Some People are More Equal Than Others: Inequality I

February 27, 2012
by Bill Barnes

A good national conversation about inequality would be useful. 

The prospects may seem poor because the current federal election campaigns are shaping up as more wild and desperate than informed and thoughtful. That's a shame and a lost opportunity, especially because government policy often helps create and perpetuate inequality and because too much inequality is not good for either economic performance or for politics.

Unsettled and Contradictory Views

Last year, 66 percent of Americans said there are "strong conflicts" between rich and poor people in the United States. That percentage, from a Pew Research Center survey, increased from 47 percent in 2009. 

In contrast, a majority said, in a 2011 Gallup poll, that the nation is not divided into "haves" and "have nots." A few years earlier, a majority said that the nation is divided. 

Robert Rector, a fellow at the conservative Heritage Foundation, says that the Pew survey trend is not meaningful "other than that the topic has been in the press for the last two years." Charles Blow, a liberal New York Times op-ed writer, suggests that the Gallup results shifted because "the facts of an existential threat lose traction among a weary public as deniers attempt to reduce them to partisan opinions."

Perhaps both Rector and Blow are partly correct. More likely, however, most people are just struggling with how they fit fairness into a civic culture that is usually dominated by themes of prosperity and freedom. How much inequality is too much? Even if it violates their sense of justice, is inequality an inevitable offshoot of globalization and capitalism? Are there roles here for government?

These sorts of questions concern what the classical Athenian Oath refers to as "the ideals and Sacred Things of the City." Such questions are not addressed by underestimating people's sincerity or by shouting "class warfare." Facts and analyses are more helpful and those are readily available.

Separate and Unequal

In 2011, the Congressional Budget Office reported that the top 1 percent of earners more than doubled their share of national after-tax income over the previous 30 years. The richest 20 percent received more of total national income in 2007 than the other 80 percent, 53 percent to 47 percent. And so on.

The CBO findings were, in a sense, old news: CBO had reported similar findings for at least a decade. Others had too: Frank Levy, for example, had been analyzing the interplay of American incomes and economic change since his first "Dollars and Dreams" book in 1987.

Some descriptions of economic inequality focus on structural aspects: wages have stagnated, even declined in real terms since the early 1970s; capital increased its portion of national income versus labor; outcomes for blacks and Latinos lag those for whites; the "middle class" shrank; residential segregation by income sharply increased. 

Polarized income distribution is so embedded that it shapes corporate strategies. Proctor & Gamble, for example, is reported to have changed its consumer product lines and marketing to focus on the "pools of have and have not consumers" that have become larger "at the expense of the middle." 

Other descriptions focus on specific financial outrages: CEO earnings skyrocketed; exorbitantly wealthy people paid low tax rates. 

Policy and Power

All of these disparities are exacerbated by globalization, technological innovation, racism, changing social mores and the continuing plagues of the financial crisis and the great recession. 

But inequality is not solely or even mainly the result of economic factors or impersonal forces beyond our control. 

Public policy can produce inequality as well as mitigate it. 

Policy produces the so-called safety net.

Policy also produces the rules of the game that skew benefits upward through the class structure. 

In a system where money and status can buy access and influence, that's no surprise. In 1984, Thomas Edsall's "The New Politics of Inequality" reported "an erosion", dating from the early 1970s onward and across both major political parties, "of the power not only of the poor but of those in the working and middle classes" and also "a sharp increase in the power of ... the top 15 percent of the income distribution." 

Hacker and Pierson's "Winner Take All Politics" (2010) shows how federal action and inaction often begets more wealth for wealthy people at the expense of others. Examples abound. Tax policy gives preference to "unearned income." Labor relations regulation tilts toward corporate interests. Lax regulation of financial institutions facilitates immense bonuses, abusive lending and financial collapse. Too-big-to-fail companies and their executives get bailed out while smaller firms, home owners and workers bear the burdens.

Local government policy can also promote disparities. Increased use of fees instead of the general fund to pay for public services places greater out-of-pocket burdens on those least able to pay. The uneven quality of public schools as between rich and poorer neighborhoods and between jurisdictions perpetuates the differences. Across regions, inequality is written on the land through exclusionary land use mechanisms.

Everyone and anyone can work toward useful and productive explorations of fairness and other "ideals and Sacred Things" of the national, regional or local community where they have a voice. The results could be very useful.

A coming Emerging Issues column will comment on two new books that broaden and sharpen the inequality debate: Charles Murray on culture and Thomas Edsall on power. 

Bill Barnes, the director for emerging issues at NLC, can be reached at barnes@nlc.org. Previous monthly columns are collected on the Emerging Issues webpage.