Few experts dispute the fact that economic inequality in the United States has increased dramatically in recent decades, especially under the Bush administration. Americans are harder working and more productive than ever, yet the rewards for that productivity flow into the pockets of fewer and fewer people. That is a political as well as an economic problem.
Those at the very top of the nation’s economic ladder have seen their income climb exponentially over the last twenty-five years. Top corporate executives now earn three hundred times the average wage of their employees. According to the Economist (June 15), that’s a tenfold increase for management since the 1970s. There is nothing inevitable about this development. European executives, for example, are not nearly as extravagantly compensated. In no advanced nation is the gap between rich and poor greater than it is in the United States.
The concentration of wealth is reaching Gilded Age proportions while the nation’s indebtedness soars. Since 1980, the Economist reports, the highest-earning 1 percent of Americans has doubled its share of the nation’s aggregate income, the top tenth of 1 percent has tripled its share, and the top one-hundredth of 1 percent has quadrupled its piece of the pie. At the same time, as Paul Krugman points out in the New York Times (September 8), the federal tax rate for that richest .01 percent of earners has fallen from 60 percent to less than 35 percent. In short, “the lion’s share of the benefits from recent economic growth has gone to a small wealthy minority, while most Americans were worse off in 2005 than they were in 2000.”
The reasons for this maldistribution of wealth are hotly debated. Bush’s tax cuts are not the primary problem, defenders of the president argue, noting that those at the top got wealthier during the Clinton era as well. Yes, respond the president’s critics, but so did the middle class and the poor. Yet under Bush, income for most Americans has stagnated while the wealthiest have reaped greater and greater rewards. In short, wealth has been redistributed upward.
Conservatives tend to argue that this trend is an inevitable result of the changing economic realities associated with globalization. With outsourcing and international competition for white-collar as well as manufacturing jobs, technological, entrepreneurial, and organizational skills are more important then ever. Taxing the wealthy is not the way to fight economic equality, say defenders of the rough justice of today’s highly stratified economic system. Instead they emphasize how important social and cultural values such as strong families and self-discipline are in preparing people to succeed in the modern workplace.
It would be foolish to deny the strong correlation between family stability, personal attributes, skills, and economic success. Still, economic opportunity and its rewards are not as predictable as they once were. Many Americans who have worked hard and “played by the rules” have nevertheless seen their paychecks shrink or their jobs disappear. Moreover, it would be naive to draw too strong a correlation between virtue and economic success. Markets are remarkable economic mechanisms, but they are not immune from manipulation or corruption.
Americans seem willing to tolerate great disparities in wealth as long as the economy continues to expand opportunity and reliably reward hard work. At what point workers will lose confidence in the promise and fairness of the economy is difficult to predict. One thing is certain, however: our democratic institutions must hold the market accountable to a standard of justice and fairness that transcends mere economic considerations. A strong public sector, and a tax system that provides for the poor while ameliorating the more grotesque excesses of the marketplace, are just as important as a dynamic, growing economy. An excessive concentration of wealth is not only unjust, but also a threat to democracy, which depends on government remaining beyond the control of the rich.
Congress should reintroduce a greater degree of progressivity to the income tax. The rich are doing just fine, thank you. An increase in the minimum wage, and further expansion of the earned-income tax credit, are modest but proven ways to help those at the very bottom of the ladder. The middle class, which is losing most ground, needs tax credit help for child care, college tuition, and the care of elderly parents. Federal law should make union organizing easier, not harder. For both moral and economic reasons, the nation needs universal health insurance. Much work needs to be done, but it should be clear that the nation can’t rely on the wealthy to do it. It is neither necessary nor desirable to let only those at the top determine how the economic pie is divided. Enough is enough.
September 12, 2006