David Leonhardt has been getting a lot of attention for his piece in the New York Times: “In Health Bill, Obama Attacks Wealth Inequality.” He has a good angle, placing health care reform in the context of some crucial economic facts of which most Americans just aren’t aware. Leonhardt writes:
For all the political and economic uncertainties about health reform, at least one thing seems clear: The bill that President Obama signed on Tuesday is the federal government’s biggest attack on economic inequality since inequality began rising more than three decades ago.
Over most of that period, government policy and market forces have been moving in the same direction, both increasing inequality. The pretax incomes of the wealthy have soared since the late 1970s, while their tax rates have fallen more than rates for the middle class and poor.
Nearly every major aspect of the health bill pushes in the other direction.
The key stats about inequality he cites are:
Since 1980, median real household income has risen less than 15 percent. The only period of strong middle-class income growth during this time came in the mid- and late 1990s, which by coincidence was also the one time when taxes on the affluent were rising.
For most of the last three decades, tax rates for the wealthy have been falling, while their pretax pay has been rising rapidly. Real incomes at the 99.99th percentile have jumped more than 300 percent since 1980. At the 99th percentile–about $300,000 today–real pay has roughly doubled.
The laissez-faire revolution that Mr. Reagan started did not cause these trends. But its policies–tax cuts, light regulation, a patchwork safety net–have contributed to them.
Discussing inequality is vital not only in thinking about American society but also in assessing the global economy. Just as we could argue that inequality is a leading product of Reaganite domestic policies, it has also been one of our leading exports. This is to say, the economic neoliberalism of the “Washington Consensus” has probably produced inequality more efficiently than anything else.
In some parts of the world, such as Latin America, one could make the argument that neoliberalism has failed flat out to produce economic growth. However, in other parts of the world, it’s not quite as simple. Without going into specific case studies, we can imagine countries in which governments have mouthed the mantras of market fundamentalism and have actually seen some growth. But again and again, we’ve seen policies of deregulation, privatization, and austerity create gains that are overwhelmingly captured by a small elite. It’s not that such countries are going backwards in absolute terms. A little bit may indeed be trickling down. The question is, what kind of society is created amid increasingly inequitable conditions?
Another way to look at the issue, especially in the U.S., is this: productivity has been going up tremendously since the early 1970s, even while real wages for working people have stagnated. Again, it’s not that we’re going backwards in absolute terms. Still, it gets disturbing to think about where all of the benefits from our hard-earned productivity gains have been going, if not to the great majority of people who show up for work every day.
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On a closing note, Leonhardt points out:
Health reform hardly solves all of the American economy’s problems. Economic growth over the last decade was slower than in any decade since World War II…. Educational gains have slowed, and the planet is getting hotter.
The second sentence, in particular, is something not often mentioned, and even less frequently reflected upon, in venues like the Times. Political economists in the Marxist tradition have theories about the declining rates of profit and about capitalism running up against the ecological limits of production. But the respectable center tends to be far behind on theorizing these issues. Of course, should the problems Leonhardt alludes to come to a head, it wouldn’t be the first time that mainstream economics has failed to see a crisis coming.