Friday Follow-Up: Inequality And It’s Political Causes

Eight souls at yesterday’s meeting, maybe because both the Reader and CityBeat failed to list us this week.  I might have forgotten this once to contact them. 

The discussion was wide-ranging, but three points of follow-up.

First — The Moral Choices Behind Deficit Reduction.  Linda made a great point after the meeting that I should have emphasized:  Shouldn’t morality inform any decisions we make in this area?  Whether we reduce our debt levels by cutting spending, raising taxes, or both, the social safety net we have will be justified by the basic public morality that’s always been its main rationale.   A foundational liberal belief is that a decent society protects its elderly from poverty and provides a social safety net for all its citizens so they can have a chance to realize the rights the Constitution says they have on paper.  It’s not just economic efficiency or a need to correct market failures that justifies Social Security and Medicare.

Second “What went wrong.”  We talked a bit about the idea that our society is just not spreading wealth and opportunity to the broad middle class (or below) the way it used to.  A fantastic series of short articles has just been written on why inequality has been rising so fast.  It’s journalism at its finest. Part Five explains how our poliitcal system has contributed to the growing income gap.   

If you’re not up to reading these, here’s the best quick summary of the political basis of rising inequality that I’ve seen:

  • In the 60s, at the same time that labor unions begin to decline, liberal money and energy starts to flow strongly toward “postmaterialist” issues: civil rights, feminism, environmentalism, gay rights, etc. These are the famous “interest groups” that take over the Democratic Party during the subsequent decades. 
  • At about the same time, business interests take stock of the country’s anti-corporate mood and begin to pool their resources to push for generic pro-business policies in a way they never had before. Conservative think tanks start to press a business-friendly agenda and organizations like the Chamber of Commerce start to fundraise on an unprecedented scale. This level of persistent, organizational energy is something new.
  • Unions, already in decline, are the particular focus of business animus. As they decline, they leave a vacuum. There’s no other nationwide organization dedicated to persistently fighting for middle class economic issues and no other nationwide organization that’s able to routinely mobilize working class voters to support or oppose specific federal policies. (In both items #2 and #3, note the focus on persistent organizational pressure. This is key.)
  • With unions in decline and political campaigns becoming ever more expensive, Democrats eventually decide they need to become more business friendly as well. This is a vicious circle: the more unions decline, the more that Democrats turn to corporate funding to survive. There is, in the end, simply no one left who’s fighting for middle class economic issues in a sustained and organized way. Conversely, there are lots of extremely well-funded and determined organizations fighting for the interests of corporations and the rich.
  • The result is exactly what you’d expect. With liberal money and energy focused mostly on non-economic concerns, the country moves steadily leftward on social issues. With conservative money and energy focused mostly on the interests of corporations and the rich—and with no one really fighting back—the country moves steadily rightward on economic issues. Thomas Frank’s famous working-class Kansans who vote against their own economic interests are easily explained. It’s not just that conservatives appeal to them on social grounds, it’s that there’s no one left to really make the economic case to them in the first place. And even if anyone did, they have little reason to believe that Democrats would actually follow through in concrete ways. So why not vote on abortion and gay rights instead?

Third, I promised to list the biggest tax breaks;, i.e., the “tax expenditures” (technical name) that cost the federal government the most money.  Click on it to enlarge.  Turns out the mortgage interest deduction is only #3.  Also, note how popular they all are.

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3 responses

  1. Great numbers on the tax expenditures. You’re right about how popular they are.

    Speaking of morality, while taking care of the elderly is one consideration, there’s also the moral aspect of spending money now and leaving the debt in the hands of future generations. Making the current generation pay into a system that goes into insolvency before they become eligible to actually draw upon it isn’t a morally attractive option either.

  2. Paying the debt in future generations? Nonsense, I have to say. The US debt has not
    been paid since 1837.
    The principal of the debt is simply rolled over, and is ultimately liquidated by a
    combination of inflation and economic growth, however you look at it. Did anyone worry about paying the WW II debt in the 60s and 70s? Of course not. By that time the 100 billion debt seemed like chicken feed.

    A real amount which does have to be paid, however, is interest on the debt. Because
    interest rates are currently very low, this is now a relatively small amount in the budget, however.

  3. I agree, although both prinicple and interest paid to foreign holders of bonds are lost to us. However, even there, the what-do-we-use-the-loans-for point applies. We get to use China’s excess capital for a while. What we do with it and the other choices we make in our economy over the next decade or two will determine how wise it was to borrow so heavily.

    Also, reading the bullet point summary of the causes of liberals decline again, I see a big flaw: Race is missing. He considers civil rights to be a mere cultural/social agenda issue, when it really was a matter of economics and power — especially to those affected by it most, black and white. So too were feminism and the others he lists. They were hardly “post-materialist” issues. Maybe because he misses this, he goes on to ignore the role that white working class resentment over black civil and economic rights played in dissolving the liberal coalition. It wasn’t just the breakdown of organized labor and the rise of corporate political power.

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