Inequality Matters, pt. 1

Mother Jones, true to it's modus operandi, has a series of charts addressing income inequality. In case you didn't know already, this blog loves charts (Mother Jones only one some days). While they're all great, this chart stands out.

The second chart is probably stronger. While the share of after-tax income for the top 20 percent has climbed steadily since 1979, it's declined for everyone else. It's important to point out that this is a dynamic view of inequality, not incomes of middle class people per se, although they've been declining over the last ten years too. Instead, see it as the wealthy's income forming an ever greater share of the economy, the rate at which inequality is growing. It's growing fast.

There's a big challenge when discussing these issues in the US, especially with those on the Right that are wedded to the current economic and political regime. Many Americans see income inequality as the result of hard-work and education, making something like this seem more natural. They would see measures to limit income inequality as an assault on the incentives to build businesses and grow the economy as a whole.

They're wrong. And they're wrong for the very arguments that they provide: income inequality reduces the incentives for people to try and succeed. Why should people try hard or be entrepreneurial in the current economy? You have at least a one in ten chance of being unemployed, and if you've got a job, you're salary probably isn't too far from a extremely disappointing 31k a year. Your benefits suck, and you have no hope of it getting any better. Why, indeed, would anyone work hard?

Tyler Cowen argues that most of America's success came from the fact that average, uneducated people could be very successful. You see this all the time when you look at the Great Depression. It's remarkable how many powerful people on Wall Street and abroad had nothing more than a high school education. Even this was rare, since only 6.4 percent of Americans at that time even completed high school.

Now, even a law degree (and 200k in debt) isn't even much of a guarantee you'll land a decent job.  The whole result of the de-unionization de-regulation of the US economy has been to make it almost impossible for regular Americans to succeed. Not surprisingly, America now has one of the lowest levels of intergenerational economic ability in the world. In simpler terms, the American dream is dying: people born rich stay rich, people born poor stay poor, and the gap between them grows wider every day.

Oh yeah, and what are those economically mobile countries out there, rewarding hard work with higher economic status? They're those socialist hell-holes France, Germany, Sweden, Canada, Finland, Norway, and Denmark. Funny how that works, isn't it?