The eruptions in Baltimore have been tied, in complex ways, to frustrations at American inequality, and a new measure of the economic gaps arrived earlier this year:
It turns out that the Wall Street bonus pool in 2014 was roughly twice the total annual earnings of all Americans working full time at the federal minimum wage.
You read that right: Just the annual bonuses for just the sliver of Americans who work just in finance just in New York City dwarfed the combined year-round earnings of all Americans earning the federal minimum wage.
We’ve been walloped with staggering statistics like this long enough that although this used to be a Democratic issue, Republicans are now speaking up. “The United States is beset by a crisis in inequality,” warned Sen. Mike Lee of Utah, a Republican with Tea Party support (although he added that his concern is gaps in opportunity, not wealth).
Likewise, Lloyd Blankfein, the chief executive of Goldman Sachs, declared recently that “we have to do a better job” of curbing inequality.
Yet while we broadly lament inequality, we treat it as some natural disaster imposed upon us. That’s absurd. The roots of inequality are complex and, to some extent, reflect global forces, but they also reflect our policy choices.
In his new book, “The Great Divide,” Joseph Stiglitz, a Nobel Prize-winning economist, includes two chapters whose titles sum it up: “Inequality Is Not Inevitable” and “Inequality Is a Choice.”
“I overheard one billionaire — who had gotten his start in life by inheriting a fortune — discuss with another the problem of lazy Americans who were trying to free ride on the rest,” Stiglitz writes. “Soon thereafter, they seamlessly transitioned into a discussion of tax shelters.”
We as a nation have chosen to prioritize tax shelters over minimum wages, subsidies for private jets over robust services for children to break the cycle of poverty. And the political conversation is often not about free rides by corporations, but about free rides by the impoverished.
The Kansas Legislature is so concerned with this that it recently banned those receiving government assistance from, among other things, spending welfare funds on cruise ships (there is, of course, no indication that this was a problem). Will Kansas next address the risk that food stamps are spent on caviar and truffles? We all know that public money is better used to subsidize tax-deductible business meals by executives at fancy restaurants.
As Stiglitz notes: “Inequality is a matter not so much of capitalism in the 20th century as of democracy in the 20th century.”
So if we were to choose to make inequality a priority, what policies could we turn to? This month, Harvard University Press is publishing “Inequality: What Can Be Done?” by Anthony B. Atkinson, a British economist, in which he lays out 15 steps to reduce inequality. A few of his recommendations:
• Government should be more concerned with monopolies and competition policy.
• Trade unions should be bolstered to represent workers’ interests.
• Government should provide public-sector jobs at minimum wage to those who want them, in areas such as meals-on-wheels, elderly care, child care and so on.
• In addition to a minimum wage, there should be a framework to restrain pay at the highest levels. Atkinson cites companies that have voluntarily decreed that executive pay should be capped at 65 or 75 times the average pay in the firm.
• Personal income taxes should be made more progressive, with a maximum rate of 65%.
• Every child should get a “child benefit” payment, to help keep kids out of poverty.
So if we’re all upset at inequality, these are ideas to debate. Others, including Stiglitz, have put forth many more. Research groups like MDRC have rigorous evidence of what breaks cycles of poverty. In short: We’re not helpless.
In the case of inequality, there’s a bizarre disconnect between the scale of the challenge and the tools politicians are prepared to use. This is, according to a Pew survey last year, what the U.S. public viewed as the greatest threat to the world, yet Congress won’t even lift the federal minimum wage to the inflation-adjusted level it reached in the 1960s.
Indeed, answer this question on how Congress responds to inequality. More than one choice could be correct.
Congressional leadership is showing resolve to slash: A) subsidies for private jets; B) the carried interest tax loophole for billionaires; C) food stamps; D) the estate tax on couples with estates worth more than $10.9 million.
The answer is C and D — steps that would hurt low-income children while offering a helping hand to billionaires. Congress is addressing inequality by exacerbating it at both ends.
Inequality is a tough problem, but we have tools that could begin to make a difference. The problem isn’t inequality; the problem is us. We’re paralyzed.