Tag Archives: middle class

How the 1 percent is systematically destroying the middle class

The idea of a property-owning democracy has long roots in American political thought. In their book, “The Citizen’s Share,” Joseph R. Blasi, Richard B. Freeman and Douglas Kruse argue that the Founding Fathers wanted everyone (well, everyone who was white and male) to own a small slice of property. Both Madison and Washington praised the relatively equal distribution of property in the United States (compared with Europe). Thomas Jefferson wrote, “It is not too soon to provide by every possible means that as few as possible be without a little portion of land. The small landholders are the most precious part of a state.” Indeed, the concept is still popular today, even on the right. James Poulos writes, “Without an ownership society, where citizens are prudent stewards of broadly distributed private property, freedom tends to become what it was in revolutionary France — an abstract ideal that can easily arouse destructive political feelings that know no bounds.” But new data suggests America may no longer be such a society, and that has worrying implications for democracy.

The idea of a property-owning democracy is no longer the reality in the United States. Edward Wolff finds that the wealthiest 10 percent own 90.9 percent of all stocks and mutual funds, 94.3 percent of financial securities but only 26.5 percent of the debt. For the middle class, their home makes up 62.5 percent of their limited wealth. (The bottom 40 percent have negative wealth.) The Gini coefficient for net worth has increased from 0.803 in 1962 to 0.871 in 2013. (By way of comparison: A Gini coefficient of 1 means that 1 person owns all of the wealth.) As the chart below shows, financial instruments and wealth are far more unequally distributed than income.

The United States is no longer more equal than European nations, but actually deeply more unequal. The chart below shows that the United States has the most unequal distribution of the wealth of any Organisation for Economic Co-operation and Development (OECD) member country examined. Across the OECD, the bottom 60 percent own about 13.3 percent of the wealth. (The bottom 40 percent own only 3.3 percent.) In Canada, the bottom 60 percent own 12.5 percent of the wealth, and the bottom 40 percent own 2.2 percent. In France, the respective numbers are 11.6 percent and 1.8 percent. And in Britain, they are 16 percent and 4.7 percent.

In the United States, however, the bottom 60 percent own a mere 2.5 percent of the wealth and the bottom 40% own negative 0.4 percent of the wealth.

As wealth and stock ownership has become more concentrated, good jobs that lead to a middle class lifestyle are increasingly eroded. Unfortunately, not enough people seem to be noticing.

Indeed, the Wall Street Journal recently reported that “apps do your chores” — but the unfortunate reality is that workers, not “apps,” are doing those chores. The workers are called “contractors,” instead of employees, meaning that they don’t get the protections full-time employees do. And examples of exploitation are piling up.

A startup called CrowdFlower Inc. — which, according to WSJ “breaks down digital jobs, such as data entry, into tiny tasks performed by millions of workers” — was recently sued for paying some of those workers between $2 and $3 an hour. Industry leader Uber, meanwhile, has been criticized for exaggerating the wages of its contractors.  This practice is becoming widespread. A recent study finds that 53 million Americans are doing some sort of freelancing work. Of those, 40 percent are full-time independent contractors, meaning they have no other source of income.

The rich are driven by two main desires: First, to make sure they have more money; and, second, that someone else does the work. There is literally no job the rich are not lazy enough to outsource. Because they cannot figure out the location of their post office, they need “Shyp.” With “Luxe,” they can get a person to park their car for them. And with “Saucey,” they can save themselves a trip to the liquor store. In a recent article for  The New Yorker, Patricia Marx describes some of the more absurd tasks that were included on TaskRabbit, including “Lego sorting,” locating “a reptile handler who is in legal possession of a rattlesnake” and finding a fake wedding ring that looks just like a real one.

It is not of insignificant concern that the rich may cease to be capable of performing the basic tasks necessary in the modern economy. The result is something like the dystopia described in the recent science-fiction film “In Time,” except that the rich elongate their lives by making the poor do their mundane tasks.

Robert Kuttner writes of TaskRabbit:

To get an assignment, an aspiring Rabbit offers to do the chore for less money than he or she thinks other prospective Rabbits are bidding. That’s what makes it a metaphor for the new economy, a dystopia where regular careers are vanishing, every worker is a freelancer, every labor transaction is a one-night stand, and we collude with one another to cut our wages.

Together these trends should be worrying: The vast majority of Americans own no assets, but are instead laden with debt. The social safety net is being shredded by plutocrats and their political henchmen. Conservatives say workers should instead get benefits from their (preferably privately owned) employers. But those companies are supporting workers less and less: Defined benefit pensions are a thing of the past, and even basic retirement plans are in decline. And that’s just for those who are lucky enough to have jobs with benefits. Many workers are misclassified, or are never employees to begin with, meaning they must manage for retirement and health insurance without all the benefits the government funnels through the employee-employer relationship.

As Matt Bruenig notes, in the United States,

“employers often handle sickness (health insurance, subsidized by federal government), old-age insurance (401k and defined-benefit pensions, subsidized by federal government), survivor’s insurance (life insurance, subsidized by federal government), family benefits (paid leave and health insurance for children), unemployment (severance, though more typically rely heavily on public unemployment insurance), on top of providing socially adequate levels of cash income.”

That is, government has funneled important social benefits through corporations. This not only makes a corporate job more cushy than otherwise, it also makes freelance work more precarious. Christopher Mims notes that, “Uber isn’t the Uber for rides — it’s the Uber for low-wage jobs.” A large portion of Americans now have two choices: Become servants to the rich for minimal wages, or starve to death. The idea that low-wage work is merely a short-term part of the rung towards a better life is also largely illusory: Upward mobility has been destroyed.

America has fallen into neo-feudalism: A wealthy capital-owning class exists behind a servile class with no assets, and only a life of drudgery ahead of them. The master-servant relationship will only further degrade social trust and civic values. Americans can’t see themselves as equals in the political sphere when large portions are consigned to wait upon the whims of new aristocracy. Conservative politics relies on the middle class making a devil’s bargain, believing they have more in common with the rich than the poor. It won’t be long before that facade crumbles.

This piece originally appeared on Salon. 

Rubio Will Likely Be The Republican Nominee

Barring a massive strategic blunder, Marco Rubio is well-positioned to become the Republican nominee for President in 2016. The Florida senator is the ideal candidate to expand the Reagan coalition while holding on to the conservative base and he can take shots at Clinton that would sound hypocritical coming from Bush. While his power as a candidate has yet to emerge in the polls, a misstep by Bush will send him straight to the top.

Right now the Republican party is deeply fractured, and its coalition, at least at the presidential level, is weak. Republicans have failed to win the popular vote in 5 of the last 6 elections, and when they were successful, it was largely because of George W. Bush’s modest success with Latinos. The problem Republicans face going into 2016 is that the rise of the nativist Tea Party makes it difficult for them to woo Latino voters without losing their base. Rubio offers them such a bridge candidate.

Before exploring why Rubio could act as a bridge between conservatives and Latinos, it’s important to explode a key myth — that Republicans simply can’t win Latino voters; as I’ve noted before, there are indications that they can.. The problem is that appeals to Latino voters will often alienate the more nativist Tea Party portions of the Republican base. Thus, the GOP needs to find a candidate that can perform well enough to neutralize the Latino vote but also ensure that the conservative base turns out to vote.

According to data from a recent Economist/Yougov poll, while no Republican candidate has a net favorability with Latinos, Rubio dramatically outperforms Bush. The split among conservatives is perhaps even starker: Rubio holds a 37 percent net favorability and Bush holding a 15 percent net favorability.

Republicans will also want to make inroads with the poor, the middle class and youth. Here again, Rubio has a distinct advantage, polling strongly with young people and the middle class (those making between $40,000 and $100,000). Among those making less than $40,000, Bush and Rubio are at a dead heat. (Scott Walker polls significantly better than both in this category, however.)

It could be that as Rubio becomes more well known, he’ll become less popular. This has clearly happened to Bush, who has seen his net favorability drop from negative 5.9 points in February 4, 2013, when 42 percent of respondents said that had “not heard enough” to judge him, to negative 16.2 points on April 21, 2015, with only 16.8 percent of respondents saying they had “not heard enough.” But even this argument doesn’t sink Rubio. In the same Yougov poll, Rubio’s “do not know enough” score is only 4 points higher than Bush among Latinos, 6 points higher among young voters (18-29) and 8 points higher with the middle class. Even assuming all of these “don’t knows” dislike Rubio (unlikely) his net favorability would still be higher than Bush’s.

As the chart below from Sam Wang shows, as a Republican becomes more well-known, he also becomes less popular. Bush fits perfectly on the trend, while Rubio is slightly above it and Walker is slightly below it. In a recent Wall Street Journal/NBC Poll, completed before Rubio announced his candidacy, 56 percent of Republican primary voters said they could see themselves supporting Rubio, with only 26 percent saying they couldn’t. Only Scott Walker, with 53 percent and 17 percent respectively, had better numbers, and Jeb Bush pulled in a squalid 49 percent in favor, 42 percent against.

Republicans consider who their nominee will be must also consider how they are going to run against Clinton. It’s likely that they will prefer three major criticisms: First, that she’s dynastic; second, that she’s too old (an argument with sexist undertones, to be certain, but it may still resonate with voters); and third, that her Washington-insider status should disqualify her. Each of these arguments will be muted in the case of a Bush nomination, but could be much more persuasive coming from Rubio — the son of a immigrant father and a working class mother with strong Tea Party connections. He’s young and he’s targeted much of his rhetoric towards benefitting the middle class (no matter their dubious merit).

To test whether Rubio might be a better foil to Clinton, we can look at the Real Clear Politics General Election Match-Ups. The current average suggests that in a head-to-head election with Clinton, Rubio would lose by 7.5 points. The three most recent polls show Clinton up by 14 points, 2 points and 4 points respectively. In all three, Rubio loses. However, his margin is still lower than Bush, who loses by 8.9 points on average, and 17 points, 7 points and 4 points respectively. Walker loses by 8.6 points on average (22 points, 5 points and 6 points, respectively).

The most recent polls, taken from March and April, are shown below, where each bar corresponds to Hillary Clinton’s margin of victory in a hypothetical matchup:

The other conceivable option on the table is Scott Walker, who does poll well with blue-collar Americans. The problem is that his strategy for winning the White House relies entirely on maintaining the old Republican coalition, which won’t be appealing to party elites. Recently, for example, he signaled opposition to immigration reform, which isn’t surprising given his vision of the party’s future, but will ultimately doom him as a candidate. Without making inroads into the Latino vote, Republicans will never take back the White House.

The arguments against Rubio, meanwhile, are melting away. Worried about his embarrassing SOTU response? Witness his energetic and moving announcement speech. Worried he won’t get the support of big backers? Sheldon Adelson may back his campaign. The failure of immigration reform in 2013? No support among party elites? Rubio just got kind comments from Brooks and Douthat. Stagnant wages and stunted upward mobility? Marco Rubio said it best in his announcement:

My candidacy might seem improbable to some watching from abroad. In many countries, the highest office in the land is reserved for the rich and powerful. But I live in an exceptional country where even the son of a bartender and a maid can have the same dreams and the same future as those who come from power and privilege.

Indeed, Rubio’s biggest problem seems to be that his impressive qualities show up everywhere but in the polls: Real Clear Politics still puts him below Walker and Bush. However, Rubio offers a perfect embodiment of the Republican vision of the American Dream. He’s offering a vision that may can win enough Latinos, working-class white, youth and Republican regulars to credibly threaten Hillary. He’ll likely be the Republican candidate.

This piece originally appeared on Salon

How Racism is Destroying the Middle Class

Progressives have long argued that conservatives play up racial resentments to undermine the welfare state. Conservatives tend to respond to such accusations with their own charges of liberal “race baiting.” But whatever right-wing voices might say on the matter,  a new analysis of the data suggests that racism does, in fact, strongly predict welfare spending.

Using two surveys from 2008, Douglas Spencer and Christopher Elmendorf estimatedracial resentment across the states by measuring responses to questions about the work ethic, intelligence and trustworthiness of blacks Americans. They estimate the portion of whites in each state that are in the top quartile of racial resentment (so a state with large amounts of racism would have more than 25 percent of whites espousing racially biased views).

I combined this with data from the Center for Budget and Policy Priorities showing Temporary Assistance for Needy Families benefits for a single-parent household of three. As the scatterplot below shows, these two variables are strongly correlated:

I asked Eric Stone, the lead data scientist at Smarterer and a former hedge fund manager and USDA statistician, to help me see if there was another factor driving this trend. He ran the numbers again, controlling for state revenues per capita (based on Tax Foundationdata, averaged from 2008-2010), as well as the average ideology of citizens and the average ideology of the state government (based on data from Richard Fording, again averaged over the period of 2008-2010).

Stone tells me that after controlling for these factors, “racial resentment is indeed the strongest predictor of TANF, at least in the context of this model.” He reports a p-value of <.001 (indicating there is a less than .1 percent chance that the relationship was observed by chance) and an R2 of .556 for the model (meaning that these variables collectively explain more than half of the variation in TANF spending).

The idea that racism strongly predicts opposition to welfare has strong support in the academic literature. In his book, “Dog Whistle Politics,” Ian Haney Lopez showed how conservatives have used racial animus to drive opposition to welfare. In an interview with Salon, he said,

Dog-whistle politics is not fundamentally about race. It’s fundamentally about attacking liberal government, attacking New Deal government, which is good for the country as a whole, but bad in the perception of some of the very rich. This is fundamentally about power, it’s fundamentally about how we are going to organize a society for everybody. The core point here is that race is being used to wreck the middle class.

The research supporting Lopez’s argument is strong. Political scientists Richard Fording, Sanford Schram and Joe Soss find in their book “Disciplining the Poor,”

concerns over welfare were significantly more likely to be activated among respondents who perceived “most blacks” as lazier than “most whites.”

This aligns with Martin Gilens, who found that, “racial considerations are the single most important factor shaping whites’ views of welfare.” Media are certainly part of the explanation, as he finds elsewhere that “network TV news and weekly newsmagazines portray the poor as substantially more black than is really the case.” International research on the social safety net confirms this research.

Alberto Alesina, Edward Glaeser and Bruce Sacerdote find that racial fractionalization (a measure of racial diversity) strongly predicts social spending. This relationship also holds within the United States: states where a larger portion of the citizens are black spend less on welfare. Matthew Fellowes and Gretchen Rowe find that as the share of African Americans on TANF increased, states lowered benefits, made eligibility rules stricter and reduced the flexibility of work requirements. In another paper, Alesina and his co-author, Paola Giuliano, write, “When the poor are disproportionately concentrated in a racial minority, the majority, coeteris paribus, prefer less redistribution.” They further note, “ In the US the racial majority (whites) is much less favorable to redistribution than minorities.” The U.S. also has an unreasonably strong belief in the idea that hard work is the key to success, and therefore believes that those who are unsuccessful must be lazy.

Similarly, a Pew study finds that the global median of people disagreeing with the idea that “success in life is pretty much determined by forces outside our control” is 38 percent, in the U.S. it’s 57 percent; the percentage of people internationally agreeing that it’s “very important” to work hard to get ahead in life is 50 percent, in the U.S. it’s 73 percent. In a country where poverty is deeply pathologized, and people of color are more likely to be poor, racism will be more likely.

As I’ve noted elsewhere, almost half of Americans end up on welfare at some point in their lives, but of those, less than 5 percent spend 10 consecutive years on welfare. The idea of welfare dependence is an utter fabrication invented by rich Republicans to gut the social safety net. But this safety net has actually been incredibly effective. As Christopher Jenks notes, “With these corrections the official poverty rate falls from 14.5 to 4.8 percent, making the 2013 rate roughly a quarter of the 1964 rate (19.0 percent).” Such a dramatic reduction in poverty should be considered one of humanity’s greatest accomplishments (though there is still more to be done).

While the Tea Party, and Republicans, have denied that their war on the poor isn’t racially biased, they occasionally slip up (Rick Santorum’s famous “blahs,” comment for instance). But the data strongly suggest that opposition to the welfare state is tied up in the belief that it is simply a way to give “them” benefits. Indeed, Daniel Tope, Justin Pickett and Ted Chiricos recently confirmed that racial resentment was “among the strongest predictors” of Tea Party membership. But through the “submerged state,” the governmentprovides massive benefits to the middle class (not to mention the big bailouts to banks and corporations). Racism is still a major factor in American politics, and racial resentment continues to erode the safety net, for the benefit of the super-wealthy.

This piece originally appeared on Salon.

How To Take Back Democracy On November 4th

Bold prediction: Rising inequality of income and wealth will be the most important political battleground over the next few decades.

Just take a look at the figures. The share of income accruing to the top 1 percent increased from 9 percent in 1976 to 20 percent in 2011. The richest 0.1 percent controlled 7 percent of the wealth in 1979 and 22 percent of the wealth in 2012. Meanwhile, there are a number of studies out there showing that the most effective way to reduce this inequality would be higher taxes on income and wealth, but the rich won’t let it happen.

Consider also this: The rise of income inequality and wealth inequality are intimately connected, and causes all sorts of problem over the long term. As Emmanuel Saez and Gabriel Zucman write,

Income inequality has a snowballing effect on the wealth distribution: top incomes are being saved at high rates, pushing wealth concentration up; in turn, rising wealth inequality leads to rising capital income concentration,which contributes to further increasing top income and wealth shares.

That is, income is a flow, which quickly becomes a stock. The rich make enough money to save; in contrast middle-class and low-income workers don’t have enough money to live, so they are increasingly burdened by debt. They can’t build up wealth, which means they are deprived of opportunity. This creates a self-perpetuating cycle of wealth on the top and debt on the bottom.

In a comedy bit on wealth, Chris Rock claims, “You can’t get rid of wealth.” The empirical research on the question largely supports his assertion. In “The Son Also Rises,” Gregory Clark finds that wealth remains in a family for 10-to-15 generations and notes,

Groups that seem to persist in low or high status, such as the black and the Jewish populations in the United States, are not exceptions to a general rule of higher intergenerational mobility. They are experiencing the same universal rates of slow intergenerational mobility as the rest of the population.

 

But, of course wealth and income inequality weren’t always as bad as they are today. What happened? In a word: cheating. Although many people try to explain rising inequality away by arguing we live in a winner-take-all economy or that inequality is the result of skill-biased technological change, these arguments are bunk. Inequality has been driven by public policy choices that favored the richthe decline of unions and the rise of finance. As the chart below shows, tax rates on both income and inheritance were high during the relatively equal ’60s, ’70s and ’80s and then fell dramatically paving the way for the inequality we see today (Chart Source).

The best way to reduce inequality would be to tax income and wealth. While conservatives often claim that this would reduce economic growth, such claims have very little economic support. For instance, Thomas Piketty, Emmanuel Saez and Stefanie Stantcheva find no correlation between economic growth and tax cuts. Because of this, they find, “the top tax rate could potentially be set as high as 83%.” (Chart Source)

Nobel Prize-winner Peter Diamond argues that the top marginal tax rate could safely breach 73 percent, and indeed, such a rate might even be “optimal.” Another recent studyfinds the top marginal tax rate could be as high as 90 percent. Republicans sometimes claim that inequality is necessary for economic growth; in fact, the evidence suggests rather the opposite is true: High levels of inequality imperil growth.

But, here’s the problem: The same political forces that allowed the 1 percent to take our political system hostage have only worsened in the past decade. As Nick Hanauer notes in a recent Intelligence Squared debate,

At the same time, the percent of — of labor — the percent of GDP devoted to labor has gone from 52 to 42.  So that difference is about a trillion dollars annually.  So that — here’s the thing you have to understand.  That trillion dollars isn’t profit because it needs to be or should be or has to be.  It’s profit because powerful people like me and [Edward Conrad] prefer it to be.  That trillion dollars could very easily be spent on wages. Or — or on discounts for consumers.  This isn’t a consequence of some magical law of economics.  This is a consequence of differentials in power.

Nick hits on a very important point: The rising concentration of economic power hascoincided with a concentration of political power. A recent paper by Adam Bonica and others illustrates that as inequality has increased, the rich have spent more money on the political system:

 

As Benjamin Page, Larry Bartels and Jason Seawright recently found that the wealthy tend to be more economically conservative than the population at large. But a particularly startling finding is that, “on economic issues wealthy Democratic respondents tended to be more conservative than Democrats in the general population.” The wealthy are usingthe political system to turn their income into wealth and then that wealth into more wealth. They’re going to keep doing it, unless we stop them.  One solution is to reduce the massive turnout gap between the rich and poor.

Studies show that states with more low-income turnout have higher minimum wages, more generous child health insurance programs and stricter anti-predatory lending policies. They also have more generous welfare benefits. The fight against inequality will be a long one, but the first step is turning out to vote — the most radical step one can take in our country is actually believing democracy is more than just an idea.

This piece originally appeared on Salon

Conservatives defend inequality out of self-interest — nothing more

Conservatives have justified inequality for decades, arguing that it is an inevitable byproduct of capitalism and broadly beneficial. This intellectual edifice has begun to collapse.

Supply-side economics rest on the assumption that the wealthy drive economic growth, and that by reducing taxes on them, we can unleash latent economic potential. In fact, however, investment is driven by demand, not supply (a point acknowledged by the relatively conservative Martin Feldstein). If there are viable investments, they will be made regardless of tax rates, and if there are no investments, cutting taxes is merely pushing on a string. Thomas Piketty and Emmanuel Saez, two top economists on inequality, find no correlation between marginal tax rates and economic growth.

Recently, two IMF papers confirmed what Keynesians like Joseph Stiglitz have long argued: Inequality reduces the incomes of the middle class, and therefore demand. This stunted demand means fewer opportunities for investment, stunting growth.

Add to this growing body of research the fact that a robust defense of inequality is increasingly difficult to muster when every other OECD country has far lower levels of inequality than the United States. Greg Mankiw’s defense of the 1 percent was widely decried, because a large swath of research shows that the rise of the 1 percent did not come from natural economic forces, but rather rent-seeking.

The evidence is clear: The economic benefits of inequality have been massively oversold. Inequality is, in fact, a detriment to growth. So why has the right not conceded the argument?

The answer is class interest.

“Class interest” does not mean that the wealthy are nefarious schemers. Instead, it means there are various cognitive biases that lead them to justify and perpetuate inequality. For instance, Kris-Stella Trump conducted experiments in which participants were asked to solve anagrams in a high inequality scenario (the winner received $9 and the loser $1) and a low inequality scenario (the winner got $6 and the loser $4). When asked what a fair distribution would look like, the high inequality group preferred an inequality of $5.54 ($7.77-$2.23) while the low inequality group preferred inequality of $2.30 ($6.15-$3.85). She concludes: “Public ideas of what constitutes fair income inequality are influenced by actual inequality.” Inequality perpetuates inequality.

Paul Piff finds that the wealthy feel more entitled to their earnings and are more likely to show personality traits typically associated with narcissism. Recent research by Andrew J. Oswald and Natavudh Powdthavee finds that lottery winners in the UK are more likely to switch their political affiliation to the right, and also more likely to believe that current distributions of wealth are fair. As people get richer, they think that tax policies favoring the rich are fair — not because of the macro-economic benefits, but because of how they benefit me.

These cognitive biases, rooted in class distinctions, have deep implications. As a young economist argued in 1846, “The ruling ideas are nothing more than the ideal expression of the dominant material relationships.” Benjamin I. Page, Larry M. Bartels, and Jason Seawright examined the policy preferences of the very wealthy and found that they generally fall in line with their class interests. The wealthy were far less likely than the general public to believe that “government must see that no one is without food, clothing, or shelter,” or that minimum wage must be “high enough so that no family with a full-time worker falls below official poverty line,” or that “the government in Washington ought to see to it that everyone who wants to work can find a job.”

This is not meant to demean the policy preferences of the wealthy — only to examine the motives. For too long, the wealthy have couched their economic ideas as being broadly good for the country, but in fact, de-unionization, capital market liberalization, and austerity benefit themwhile leaving the rest of us far worse off. It’s time that we were all honest about why we support the policies we support.

Now of course, not everyone who supports conservative economic policy is wealthy. Indeed, there is a large literature devoted to the question why the working class supports policies against their own interests. Engles calls this phenomenon “false consciousness,” writing to Franz Mehring, “the real motive forces impelling him remain unknown to him; otherwise it simply would not be an ideological process.” Thomas Frank proposes that working-class conservatives are swayed by social issues. Ian Haney Lopez argues that racial animus still plays a role. Rick Perlstein notes the power of identity politics. The American ethos of upward mobility certainly plays a role; truck drivers in Tallahassee vote for tax breaks on Wall Street believing that they may someday posses enough wealth that an estate tax might affect them. John Steinbeck noted the power of aspiration, writing, “Socialism never took root in America because the poor see themselves not as an exploited proletariat but as temporarily embarrassed millionaires.”

But when it comes to wealthy conservatives who favor economic policies that hurt many Americans: Bartels’ previous investigation of economic and political power finds, unsurprisingly, that those with a higher socioeconomic status have more influence on legislative outcomes. Martin GilensDorian WarrenJacob HackerPaul Pierson, and Kay Lehman Schlozman have all recorded similar findings. It seems obvious, but it is important to connect these dots: Not only do the wealthy have interests divorced from the broader interests of society, but they also have the political heft to turn those interests into policy.

It is considered rather gauche to discuss class today, and the inequality debate is therefore situated in a purely theoretical realm. Liberals are constantly confused and aggravated about why the preponderance of evidence that austerity doesn’t work (while stimulus does) and that inequality harms society is lost on a large portion of conservatives.

Well, let’s face it: Those who support austerity and inequality are not really about “trickle-down” economics or “efficiency and equity.” They are protecting the interests of the upper class.

As Jonathan Swift warned, “It is useless to attempt to reason a man out of a thing he was never reasoned into.”

Originally published on The Week. 

Do the 1 percent create jobs?

A friend of mine, AJ, posted this on his blog:

Open letter to Jamie Johnson, director of “The One Percent”:

Dear Jamie,

You are an arrogant idiot. Your perception of a “just” America is one that is far from free, and your efforts have hurt the poor much more than they have helped them. You foolishly talked to Milton Friedman in various clips from your documentary “The One Percent”, who gave solid reasoning for why we need wealthy people for job creation. He’s Milton Friedman! You just don’t argue with him when you’re an ignorant “non-economist”–especially disrespectfully. You’ve taken Kanye West as my least favorite person, and I sincerely hope you drop your disposition and ignorance and buy a simple economics textbook. Heck, I’ll buy it if you’ll read it. Let me know.

It’s as good as any example of a tendency I’d like to address again. The idea, at its heart, is whether cutting taxes on the wealthy will create jobs, and therefore the converse, will increasing tax rates on the wealthy (to finance a stronger social safety net) decrease jobs? No. A few reasons here. First you have the Stiglitz argument that Nick Hanauer has adopted: rich people need demand. But more importantly, the amount of investment in the economy doesn’t depend on tax rates, but how much investment there is to be had. At some point, cutting taxes is just pushing on a string. In a depressed economy with little private investments available, it makes sense to make public investments financed by taxes. But even in a non-depressed economy, there is no correlation between economic growth and marginal tax rates on the wealthiest.

Piketty_Blog

Piketty_Blog

I want to plaster this chart up on every subway on the nation, because it shows, empirically, what the left has been saying for decades: cutting taxes on the rich doesn’t stimulate the economy. Why is this important? Well I was talking to my dad over the break, and I asked him why he voted for Bush, given the tax breaks for the rich. Once I established that these tax breaks primarily helped the rich, and hurt him by giving the government less money for say, Social Security or college loans, he told me this:

I just figured that the money being in the hands of someone who could invest it and create jobs, rather than me, who would just consume it.

We now know empirically that this simply isn’t true. For one, my dad can invest, he can easily take out money in the stock market, he could help me and my brother go college (or grad school). More importantly, he can spend! That creates opportunities to invest! That creates jobs! The rich want to place themselves at the center of the economy, but it’s the middle class that is the engine for growth. Don’t forget that.

Let’s talk politics quick. What my father is expressing is a classic example of what Engels would call “false consciousness.” Generally speaking, we would expect people to vote for their class interests, but often they don’t. Thomas Frank proposes that they are swayed by social issues. Steinbeck, proposes aspiration as the motivation (I have frequently invoked this as well). Other political scientists suggest that when material standards cease to become an issue, people vote symbolically (i.e. Bush is just like me!). But all of these arguments understate the extent to which the middle class is entirely unaware how misaligned the interests of the wealthy are with their interests. I find it hard to believe that prejudice against gays, aspiration and symbolism can explain why the middle class would forgo $19,000 in yearly income (how much more money the median family would have if incomes had grown proportionally over the last 30 years). That is, voters have not made rational choices, because they were deceived.

So we are back to the Marxist explanation: the central feature of all capitalist societies is obfuscating class interest and exploitation. As my mother said, “Sean, you should really tell people about this.” So I am. The rich have been screwing you. Your interests are not theirs. It’s as simple as that.

P.S. My ideas on history (and my Christianity) prevent me from being a full-on Marxist, but we really need to start understanding Marx as a classical, Enlightenment economist. This would make our public discussion of his ideas far less prone to the vulgarity * it descends to today.

*Classic sense