No time to waste

Posted: 28 November 2012 in Uncategorized
Tags: , , , ,

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I’m late, I’m late, I’m late. . .

So, I’m going to outsource this one to Josh Bivens:

Zachary Goldfarb wrote an interesting piece on President Obama’s commitment to fight rising economic inequality as president. Lots of it rings true—the president has indeed expressed concerns about rising inequality and many of his policy initiatives (particularly the coverage expansion included in health reform) will indeed do much to ensure that rising inequality no longer provides as daunting a barrier to low– and middle-income households’ living standards growth.

What’s consistently depressing in the inequality debate as waged around D.C. politics, however, is the telescoping of the debate into being all about tax rates and educational attainment.

Goldfarb repeats a piece of ossified conventional wisdom in his piece, writing, “The data show that rising inequality is largely the result of a changing economy that handsomely rewards people with better skills or credentials—a college education—and leaves people with a basic education at a disadvantage.”

The real action in inequality is the enormous share of overall economic growth in recent decades claimed by the very top slices of the income distribution—yes, the top 1 percent, who accounted for a larger share of average income growth between 1979 and 2007 than the entire bottom 90 percent of U.S. households (a bottom 90 percent that includes most college graduates).

And what has driven this concentration at the very top? It’s less about education and more about raw economic power and how policy has tilted to shove more of it to the top. For example, as of 2007, about more than half of the income earned by the top 1 percent could be accounted for by corporate executives and jobs in the financial sector. These are, to put it lightly, sectors of the economy where competition has limited reach for putting a brake on pay; in the jargon of economists, they’re sectors with substantial “rent-seeking.”

Yet despite the clear importance of economic power and income concentration at the very top driving trends in overall inequality in recent decades, little has been done to change policy to address this—and this has not really changed during the Obama administration.

I can’t say I’m a big fan of the new “rent-seeking” language used to describe incomes at the top (I prefer “surplus-seeking“) but otherwise Bivens is spot on.

And the United States is running out of time.

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