dynamic capitalist economy to allow the deserving winners to rise to the top and the lazy or talentless losers (including the dissolute children of the rich) to sink to the bottom.  (The extreme form of "just deserts" theory is the go-to move by ideologues who advise Republican presidential candidates.)  That argument, of course, relies in the first instance on a degree of equal opportunity that is mocked by current reality in the U.S.  Moreover, it takes as gospel that we should be willing as a society to simply allow the "losers" to sink to whatever low level they might reach.  And their children are the objects of some concern (sort of), until they hit age 18 and do not have high-paying jobs, at which point they are deemed to be society's leeches.

Although this particular op-ed does not explicitly go down the road of just deserts theory, the big reveal is reserved for the final line: "[W]e have much more in common with one another than we dare to realize."  This is, in other words, a tarted up version of the Republican talking point about supposed divisive "class warfare."  Maybe F. Scott Fitzgerald was wrong, and the rich are not different from you and me.

You see, we are all really alike, you and me and David Koch.  We are all exposed to prosperity or poverty during our lives, and we should admit as much and "shape our policies accordingly."  Yes, let us dare to realize that it would be better to acknowledge that sometimes people in the second income quintile jump to the first income quintile, so that we can stop thinking that America has a completely rigid income class structure.

How would that change anything that we think about anti-inequality policies?  Who knows!  Because I have never believed in the "envy" theory of redistribution, nor do I think that liberal redistributionists are motivated by a gratuitous desire to take rich people down a notch, it makes no difference whether I dare to realize that some of the rich have an occasional off year.  Having something in common with the rich does not change the fact that there is extreme poverty in this country, nor does it stop the rich from buying a political system that protects their wealth.  Maybe I am supposed to be less eager to take money from people who are kind of like me, but I cannot imagine why that should matter.

As I noted at the beginning of this post, there are many important issues that need to be discussed, if we are to take inequality and poverty reduction seriously.  Thankfully, we seem to have (mostly) passed through the initial red-baiting stage, but we are now mired in a different kind of silliness.  This cannot pass too soon.


Paul Scott said...

The solution matters and the solution favored most by Democrats is why the Republicans have such an easy time of it.

So, here is the problem as I see it. facts suggest a need to deal with inequality. Policy will be directed to increasing the tax burden of the "wealthy" - except that it never really is. The biggest tax increases will not come on the 0.1%, but will instead fall on people exchanging time for cash that fall in the 5% to 1% - the doctors, lawyers, high-level managers and low-level execs, other professionals, etc. This is a mistake the Democrats routinely make. They increase taxes on income, but largely leave taxes on wealth untouched (or lightly touched).

What we need is a series of anti-poverty programs such as housing programs, food and cash grants, significant increases to the EIC, etc. This needs to be paid for by increases to capital gains rates (progressively, so that you are paying 0% on the first, say $10K, 5% on the next $100K, going up to 40% or more at $1M+) or just treat all capital gains as income, and most importantly to direct taxes on wealth - something like a 80% tax on estates (after a high cutoff - like $10M), gift taxes, etc.

This really won't happen, though. The new taxes to help with inequality will be directed at income and will make the 5%-1% pay for the bulk of it. It is a lot easier for Republicans to defend that crowd than to defend the truly wealthy.

Jimmyd said...


I agree with you on the income vs wealth issue.

I also want to put forth what I think is an even stronger rebuttal to the social mobility argument--namely, even if it's true it is bad. The analogy I like to use is a child learning to walk--they will stand, wobble forward for a bit, and then fall down again. This process repeats itself for a certain number of times until the brain figures out what is going on and the child learns to walk normally. Now imagine what would happen if the child never learned to walk but perpetually went through a process of standing up, wobbling forward, and then falling down again. We would not look at that child and go, "oh ho, there is a perfectly functional child;" we would go, "that child is disabled."

Another way to think about it is mathematically. The sum of a series of numbers such as 0,-1,+1,+5,-3,-2,+2,-2 is still zero. Sure there is a lot of mobility--in the same sense that treading water displays a lot of mobility....yet in the end gets one no where.

So for me the social mobility argument evidences a love for process over substantive results. Maybe that's right--maybe there are plenty of people who love the drama and don't care whether they end up at the bottom or the top so long as there are lots of yo-yos. But if that's the case then such people should be honest about their values rather than trying to pretend that economic mobility is an substitute for economic progress.

Cicy said...

The picture drawn of the 1 percent has been that of a static population, just as the 99 percent is often portrayed as unchanging. There is a line drawn between these two groups, and never the two shall cross.

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