Obama helplessly laments that the rich get richer
Americans take pride in calling their nation “exceptional” – and rightly so. Because when it comes to income inequality, the gap between the super rich and everyone else, few other western nations are as exceptional as us.
In a Monday speech marking the fifth anniversary of the Great Recession, President Obama lamented that the recovery has not been fairly shared among all income groups: “We need more broad-based prosperity. We need more ladders of opportunity…Because even though our businesses are creating new jobs and have broken record profits, the top one percent of Americans took home 20 percent of the nation’s income last year, while the average worker isn’t seeing a raise at all. In fact, that understates the problem. Most of the gains have gone to the top one-tenth of one percent. So in many ways, the trends that have taken hold over the past few decades of a winner-take-all economy, where a few do better and better and better, while everybody else just treads water or loses ground, those trends have been made worse by the recession. That’s where we should be focused on. That’s what I’m focused on.”
Good luck with that focus.
Truth is, both political parties since the 1970s have conspired to widen the income gap, which is currently the worst since the ’30s Great Depression. Republicans have naturally taken the lead (no surprise, because their mantra is low taxes for fat cats), but many Democrats have willingly aided and abetted (because they too have chased the corporate bucks). The latest evidence of this long-term trend can be found in the new U.S. Census figures, released yesterday. While the top five percent of earners have fully recovered from the ’08 debacle, and are now raking in as much money as they did pre-debacle, 80 percent of America’s earners are currently making less than they did before. And that actually understates the size of the gap, because the Census stats don’t include the capital gains reaped from rising stock prices and juicier dividends – and we all know which income bracket reaps the disproportionate share of capital gains.
It just so happens that the taxes on capital gains were lowered by Congress in the mid-90s (under a Democratic president), and again in the early ’00s (in tandem with George W. Bush’s income tax cuts). According to a 2013 report by Thomas Hungerford, an economist at the non-partisan Congressional Research Service, the slashing of capital gains is “by far the largest contributor” to our ever-widening income inequality. The lopsided recovery speaks for itself; as the respected Economist magazine noted yesterday, “It is disconcerting enough when the income share of the super rich marches inexorably higher. When it does so amid an overall picture of income stagnation, that is very bad news indeed.”
Can Obama use his “focus” to reverse a four-decade trend? Only if lawmakers in his party ditch Wall Street and jack up those capital gains taxes – and somehow cajole lots of Republicans to go along. Only if lawmakers in his psrty agree to create new tax brackets at the top of the income scale – and get enough Republicans to sign on. Those measures would be a good start. But as the saying goes, a frog with wings wouldn’t bump its ass.
Way back in 1996, when I wrote about a widening income gap on Bill Clinton’s watch, I interviewed an economist and Democratic adviser named Jeff Faux. He nailed the problem: “To pull up the wages of working people, you need solutions that are not ‘acceptable’ in politics today. You’d need a politician to say, ‘We need more unions,’ but that would mean going up against business. On free trade, you’d need some sort of protection for domestic workers who are threatened by low-wage foreign competitors, but that would mean going up against the multinational business community, for whom low wages are the point. It would mean big redistribution changes in the tax code. It would mean (laws) making corporations more accountable. All of these solutions require political conflict. But let’s not be naive. Politicians don’t want to tackle that, and disturb all their business money.”
So where does this leave us? With exceptional status as a steward of income inequality.
The Organization for Economic Cooperation and Development, an international body with 34 member nations (including ours), released a report earlier this year on the whole topic. Check out the graph at the top of page four, which measures income inequality among the 33 nations that supplied data. The very worst nations are Chile, Mexico, and Turkey. We’re number four. That’s right, folks; when it comes to economic fairness, America is worse than places Poland, Greece, South Korea, Estonia, and Slovenia.
Kind of messes with our knee-jerk self-flattery, don’t you think? If we really want to fetishize the phrase “American exceptionalism,” maybe we should do a tad more to earn it.
Follow me on Twitter @dickpolman1
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