Hard Facts Animating Discussion over Economic Inequality

January 24, 2012

by Jeremy Leaming

It may be hokum to some conservative pundits, but government policies that coddle the nation’s super wealthy, have sparked what some economists say are long overdue and legitimate protests, such as the Occupy Wall Street demonstrations.

In his Jan. 24 column for The New York Times, David Brooks blasts lawmakers for taking up the concerns of the OWS protestors, writing that they are obsessed with “pounding down the rich.” But Brooks seems to have missed what is animating those protests – the fact that conservative economic policies in the United States have been aimed heavily in favor of protecting a powerful few.

Columbia University professor Joseph E. Stiglitz has written about this nation’s growing wealth gap, while acknowledging that the top 1 percent has contributed to society. Nonetheless, Stiglitz notes the policies protecting the top 1 percent are shrinking middle classes in numerous countries, and creating disconcerting gaps, between the top 1 percent and everyone else.

“But, around the world, political influence and anti-competitive practices (often sustained through politics) have been central to the increase in economic inequality. And tax systems in which a billionaire like Warren Buffet pays lower taxes (as a percentage of his income) than his secretary, or in which speculators, who helped bring down the global economy, are taxed at lower rates than those who work for their income, have reinforced the trend,” Stiglitz wrote in a piece republished by Slate.

Stiglitz goes on to note that many of the bankers who helped trigger the Great Recession, and were later bailed out by taxpayers, are “now back at their desks, earning bonuses that amount to more than most workers hope to earn in a lifetime, while young people who studied hard and played by the rules see no prospects for fulfilling employment.” (In a recent piece for The Times, Susanne Craig reports that large bonuses have already returned for top executives of two Wall Street titans. For example, Craig notes that despite a “rough year,” JPMorgan’s chief executive, Jamie Dimon, “was awarded $17 million in equity-linked stock for his work in 2011, according to a regulatory filing.”)

Stiglitz says the “rise of inequality is the product of a vicious spiral: The rich rent-seekers use their wealth to shape legislation in order to protect and increase their wealth – and their influence. The U.S. Supreme Court, in its notorious Citizens Uniteddecision, has given corporations free rein to use their money to influence politics. But while the wealthy can use their money to amplify their views, back on the street, police wouldn’t allow me to address OWS protesters through a megaphone. The contrast between overregulated democracy and unregulated bankers did not go unnoticed. But the protestors are ingenious: They echoed what I said through the crowd, so all could hear.”

Some lawmakers, despite conservative pundits’ derision of the OWS protesters, are listening.

In his Dec. 6 address in Osawatomie, Kan., President Obama cited the statistics, widely reported by Stiglitiz and others, saying “the average income of the top 1 percent has gone up by more than 250 percent to $1.2 million per year. I’m not talking about millionaires, people who have a million dollars. I’m saying people who make a million dollars every single year. For the top one hundredth of 1 percent, the average income is now $27 million per year. The typical CEO who used to earn about 30 times more than his or her worker now earns 110 times more. And yet, over the last decades the incomes of most Americans have actually fallen by about 6 percent.”

The president said this reality has in part been produced by an economic theory that calls for a lightly regulated market. Such a market will correct itself, and the gains of the super wealthy will trickle down to everyone else.

The president declared, “It doesn’t work, it has never worked. It didn’t work when it was tried in the decade before the Great Depression. It’s not what led to the incredible postwar booms of the ‘50s and ‘60s. And it didn’t work when we tried during the last decade.”