America has a problem. Income inequality.
The status quo is unstable and may be unsustainable.
A great many Americans think the system is rigged against them. They see wealth trickling up, not down. The rich get richer, the educated have their licenses and certifications that protect their jobs, while working people fall behind and struggle to afford housing and other essentials. The frustration fuels populist discontent. Populism on the right targets "takers" -- the lazy, the incompetent, the addicted, the system gamers, the "welfare queens" -- who are a drag on hard working people like themselves. Some resent affirmative-action. Some blame immigrants who bring down wages because they work too hard for too little. Some blame competition from Mexico or China. Populism on both right and left points at economic elites -- corporations, and the very wealthy, with their lobbyists, special interest PACs, and ability to pull the strings of democratic government.
Ipsos posted a poll that included these results:
Michael Wallace is a college classmate. He offers a solution to the problem of income inequality. After college Wallace joined the Peace Corps and then returned to obtain a Ph.D. from the JFK School of Government. He retired in 2018 and enjoys daily walks with his dog Layla.
Guest Post by Michael Wallace
One of my ongoing concerns is the persistent inequality of income and wealth in the United States (and the world). This inequality has certainly seen its ups and downs, but in the last 30 years it has increased, so that from an economic perspective, we are a more unequal society now than we were in 1990. Some people may not think this is a serious problem, but I do. I think that more egalitarian societies are happier societies.
There are a variety of ways to address this problem, from equalizing the acquisition of income in the first place to equalizing the retention of this income after it is acquired. This post addresses the redistribution of income after it is acquired.
To simplify the exercise, I consider a simple society composed of five quintiles of income. The current (2021) distribution of income by quintile in the United States is shown in the left side of the table below:
Tax Policy Center To redistribute income, I would take 10% of the income of the top quintile and give it to the bottom quintile. I would take 10% of the income of the second highest quintile and give it to the second lowest quintile. The ranking of the quintiles would not change, so individual personal positions would stay the same in the overall society. As only 10% of anyone’s income has been taken and redistributed, absolute losses would be relatively small.
However, the absolute incomes of the bottom quintile of people would increase by 181%--their incomes would nearly triple. The absolute incomes of the second lowest quintile would increase by 28%--more than a quarter. The bottom two quintiles would be much happier, and the top two quintiles would hardly be disadvantaged.
I think this would be a better and happier society.
[Note: To get daily delivery of this blog to your email go to: https://petersage.substack.com and subscribe. The blog is free and always will be.]
6 comments:
This proposal is instructive as a way to illustrate the fundamental issue. It basically is tax the rich, which is the mantra of democratic socialism. And certainly would be an element of a tax system that was more skewed towards economic equality. But there are other considerations that would complicate its success.
Without getting into all of the factors, and there are many, I'll address one that I consider fundamental. For such a plan to work would require a change in attitudes toward wealth, first of all by the wealthy, which would be earthshaking, but mostly by those who mistakenly believe rich people have some magic quality that earns them reverence.
Aside from the bigotry and xenophobia, MAGA is a cult that worships the wealthy, to the extent that cult members vote against their own economic interests. It's deviously brilliant, essentially convincing people with little hope of every becoming rich under any circumstances other than a lucky lottery ticket that they are being cheated out of their birthright by the homeless, the addicted, uppity women, and refugees from Central America.
There are hopeful signs that this society is changing, but as long as one of the major political parties only policy is protecting the wealthy through tax cuts and cutting social services any way they can, it will be a struggle.
Look what is possibly happening in Russia right now. Vast discrepancy between the rich and the masses and a potential chaotic regime change.
It seems to me that democrats want to help the working class and republicans want to screw them by giving even more money to the rich, but they vote for republicans anyway. Income inequality and revolution are related and need to be addressed. How about we tax the rich and use that money to bring universal health care for all Americans? Let’s insure all Americans are getting enough to eat. Is that asking for too much America?
From the 1940s through 1970, CEOs received about 30 times the annual average salary of production and nonsupervisory workers in the key industry of their firm. Now they make about 400 times as much.
Income inequality in the U.S. is the highest of all the G7 nations, and pervasive economic inequality has led to the most disruptive revolutions of human history. That's probably the real reason so many feel the country is going in the wrong direction.
Speaking as a “native“ who’s somewhere near the boundary between the fourth and fifth quintile, I will stop beating my drum for a moment to say that something like this had better happen soon, or there may be the kind of cataclysm that can lead to rows of heads on pikes.
The problem is not "income inequality" because that's simply a mathematical calculation. For example, one could reduce Bezos' and Gates' wealth by half and "income inequality" would be reduced but nothing else would be affected, right? Apart from envy or issues of unfairness, the real issue is linked to how well basic needs are attended to for everyone on the income spectrum. I don't care at all, really, about "income inequality." Rather, I care about free or otherwise affordable access, for everyone, to education, health care, property insurance, environmental quality and similar things. If all those were attended to, who would care if, say, Bezos' and Gates' "income" were tripled? So, I say forget the mathematical calculation and the somewhat interesting historic ratios and worry, instead, about how everyone is served by schools, hospitals, parks and so many other things. I realize this particular post addresses actual redistribution of money (income) but, again, I do not see that as the issue at all. Progressive taxation is what will allow basic goods to be fairly distributed, for sure. But we'd all be better served if "income inequality" is never mentioned again, and the argument moves over toward the real issues at hand.
Anon, thank you. I’ve tried to explain this concept to many, almost all of whom can’t seem to get it. Maybe 5-6 decades without using simple math has left their cerebra inoperative. Maybe your explanation will help edify someone.
Post a Comment