Income Inequality Debate Continues

by Michael Sean Winters

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I am not sure we can credit Pope Francis with the renewed national focus on income inequality. Just as the “Francis Effect” on Catholics is the result of two factors – his remarkable personality and the continued hunger of ordinary people for the Gospel – so, too, the traction of the income inequality debate comes both from some important people talking about it and from the hunger of ordinary people for a more just society. And, while the White House has indicated it is not going to talk about income inequality very much anymore, and instead concentrate on culture war issues in advance of the midterm elections, the conversation is continuing even though the bully pulpit stands empty.

In this morning’s Washington Post, Harold Meyerson penned a typically incisive column attacking the idea put forward by conservative economist Tyler Cowen of George Mason University that “The returns to growth are going….generally to people with high I.Q., no matter where they live. I don’t really know how you can undermine this dynamic, short of wrecking the world.” Cowen’s argument is an updated economic version of Calvin’s thoughts on predestination only, for Cowen, returns are equal to salvation and I.Q. is the equivalent of grace. It is all predestined by I.Q. The Protestant work ethic without the work.

Meyerson points out that between 2002 and 2007, 65 percent of all income growth went to the top one percent of Americans, but that since the beginning of the recovery in 2009, 95 percent of all income growth went to that same one percent. He writes, “During this time, wages have stagnated while stocks and corporate profits have soared. Viewed through this prism, what’s IQ got to do with it?” Indeed, I doubt the IQ of the one-percenters increased in the past five years.

The key question – why go after the one percenters? – has an answer and Meyerson provides it. “In part because its ascendancy is the result of wealth appropriation at the expense of wealth production.” He points to a recent study in the Harvard Business Review that showed a majority of chief financial officers surveyed would recommend actions that harm their companies, such as canceling a project with a positive net present value, “to meet Wall Street’s targets and fulfill its desire for ‘smooth’ earnings.” This is the financialization of the economy at work. Instead of Adam Smith’s “invisible hand,” the financialization of the economy is a kind of “invisible foot” that keeps kicking the 99 percent in the behind.

Meyerson concludes, “[T]here have always been people with high IQs. What has changed is the ability of major shareholders to demand a greater share of income from enterprises that would otherwise put it to more productive use and enable greater consumption. That’s a reason – one among many – why attacking economic inequality needs to be the centerpiece of our national agenda.” To which those of us committed to Catholic social teaching can only offer a rousing “Amen.”

Also in this morning’s Washington Post, is a column by Chuck Lane that examines a new tax overhaul proposal from Michael Graetz, who worked at the Treasury Department in the first Bush administration and now teaches at Columbia Law School. Noting the continued problem with capital flight to low-rate countries, Graetz floats an idea that progressives have long fought against: A value-added tax (VAT) or national sales tax. But, what is different about Graetz’s proposal is that it would not only lower corporate tax rates to make capital flight less appealing, it would eliminate income taxes for 80 percent of current filers (a couple making less than $100,000) and there would be tax credits for low-income workers to ameliorate the regressive impact of a sales tax.

I am inclined to listen to any proposal that would simplify the tax code. The byzantine architecture of the current code is designed to allow fat cats with political connections to avoid paying their fair share.  But, like most progressives, the regressive nature of a sales tax is abhorrent to me. If there can be a way to ameliorate those regressive effects, through tax credits for the working poor, I am more inclined to listen.

Worthy of note is the difference between Meyerson’s concern about increasing consumption and Graetz’s proposal which would undoubtedly dampen consumption: Sales taxes make goods and services more expensive. For a host of reasons, most of them having to do with the environmental and moral consequences of consumption, I think progressives need to re-visit the idea of a VAT provided we can actually address its regressivity. Graetz’s proposal is not enough to off-set the ugly trends in contemporary capitalism, but liberals should not dismiss it out of hand.

Lastly, I call attention to an essay published this week by Kim Daniels at the “Common Good Forum” sponsored by Catholics in Alliance for the Common Good. Daniels looks at the recent proposals by Congressman Paul Ryan for combating poverty. I agree with Daniels that people on the left should be delighted to welcome Ryan to the anti-poverty fight, even while we should examine his policy proposals with strict scrutiny. Unfortunately, this being Washington, too many on the left were quick to throw Ryan’s words back into his teeth the second they were uttered, which does not advance the discussion very much. At the very least, and from a purely political angle, have a leading Republican on board some issues, such as increasing the Earned Income Tax Credit, is vital if we want to see such an increase enacted. It is all well and good to insist that we also need an increase in the minimum wage, which we do, and to fault Ryan for opposing such an increase, which he does, but with a divided Congress, those of us who want to move the ball on poverty need to find ways to work with Republicans or we will fail to improve the lot of the poor, even if we can pristinely claim the moral high ground for articulating better anti-poverty proposals.

Daniels also picks up on a key aspect of Ryan’s evolving ideas about fighting poverty, his focus on the person. Some on the left attacked Ryan’s plan the day it was issued for wanting to “micro-manage” the lives of the poor, but this was entirely unfair. Ryan’s plan calls for case managers to serve as a resource for those struggling to get out of poverty, helping them access programs and assistance about which they might not even know, crafting an individualized plan with them for advancement and self-sufficiency. It seems to me that Ryan’s case workers would function the same way as the Navigators who helped people sign up for the Affordable Care Act. All of us, not just the poor, need help confronting the labyrinth which is the federal government’s bucket of social programs. And, the focus on the person will help defeat ideologues of both left and right, in all ages and on all issues.

The White House and the campaign consultants may have decided that the “war on women” is a better bumper sticker for the midterm elections than confronting income inequality. It would be nice to hear the president even utter the word “poverty” now and then. But, with or without him, the discussion is continuing in interesting ways and Catholics should be at the forefront of this debate, and not just because Pope Francis said so.  



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