Weekend Economists Toast the Apostle of Ireland March 14-16, 2014

[Demeter]

18. We Can’t Grow the Gap Away Charles M. Blow

MR. BLOW MAY BE A CONSERVATIVE IDIOT...BUT HIS MAIN POINT IS TRUE.

http://www.nytimes.com/2014/03/15/opinion/blow-we-cant-grow-the-gap-away.html

The shocking level of income inequality in this country has set off alarms that grow louder by the day, but little seems to be underway to reverse the trend. As a January International Monetary Fund paper that was officially released on Thursday points out:

“In the United States, the share of market income captured by the richest 10 percent surged from around 30 percent in 1980 to 48 percent by 2012, while the share of the richest 1 percent increased from 8 percent to 19 percent. Even more striking is the fourfold increase in the income share of the richest 0.1 percent, from 2.6 percent to 10.4 percent.”

In fact, a study published last year in The Journal of Economic Perspectives found that the share of income going to the top 1 percent in America was higher than in other developed countries. At the same time, the plight of the poor has grown worse and has become stubbornly resistant to improvement. The rate of poverty in America remains stuck at the untenably high level of 15 percent. Among children, the rate is 22 percent. We are reminded ad nauseam about the record number of Americans receiving food assistance from the Supplemental Nutrition Assistance Program. What we hear far less about is that a record high percentage of poor families with children are not receiving Temporary Assistance for Needy Families, the federal government’s primary welfare program. In 1997, only 36 percent of such families received no TANF benefits; that number in 2012 climbed to 74 percent.

It stands to reason, then, that food insecurity in this country remains alarming high. The United States Department of Agriculture reported in September that 14.5 percent of the country, or 17.6 million American households, “had difficulty at some time during the year providing enough food for all their members due to a lack of resources” in 2012. This widening gap between the hardscrabble and the high rollers is unseemly and unsustainable.

A January poll by the Pew Research Center and USA Today found that “65 percent believe the gap between the rich and everyone else has increased in the last 10 years.” A February poll by CNN/ORC International found that “more than six in 10 Americans strongly or somewhat agree that the government should work to narrow that gap, compared to 30 percent who believe it should not.” The president has called rising income inequality and lack of economic mobility “the defining challenge of our time.” And he has been pushing an economic agenda aimed at making a dent in inequality, including raising the minimum wage, extending emergency unemployment benefits and, this week, moving to expand overtime pay. While these moves would help, they are not nearly enough. Addressing this issue is not about ensuring an even redistribution of wealth while disregarding great ideas and hard work. Imbalance is built into a capitalistic economy. But the degree to which that imbalance has grown in this country is not only alarming; it could prove deleterious to our economic health.

There are some who suggest that the solution to this inequality problem — if indeed they concede that it is a problem — is simply to grow the economy. A February I.M.F. paper pointed out the folly of such a tactic: “It would still be a mistake to focus on growth and let inequality take care of itself, not only because inequality may be ethically undesirable but also because the resulting growth may be low and unsustainable.” Furthermore, as the I.M.F. pointed out in its January paper, inequality could, in fact, be an impediment to growth: “There is growing evidence that high income inequality can be detrimental to achieving macroeconomic stability and growth.” A December survey of several dozen economists by The Associated Press found that most believe that growing income inequality is hurting our economy.

We can’t grow our way out of this obscenity. It’s a barrier to growth. We must forthrightly address the issue with policy prescriptions. The I.M.F.’s list includes things like means-testing benefit programs, improving access to higher education and health care for the less well off, and “implementing progressive personal income tax rate structures” while “reducing regressive tax exemptions.” Surely we can figure out how to fix this. We just don’t have the political will to do so.