The current wave of mass protest against Wall Street excess has completely reframed the public conversation in the United States. The "deficit problem" with which Washington was consumed in the first half of 2011 has not vanished from the political agenda, but its resolution will now have to be achieved against the background of a growing understanding of the sheer scale of current income and wealth inequality. If the Republicans in Congress have their way, the politicians may yet cut entitlements programs for the poor while declining to raise taxes on the rich. But if that is how the deficit problem is eventually resolved, that resolution will be more extensively recognized as class-biased in its character and impact than would have been the case before the OWS protests began. The super-rich are invisible no more, and are now being held to account.
Even the Congressional Budget Office has recently joined the fray, publishing last week Trends in the Distribution of Household Income Between 1979 and 2007. The CBO reported rises in the average real after-tax household income of the top one percent of the U.S. population of 275% between the two dates, as against a rise of 65 percent for the top 20 percent of income earners, just under 40% for the top 60 percent of income earners, and a tawdry 18 percent rise for the bottom 20 percent. All the resulting headlines focused in on that top one percent and its staggering 275 percent gain in income. "Top Earners Doubled Share of Nation's Income, Study Finds," was the ruling headline in The Washington Post in the immediate wake of the report. "Incomes rising fastest at the top" was the headline on October 19's EPI Economic Snapshot. "Another word for what's been happening might be theft" was the way Eugene Robinson put it in his opinion piece in that same Washington Post.
All that is true of course, but even so a word of caution is in order. Though fully justified by the data in the report, those headlines help frame the public conversation in ways that might yet leave progressive forces vulnerable to rapid pushback. For by focusing on the super-rich, such headlines leave their authors (and us) open to the counter-argument that since 2007 trends have been reversed -- that the rich are no longer as excessively rich as they once were, and so are correspondingly less in need of punitive taxation than was originally the case. By focusing on the CBO Report, the headlines also open us to the argument that even the bottom 20 percent of American income earners are becoming steadily better off -- so why make a fuss if their entitlements programs are now marginally eroded in the name of a wider American need for fiscal restraint?
We can expect both responses. Indeed both are already underway. The Cato Institute's Michael Tanner recently argued that in the wake of the 2008 recession "the rich are earning a smaller proportion of U.S. income" than before, and that "interestingly, the decline in earnings by the rich has corresponded with higher unemployment and rising poverty overall. We are all poorer," Tanner said, "but at least we are more equally poor. Hooray." That response should not surprise us. Commentators on the Right have long argued that tax data fails to accurately measure income and wealth inequality in the United States, and invariably overstates the riches of those at the top of income and wealth tables. Some have also long argued that the American poor are not really poor. They are not as poor as the income data would suggest, because fiscal transfers (earned income tax credits and the like) offset much of that poverty. They are not poor by historical standards -- they live better now than many middle class families did two/three generations ago. They are not poor when compared to the genuinely poor in the global economy: the American poor have cars, fridges, televisions, cell-phones and often generous living space -- things that are still not available to the emerging middle class in many developing societies even now, let alone to the third world poor. And if some Americans are poor when measured against official U.S. poverty standards, then much of that poverty is self-induced. Had the young single mothers now trapped on welfare only stayed at school, got a job and delayed having children until they were financially secure, they could easily have slipped into the bottom rungs of the American middle class. So at least many conservatives regularly argue!
If that dismissal of American poverty is not to hold sway, we need to go beyond the statistics in the CBO Report, to say other things about the American rich and the American poor. One thing we need to say is that -- as the CBO Report indicates -- both the rich and the poor are still with us. The poor have not gone away, and their conditions of life remain seriously impaired when compared to those enjoyed by the rich. Another thing we need to say -- following Eugene Robinson -- is that there are poor Americans primarily because there are also rich Americans. The rich and the poor in contemporary America are not separate categories of people, unconnected and dissimilar. Instead the two categories are organically linked: linked because the rich and the poor are ultimately just people sharing a common country and economy; and linked because in a world of scarce resources, the excessive claims of the privileged deny full access to those resources by the less privileged. In a very real sense, the pursuit of rising incomes in contemporary America is a zero-sum game -- if the man in the big office takes a big salary hike, that hike leaves less in the salary pool for those working in the smaller offices behind -- and like all games, this one only works if everyone follows the rules. Right now, the rules in America's zero-sum income game are heavily stacked in favor of the excessively wealthy and against the excessively poor; and because they are, they are rules that we need to change.
No matter how often some conservative commentators deny it, there is still massive poverty in the contemporary United States, the bulk of which is involuntarily acquired. Of course, if we are crazy enough to only measure poverty against some absolute and timeless scale, then there is no real poverty now because everyone in the contemporary United States lives so much better than did people in the past, since technological progress here has been so great over the last century as a whole. But to measure poverty in that way is to trivialize the issue. Better therefore to define poverty either against a basket of goods representing a minimum acceptable standard of life (as we do here in the United States when calculating the official poverty rate), or against a percentage of median income (say 60 percent, as do the Europeans); and if we do, we must see overwhelming evidence of the persistence of genuine poverty in the midst of all our contemporary affluence: evidence such as this.
All this adds up to one clear truth: most Americans are not poor because they made bad choices in relation to education, work and the timing of children. Most Americans are poor because they can't find work in an economy now beset with both recession-created and structurally-induced unemployment. People are without work because the financial crisis of 2008 generated a recession that destroyed jobs. People are without work because whole industries have been outsourced to cheaper labor markets overseas. Textile and furniture employment in my state -- North Carolina -- has now largely relocated to South Asia and China. Under those conditions, people without work are victims, not architects, of their condition -- and need to be honored as such. And if there is a cycle of deprivation -- if the children of the poor have a greater propensity than others to stay poor -- then those children are themselves innocent recipients of the consequences of the one involuntary decision we all make: namely our choice of parents. People may, by their own actions, move themselves around on the ladder of inequality: but for that movement to leave those at the bottom of the ladder mired in poverty, there have to be badly resourced lower rungs on that income ladder. If we want all Americans to escape poverty, we as a society have to stop creating poverty slots at the bottom of the ladder. We will get rid of poverty by shortening the ladder and by raising its base. We will not get rid of poverty by urging the poor to climb harder, leaving others behind to fill the poverty slots they have at least temporarily vacated.
Given the severity of the deprivation at the bottom of the contemporary U.S. income ladder, it is hard to find much sympathy for the problems of the American super-rich, now (according to their defenders) suffering diminutions in their wealth because of poor returns on the stocks they hold. Maybe 2008 and 2009 were marginally difficult years for the top one percent of American income earners, but any sympathy for them would still be largely misplaced. For when all the data is in, 2010 and 2011 will no doubt have seen the re-establishment of the upward trajectory of their income and wealth; and even if it has not, the super-rich will still hold 40 percent of our entire wealth and monopolize a quarter of the total American income bill. The fact that the top one percent takes so much of our collective income and wealth means that there is less for the rest of us. So unless the rich can prove that their disproportionate claim on income and wealth stimulates investment and job creation from which the rest of us benefit - unless they can prove that trickle-down economics works - we will have to keep on saying, as the OWS protesters do, that income and wealth inequality on the scale we are experiencing now is best understood as theft.
Wealth creation is, after all, a collective endeavor. As Elizabeth Warren said, no one in America gets rich alone. The rules governing income and wealth distribution are socially determined, and for the last three decades in the United States, those rules have been stacked in the rich's favor. With the scale of poverty and unemployment now around us, it is time for those rules to be reset. There are more than statistics at play here; and in truth the detail of the income and wealth statistics matters less than we might think. For no matter how the income numbers vary month by month or year by year, they consistently demonstrate that levels of inequality in contemporary America run remarkably deep. Because they do, they necessarily raise for all of us basic issues of morality. It is simply not right that children should be denied a level playing field on which to begin their pursuit of the American Dream; and it is indefensible that people of color should be denied the right to participate fully in the society than their forebears did so much to create. In the end, setting the detailed statistics aside, it is vital that we ask more fundamental questions. To what degree are we all fellow-citizens in this society, and to what degree are we not? Are we one America or are we two? If we are one America -- or at least if we want to be one America, united and at social peace -- it is surely time to make the alleviation of poverty our number one priority. Inside the 99 percent, it is surely time to focus hard on the needs of the bottom fifth.
First posted with full academic citations at www.davidcoates.net