October 25, 2019

Mind the Gap: How Law Can Address Income Inequality in America 

On October 23rd, the American Constitution Society convened a panel of experts, featuring Lisa Cylar BarrettLina KhanAnne Marie Lofaso, and Ganesh Sitaraman, for a discussion on the causes, effects, and solutions to income inequality in the United States titled Mind the Gap: How Law Can Address Income Inequality in America. The speakers discussed how tax law, labor law, and antitrust law might all be used to curb inequality and the widening racial wealth gap, and what constitutional potholes advocates should avoid. 

This discussion was incredibly timely. Just last month, the Census Bureau released data showing that income inequality in the United States has hit its highest level since the Bureau began tracking it more than five decades ago, even as the nation’s unemployment rates are at historic lows.  The Gini Indexwhich measures income inequality on a scale from “0,” indicating perfect equality, to “1,” indicating perfect inequality, gave the United States a score of 0.485 in 2018.  By comparison, no European nation had a score greater than 0.38 – placing the United States’ inequality score on par with anti-democratic countries like China and Russia.

As Ganesh Sitaraman noted in his remarks, extreme income inequality is associated with unstable anti-democratic societies. Hexplained, “In any society where you have a deep divide between the rich and the poor…you have a very unstable system.  Either the rich are going to oppress the poor or the poor are going to try to overthrow the rich.  And the result will be violence, instability, and revolutions.” 

This is a problem that stretches back to the Ancients and was one that our Founders knew and understood well. 

Lisa Cylar Barrett pointed out that, despite this knowledge, our Founders purposefully “baked” income inequality into our system of government through the enslavement of black people.  As she explained, modern income inequality and the widening racial wealth gap in the United States are a “predictable consequence” of policy decisions that “purposefully discriminated against black people in the country,” all the way from slavery to the exclusion of farmworkers in the Social Security Act to today’s predatory lending practices. 

With this backdrop in mind, the panelists organized their proposals for how to reform the system and reverse these trends into two groups:

(1) structural reforms that would build a system that works to create more equality, and

(2) redistributive reforms that reallocate concentrations of wealth through the tax code and other means.  

Recognizing that redistributive reforms alone will likely be insufficient, the panel focused mostly on structural reforms, including Sitaraman’s suggestion that we change the design of our tax laws and Anne Marie Lofaso’s recommendation that workers sit on the boards of directors of big corporations. Lina Khan, an expert in antitrust law, argued that antitrust law can be “one tool in a broader anti-monopoly toolbox” designed to combat market concentration and restructure how markets operate.   

Despite significant energy on the panel and in the room to work on legal and policy changes to combat income inequality, our moderator Dora Chen rightly pointed out that we are facing an “increasingly conservative judiciary.” We know from history that the judiciary can either be an agent of change or a slave of circumstance. Particularly during the early part of the New Deal Era, the Supreme Court chose the latter course. As we debate and, hopefully, enact structural reforms, it remains an open question what sort of reception they will receive from today’s conservative judiciary.  

Watch the video of this discussion.

Economic Inequality, Fair Housing, Regulation and the Administrative State