Middle class growth key to combat U.S. inequality
Income inequality has become an increasingly common term in the last three years.
Occupy Wall Street’s emergence in 2011, with its rhetoric of the 99 percent versus the 1 percent, suggested the potency of income inequality as a political issue.
Elizabeth Warren’s (D–Mass.) skyrocketing national appeal, fueled by her pointed advocacy for the American middle class, hinted at the reservoir of support available for a savvy candidate willing to give voice to many Americans’ sense of unfair economic treatment.
Bill de Blasio expertly tapped into this sentiment throughout his successful campaign for mayor of New York City, trumpeting that New York told a “tale of two cities” — rich and poor — that needed to be reconciled.
Finally, President Barack Obama carried the baton into 2014 during his State of the Union Address: “Today, after four years of economic growth, those at the top have never done better. But average wages have barely budged. Inequality has deepened. Upward mobility has stalled.”
What facts support this rhetoric? The disappearance of well-paying manufacturing jobs, which historically ushered a broad swath of Americans into the middle class, is blamed for this rise in income inequality.
The American middle class today can handily be described as an hourglass — wide at the top and bottom, where it is populated by the rich and the poor respectively, and narrow in the middle, due to a shrinking middle class.
Even more compelling is the available data. The single most arresting statistic, drawn from the 2012 Economic Report of the President, states that between 1979 and 2007, real after-tax income grew roughly 38 percent for 99 percent of Americans and 278 percent for the top one percent. Americans in the 81st to 99th percentiles saw a real income growth of 65 percent in those three decades.
Meanwhile, the top one percent in that quintile enjoyed more than four times as much income growth as the rest of this wealthiest group of Americans. Truly, Occupy Wall Street’s slogan — “We are the 99 percent!” — was empirical gold.
How do our political parties respond to these statistics? Republicans argue that income inequality is the natural consequence of differently talented individuals competing in a free marketplace.
The promise of high incomes motivates some individuals to work hard and take entrepreneurial and innovative risks that may create both great personal wealth and whole new industries. Capitalism, governed by the invisible hand of economics, rewards each individual according to his talent and his work ethic, and differing incomes merely represent the differing value of each individual in the marketplace. Therefore, while income inequality may be disquieting in the short run, it produces such goods and services in the long run as to make the daily life of a poor person today more convenient than that of a rich person decades ago.
This argument is sound, but it does not address the recent spike in income inequality. The post-WWII era, a halcyon ideal of the American conservative, was marked by historically low income inequality. How can the American conservative then, with a straight face, dismiss spiking income inequality today as a minor byproduct of the machinery of capitalism?
After all, the conservative vision seeks order at nearly all costs. A democracy driven by great disparity in wealth is vulnerable to angry populism, in addition to mob rule and its attendant chaos.
Journalist for The New Yorker George Packer eloquently observed that inequality, by dividing us from one another, “makes it harder to imagine the lives of others.” Such failure of imagination is the death knell of a democracy, for democracy demands us to intelligently select the best possible course of action for our country and all our fellow citizens and trust that they can and will do the same.
Though Democrats brought income inequality to the forefront of the national political conversation, their solutions are short-sighted.
No sane liberal would propose a scheme of perfect egalitarianism, but while equality of income may be utopian, equality of opportunity is not.
Liberal solutions too often seek to raise taxes on the rich, but this redistribution of wealth — after incomes have already been established in the marketplace — chases a problem rather than confronting it.
Smarter solutions, including public investments in education, infrastructure, and sustainable energy, would create numerous middle-class jobs and lessen widespread income inequality. By driving middle-class growth, the hourglass could be filled out for decades to come, rather than moving wealth by state fiat from the rich to the poor.