The very week that the Republican presidential field insisted that the economy is great, we need more tax cuts for the rich, and that Americans who feel left behind really have nothing to complain about, we see yet another report about the stunning gap in income inequality.
The richest Americans’ share of national income has hit a postwar record, surpassing the highs reached in the 1990s bull market, and underlining the divergence of economic fortunes blamed for fueling anxiety among American workers.
The wealthiest 1% of Americans earned 21.2% of all income in 2005, according to new data from the Internal Revenue Service. That is up sharply from 19% in 2004, and surpasses the previous high of 20.8% set in 2000, at the peak of the previous bull market in stocks.
The bottom 50% earned 12.8% of all income, down from 13.4% in 2004 and a bit less than their 13% share in 2000. […]
The IRS data go back only to 1986, but academic research suggests the rich last had this high a share of total income in the 1920s.
Asked about the growing gap between rich and poor, the president said, “[O]ur society has had income inequality for a long time,” and then muttered a bit about why No Child Left Behind is such a great idea.
There are any number of ways to look at this problem, but I think the key that often goes overlooked is that Americans, despite a political culture that de-emphasizes class, actually notices the societal gap.
For years, even a casual reference to the class gap was immediately met with cries of “class warfare!” It was more important to avoid mentioning the gap than it was to address the problem. The conventional wisdom suggests Americans should just work hard and hope for the best — if the rich get richer while everyone else struggles, then so be it. It’s a “classless” society.
But as the Pew Research Center reported this week, the public isn’t exactly buying into the conventional wisdom anymore.
Over the past two decades, a growing share of the public has come to the view that American society is divided into two groups, the “haves” and the “have-nots.” Today, Americans are split evenly on the two-class question with as many saying the country is divided along economic lines as say this is not the case (48% each). In sharp contrast, in 1988, 71% rejected this notion, while just 26% saw a divided nation.
As more wealth is concentrated at the very top, everyone else starts to notice. What do you know.
Usually, at least in progressive circles, the next question usually involves identifying some kind of explanation for why the gap is widening. Matt Yglesias suggests today the “why” shouldn’t be the focus of attention; the remedies should be.
The relevant debate isn’t about how we got here, it’s about what would happen if we tried to change things. Some people, of course, think changing things would be immoral. Indeed, there are some people I know who adhere to the bizarre view that one source of injustice in the contemporary United States is that our richest citizens aren’t rich enough. But beyond those people, you have a lot of people who take the view that raising taxes would have dire economic consequences, whereas lowering them would have large benefits. That’s the only debate that really matters in this regard. If the costs to the non-rich of higher taxes on the rich would be small (as I believe), then higher taxes on the rich to provide more benefits to the non-rich makes sense irrespective of why inequality has grown so much whereas if the costs would be high then it doesn’t make sense — again, completely apart from the causal issue.
Sounds right to me.