Economics: Inequality
Growing since Reagan and Thatcher!

US Inequality: The Economics of Nastiness ... Americans are systematically lulled into believing that inequality is an unalterable fact of life.

Burgess COMMENTARY
Professor Brenner describes the state of affairs quite well ... as do many other people in academics, and to some extent in think tanks and political circles ... but doing anything practical to change this disastrous state of affairs is not part of the conversation. Tax reform is needed so that corporations pay an appropriate amount of tax. Modest profits (that is a modest return on real investment) should be free of tax, but profits reflecting a very high return on real investment should attract a much higher level of taxation. There should also be high taxation on the negative impacts that business is having on society and on the environment so that government has the money to do the necessary remediation! Governments should be very clear about what are investments and what are expenses ... as in corporate accounting ... and GDP growth should also be clear about what is invetment and what is consumption. Poor countries need more consumption, and rich countries like the USA need much less consumption, but a whole lot more investment to catch up the low investment of past years. There should be more clarity around the place (the United States for example) and the Government of the United States. The latter is an organization. Without this clarity, it is difficult to understand the finances of the Government and the finances of the nation. For example, ALL of the US dollars that went to China were sent there by the US private sector in order to buy Chinese products that could be sold profitably in the USA! Poor people need a basic income in order to pay for their cost of living ... but conventional thinking about financing basic income makes basic income impossible. But funding bank liquidity in 2008 was also impossible, but it was done in a matter of days because collapse of the banking system was unthinkable. We have a collapse of society ... and it is time to think of a way to finance basic income using some sort of massive social credit! And the same applies to the environment which has been seriously degraded and needs massive investment in remediation ... again impossible to finance unless there is some sort of thinking to establish a massive amount of environmental credit. A better system is possible ... but not by doing more and more of the same. Peter Burgess http://truevaluemetrics.org
Peter Burgess

US Inequality: The Economics of Nastiness Americans are systematically lulled into believing that inequality is an unalterable fact of life.


Photo Credit: robert cicchetti / Shutterstock.com

Takeaways

Income inequality in the US began to widen in the 1970s -- 35 years before the much blamed robotic/IT so-called revolution and globalization ever showed their full force. While the rich have perfected tax evasion with the acquiescence of Washington, America’s salaried workers have experienced stagnation or an actual drop in disposable income. Since 1973, more than 90% of the increase in US GDP has gone to the top 4% of the US population. In the US, the share of income of the top 1% went up from 20.27% in 2013 to 23.80% in 2016.

Unfortunately, Americans – despite their supposed “revolutionary” beginnings – are an obedient bunch. They just suck up what their ruler tells them to believe.

For all the mystery that currently surrounds the issue of inequality, at least in the United States neither the reality nor the cure is as mysterious as commonly made out to be.

A few facts: Inequality of income in the United States began to widen in the early 1970s. That is to say, 35 years before the much blamed robotic/IT so-called revolution as well as globalization ever showed their full force.

The pace of inequality accelerated beginning with the Reagan years, followed by Clinton’s deregulation move, as well as the bubbles of the past 20 years.

Since 1973, more than 90% of the increase in U.S. GDP has gone to the top 4% of the U.S. population. If distribution rates among income levels had been constant since 1973, roughly $3 trillion dollars of income among the top 10% (the majority going to the top 1%) would be in the pockets of the other 90%.

Or it would be in the coffers of the U.S. Treasury. There, it could have been used to build infrastructure, pay for a national health care program, provide subsidies for college tuition, child care services or decent accommodations for the aged.

Under-taxing the wealthy

That present political and economic U.S. malaise derives in large part from the under-taxation of the wealthy and corporations.

While the rich have perfected the art of tax evasion with the passive acquiescence of government authorities in Washington, America’s salaried workers overall have experienced either near stagnation or an actual drop in real disposable income.

And the politically condoned economics of nastiness continue. Now, even the venerable Federal Reserve can no longer close its eyes to the facts. In its September 2017 Federal Reserve Bulletin, the Fed staff informs us on page 10 that “The distribution of income and wealth has grown increasingly unequal in recent years.”

According to statistics from the Survey of Consumer Finances (SCF), “Families at the top of the income distribution saw larger gains in income between 2013 and 2016 than other families, consistent with widening income inequality.”

Specifically, the share of income of the top 1% went up from 20.27% in 2013 to 23.80% in 2016. The share of those in the bottom 90% declined from 52.73% in 2013 to 49.69% in 2016. That’s a direct percentage point for percentage point transfer from the lower ninety to the top 1%.

Eroding job security

These numbers do not include the sharp erosion in job security and accompanying personal anguish, nor the reduced health and retirement benefits as well as deteriorated working conditions for most salaried persons.

The latter add to the social and environment factors that, in the world’s self-ascribed richest country on earth, have produced a lowering of life expectancy unprecedented since reliable statistics have been kept.

The numbers speak for themselves – or SHOULD speak for themselves. Yet, a very large majority of economists deny the compelling truths that they reveal.

Instead, quasi-mythic elements are substituted. The most pervasive, foundational myth is the claim that there are “objective” factors at work generating powerful, perhaps irresistible pressures toward inequality.

“Objective” refers to factors beyond the direct control of state authorities. We get read and hear this litany in U.S. media every day. It comes as relentless variations of a theme that first topped the charts when played by Thomas Friedman 20 years ago.

Fittingly enough, Friedman himself is the son-in-law of a billionaire real estate investor. At least, he’s no pied piper, as the Clintons and Obamas are.

Four horsemnn of the inequality apocalypse

Americans can hardly pick up a paper, a journal, a book or a scholarly conference paper without noting reference to robotization, globalization, functional specialization and STEM education – the four horsemen of the inequality apocalypse.

In this telling, cars will drive themselves, our children taught by corporate produced computer programs, our eggs dropped on our driveways by drones, our ailments diagnosed on the web and treated as dictated by data banks, etc., etc.

A coterie of high-tech magicians will create and maintain these electronic masters and will be the only ones consistently employed gainfully. The rest of us will compete for gigs to serve as McDonald’s sweepers and COSTCO greeters with clickers in hand, evidently to replace the current wave of impoverished retirees that are now handling these tasks.

Low public spending breeds inequality

What is left unsaid is that inequality is strongly correlated with low public revenues and low public spending. There are crystal-clear macro-economic linkages, philosophical linkages and political linkages.

It is no accident that it is the United States and Great Britain where the population at large now feels especially down and out. Decades-long, stringent controls on government spending for everything but the military and intelligence services generates additional pressures on working families that lower the value of their household incomes.

The great paradox is that this should be blatantly obvious to many, if not most Americans. But even upper middle-class Americans shy away from recognizing the truth – even as it stares them in the eye.

Instead, they are happy to borrow money in order to pay for university tuition as approved by Equifax (mind you, for tuition charged by state universities that were abandoned by their own state legislatures).

They also rush their kids to the ER for overdosing on opiates, provide room and board for a 31 year old son (a certified graphic designer) whose job was outsourced to India or given to a pliable H-4 immigrant at the insistence of Bill Gates and Zuck.

They also silently endure supporting millions of prisoners, overwhelmingly from the lowest income brackets, that are kept in for-profit prisons (and that at a cost greater what is spent on American higher education).

Funding the military/intelligence complex

Never mind that they also fund a military/intelligence complex to the tune of $1 trillion annually to secure – unsuccessfully – them from everything except their free-floating anxieties.

This phenomenon is charitably called “cognitive dissonance.” It points to a level of falsehood in U.S. public policy that is nothing short of an organized crime.

Unfortunately, Americans – despite their falsely stated, supposed “revolutionary” beginnings – are an obedient bunch. They just suck up what their ruler tells them to believe.

The fact that, in the United States, it is not one ruler, but rather an amorphous group of plutocrats does not make the cowardly failure of Americans at large to stand up for their own economic interests any more tolerable.

Conclusions

It should not take much for a people to understand the following as logical conclusions of the way things presently are in the United States:

1. It is public policies and the structural features of an economy they shape that are the prime determinants of inequality.

2. The United States, on this score, is out-of-step with nearly all of the developed world.

3. The answers to American inequality are to be found in its politics, its social philosophy and its culture. These are not immutable – as witnessed by the relatively recent regression from quite different government roles and outcomes in the period between 1933 and 1973.

4. The difference in GINI scores between the United States and Sweden is 19%. Those numbers tell us that if we had the same score as Sweden, roughly $3 trillion would have been transferred from the upper brackets to the middle and lower brackets.

Does that spell disaster – or, as it has been cast, in the United States, “socialism”? Anybody who does so declares fairness toward the middle(!) class as an act of socialism!

The fact that Swedes across the board do quite well compared to most Americans is another conveniently oppressed truth. Or, to paraphrase the insufferable Larry Summers, a paid piper of the billionaire class, this is an outcome that doesn’t follow from the law of economics, but the facts that the Swedes are all so “Swedish.”
----------------------------------------------------------------------------------------
More on this topic Inequality and Democratic Capitalism Globalization and National Politics Blue-Collar Blues 251
=========================================================================================
About Michael J. Brenner Michael Brenner is Professor Emeritus of International Affairs at the University of Pittsburgh. [Texas, United States] Full bio → | View all posts by Michael J. Brenner →

Michael J. Brenner
Professor Emeritus of International Affairs, University of Pittsburgh

Michael Brenner is Professor Emeritus of International Affairs at the University of Pittsburgh and a Fellow of the Center for Transatlantic Relations at SAIS/Johns Hopkins. He was the Director of the International Relations & Global Studies Program at the University of Texas.

Brenner is the author of numerous books, and over 80 articles and published papers. His most recent works are: Democracy Promotion and Islam; Fear and Dread In The Middle East; Toward A More Independent Europe ; Narcissistic Public Personalities & Our Times. His writings include books with Cambridge University Press (Nuclear Power and Non-Proliferation), the Center For International Affairs at Harvard University (The Politics of International Monetary Reform), and the Brookings Institution (Reconcilable Differences, US-French Relations In The New Era).

His research interests focus on American foreign policy, international relations theory, international political economy and national security. Mr. Brenner has previously worked at the Foreign Service Institute, the U.S. Department of Defense and Westinghouse.