Potential Obama Treasury Secretary: Income Inequality A Crisis

According to former Clinton Treasury Secretary Larry Summers, the shift of income inequality over the last quarter century simply dwarfs the amount of money being discussed in partisan debates over wealth redistribution -- and represents a serious crisis of legitimacy for society.

The former secretary's frank evaluation of the effects of a generation-long transfer of wealth to the top one percent was notable in the political realm, since it came during a week in which Barack Obama's discussion with "Joe the Plumber" gave the issue of wealth redistribution a higher profile. In the final presidential debate, John McCain repeatedly chided Obama for his casual remark to Joe about intending to "spread the wealth around." But if Summers's analysis is correct, the scope of any government redistribution that has been proposed will be nowhere near as impactful as the natural swing of fortunes to the rich over the course of the last 30 years.

Summers, who is also an economic adviser to Obama and has been suggested as a potential future Treasury Secretary, made his remarks at a conference hosted by the Harvard Business School on Tuesday.

He asked attendees to compare the respective shares of wealth commanded by different classes of earners in 1979 to the contemporary figures.

In the last 29 years, Summers said, "you'll find that the share of income going from 80 to 99th percentiles has stayed the same. And those in top one percent have gained about $600 billion. Those in bottom 80 percent have lost about $600 billion."

Summers then calculated that this overall transfer of wealth averaged out to an additional $500,000 per year in earnings for those in the top one percent, and an $8,000 loss every year for those in the bottom 80 percent.

"If the bottom 80 percent had kept pace and earned that $8,000 ... their income growth would have been twice as high over the last generation as what we in fact observed. Think about this number: $600 billion a year. It is immense compared to any discussion of changing the tax system here or there," Summers added.

Later during his speech, titled "The Future of Market Capitalism," Summers suggested that the immensity of such a growth in income inequality should supersede the normal partisan debate over redistribution of wealth via the tax code -- unsurprisingly, a hot topic in this election season. "Whatever your broad approach to public policy," Summers said, "I would suggest to you this [inequality] represents a critical problem of legitimacy."

Watch:

Summers also pointed out how life expectancy between the well off and less-well off has widened in the past quarter century to an amount equal to "the burden of cancer," something Summers called "hardly a mark of our social and economic success."

According to the AP, Summers refused to answer questions after the conference as to whether he would be open to a cabinet position in an Obama administration.

Comments

[Quackers]

The American middle class is reminding me of one of those unfortunate beasts of burden we see in third world countries. It's life is spent pulling huge loads without being fed well enough, it doesn't get good medical care if it gets any at all, and it will work and work and work until it just can't anymore and then it dies before it's time. We can change this.

[LHoney]

And now with all of that wealth, they control all of the rest of us. They will buy the politicians. they will determine every policy. They may have bought this election already (although when they do, it will be referred to as "the Bradley effect:" since they own the news as well....

[realpolitic]

Professor Summers is right that Republican policies reward the wealthy and few others. Ironically, the extremely wealthy need the help the least. Yet Republicans fight every four years to reward them with additionally tax cuts. The supposed "trickle down" effect never happens. It is always somewhere out in the future. Republican policies have failed. We do not want to be a society like Victorian England.

[billw8017]

In many ways, to diminish the resources of people is like reducing the population. It's not like so many die, but they are reduced to slinking among shadowed places and have less significance. The income disparity does reduce the resources of a nation: A person with considerable personal wealth is not that much more productive than a person with a fraction of that wealth. And, to say the same thing in a third way, increasing income disparity amounts to gutting a nation.

The solution to such problems is in the first amendment of the bill of rights, the rights of assembly and petition. You have NO rights except those you demand and protect. This is best done as a community of interests. Unions, for example, protect the dignity of the laborers and enhance their incomes. The American disparity of wealth has grown as unionisation went from 30% to about 5%.

[NicasioKid]

Please set the bar higher, Barack!

[thegreatgiginthesky]

He's right. The disparity in income is a testament to the failure that is trickle down economics. McCain calls Obama's plan as redistribution of wealth, the last 8 years has seen the stagnation of income among the poor and the middle class while the rich get richer. As they get richer the prices of goods increase thereby transfering wealth from the poor and the middle class to the rich.

[zest]

Once again, the rich are too rich. It's obvious.

[DeSwiss]

If Lawrence Summers is a "potential" Treasury Secretary, then I can only hope that his potential is somewhere between "slim and none."

Because not only is this the same Birdbrain Larry who ignored research on gender differences when spewing his sexist views on women in science under the guise of "academic freedom," but he is also the same one who help to browbeat Brooksley Born when she tried to get Congress to do their jobs and regulate derivatives back in 1997. And he's the same Larry who cheered along with Alan Greenspan and Robert Rubin when she quit in disgust.

This Larry later uttered these words upon the passage of the Gramm bill that swept away the Glass-Steagall Act: ''With this bill the American financial system takes a major step forward toward the 21st Century -- one that will benefit American consumers, business and the national economy.''

If anyone has proven that they on the side American people, and that they are smart enough for the Treasury Secretary's job, it sure as hell ain't Larry.

Brooksley E. Born for Treasury Secretary!!!

[Bobleblah1]

Summers????????

No really!

Summers???­??????????­?

I cant wait to hear what Dr Cornell West has to say about this
Just ask the Dr what a miserable SOB Larry Summers is.
Just ask the folks who worked under him at Harvard what they think of this guy.
I cant wait until all his fraudulent deals are being exposed during confirmation hearings.
Then all you cult of obama folks will get another tender morsel of Obama's phoney side.
You cant even make this stuff up.

Larry Summers?
excuse me while I go puke out a lung.

[payos]

Isn't this the guy who women are "congenitally" unfit for the sciences?

[ella52]

McFudd and company just do not understand what most people are finally coming to terms with and why we want change so much.
The old ways just aren't working any more. We have new set of imperatives before us and Americans are very agile in their ability to reinvent themselves. We don't have thousands of years of "This is the way we do it, this way we have always done it, this is the way we will always do it."
Many of the old ways are wonderful to honor as part of your culture, but the opportunity to create a new way of conducting business that would create busy downtowns again instead of the strip malls (thereby saving gas and energy), or meeting a challenge with innovation, should be honored as part of the American ideal too.
Hope and change is what I want... not some automaton on the end of phone spewing more garbage that does not relate to my life

[OCKerouac]

Here's a big brights shining beacon of why I'm voting Obama... The fact that Barack KNOWS there's an economic inequality crisis in this country...

My wife and I each work 40+ hours a week 'white collar' office jobs and cannot afford to buy a home. We have to budget closely just to make a rent payment. This is not the American dream! As hard as we both work, I'm not expecting to be able to buy a yacht, or own as many cars and haouses as the McCains, but it sure would be nice to afford a place of my own instead of having to rent and throw my money away...

Of course, had we bought a home, now we'd be stuck with an adjustable rate mortgage we can't afford, and losing money on the value of our property... So... I guess... Thanks, Bush Administration, for making sure my hard work wouldn't actually buy me anything!

[ReasonIsMyReligion]

To Bush, McCain, Gramm, et al, and the REAL elitists -- the CEO class and the Wall Streeters -- funny money is better than, as the ad used to say,

"We make money the old fashioned way; we EARN it."

Even Henry Ford knew that his workers had to be able to afford the cars they made. Duh.

[theone718]

I see Chris Dodd being treasure secretary with Summers, Buffet, Tyson, Volker, and even Holtz-Eakin (yea I said it), will be advising Obama on economics.

[OCKerouac]

I think Dodd is brilliant, but he may be too close to the collapse and bailout to bring credibility into the office. As bad as Paulson has messed it up, they'd need someone above reproach to take the spot... Paul Krugman did just win a Nobel Prize...

[ella52]

David Brooks said on Charlie Rose a week or two back that if Obama's economic team (the guys he is listening to) can't solve this then really no one can. And that from a Conservative.

The new democrats are here.... Fiscally conservative, culturally liberal.

[Fran1972]

I think I just heard about a code of ethics that anyone in Obama's administration will have to sign. That, right there, tells what we are dealing with. It's a president that's going to clean house.

I trust who he picks isn't going to be in his highschool yearbook, a lobbyist, a frat brother, Daddy's friend or someone Obama owe's a favor to. Man, I bet everyone is just itching to get this show on the road!!!

Vote early at the county clerk's office. McCain's lawyers aren't there to suppress your vote, just yet. Plus DMV can give temporary ID's and Driver's Liscenses with correct spellings and addresses.

Check all your friends and families registration status at www.votefo­rchange,co­m (need an eMail address).

Friends don't let friends vote on provisional ballots!!

[PT6]

We need a Thinking Honest Man like Summers

Today Our Current Treasury Sectretary, Paulson, Apologized for Mistakes by the Bush-Cheney Administration!

"Mistakes" is Ridiculous!

These were CALCULATED ATTACKS on AMERICANS and Particularly the Middle Class!

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McCain wants to GIVE the Banks Full Face Value for ALL BAD LOANS!

This would MAXIMIZE CORPORATE PROFITS at the cost of the TAXPAYER!

McCain is Right He is NO BUSH!

McCain is a GAMBLER and PROUD OF IT!

He is BUSH DOUBLED DOWN!

[lucite]

Did you not hear that when wealth comes to those at the top it trickles down to the rest pf the people who worked there butts off to make the money for those at the top. I have been waiting for this trickle for 20 years. The only trickle I got are bills and not $ bills.