Saturday, November 28 , 2015, 10:58 am | Fair 60º

David Sirota: Why Income Inequality Suddenly Matters

Protesters have shaken the long-standing hypothesis that the rich-poor divide is necessary for a superior economy

By David Sirota |

A few weeks ago, as the Occupy Wall Street protests were first spreading, something amazing happened: For 10 whole seconds, the local reporter on my TV screen actually talked about the realities of the recession. He even uttered the phrase “economic inequality.”

My guess is that you’ve seen something similar on your local affiliate — and that’s no minor event. When even the most local of television journalists are compelled to acknowledge this crushing emergency in a country whose media aggressively promotes American Dream agitprop, it means the Occupy protesters have scored a monumental victory. You can almost imagine a Wall Street CEO turning to an aide and muttering a slightly altered riff off LBJ: “If we’ve lost Ron Burgundy, we’ve lost Middle America.”

In response to this stunning turn of events, conservative politicians are retreating to non sequiturs. They seem to think that if they shout the phrase “class warfare” enough, the nation will go back to not caring about the divide between the rich and poor.

But something has changed.

For most of the post-World War II era, we tolerated relatively high inequality because we envisioned it as a necessary side effect of an exceptional economy that (supposedly) guaranteed opportunities for advancement. As The Wall Street Journal put it, we believed that “it is OK to have ever-greater differences between rich and poor ... as long as (our) children have a good chance of grasping the brass ring.”

However, the past three decades have invalidated our standing hypothesis. After the conservatives’ successful assault on the New Deal, America has lived a different reality — one perfectly summarized by a new Federal Reserve study revealing that today’s increasing inequality accompanies comparatively low social mobility.

“U.S. family income mobility has decreased over the 1969-2006 time span, and especially since the 1980s,” notes the Fed paper, adding that “a family’s position at (the) end of (the) 2000s was ... more correlated with its start position than was the case 20 years earlier.”

Of course, some class mobility still exists. The trouble is that it’s primarily of the downward kind. As the Pew Charitable Trusts reports, roughly a third of those who grew up in the middle class have now fallen below that station in adulthood.

This is why, for all the right-wing mythology about “Eurosocialism” snuffing out upward mobility, data from the Organization for Economic Cooperation and Development show that social mobility in uber-capitalist America is actually lower than in most industrialized countries.

This is why almost three-quarters of respondents just told The Hill newspaper’s pollsters that income inequality is a problem.

This is why my local TV news is suddenly airing pieces on economic inequality between sports, weather and all the “you stay classy” small talk.

And this is why, among all the fights over economic policy, the debate about taxes is the most crucial of all.

As the Fed noted in a separate report, the federal tax code — which remains vaguely progressive — has been the one proven way to “mitigate income inequality.” But with congressional Republicans gradually flattening federal income tax rates and with already regressive state tax rates in GOP bastions such as Texas, Wyoming, Tennessee, South Dakota and Mississippi, the tax system has lately been preserving or exacerbating existing inequality.

The good news is that if we return to the slightly higher tax rates of the Reagan or Clinton eras — i.e., the rates that existed when the economy was doing better — we can begin fixing things. If, though, we keep tax rates the same or make them even more regressive, we’ll be seeing a whole lot more about economic inequality on our local news as the current crisis inevitably reaches an ugly boiling point.

David Sirota is the best-selling author of the new book Back to Our Future: How the 1980s Explain the World We Live In Now and blogs at Click here for more information. He can be contacted at .(JavaScript must be enabled to view this email address). Follow him on Twitter: @davidsirota.

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» on 11.15.11 @ 11:09 AM

These are the impacts of the tax law changes we’ve seen over the past 30 years. Overall, regressive; that is, more and more favorable to higher incomes.

The arguments from the right are particularly specious: “The top 1% pays 20% of the income tax.” Well, of course. If I paid myself $1,000,000 and I paid my 50 workers each $10,000, I would pay 67% of all the income tax in even a flat tax universe.

Or, I like the one that says, “Our rich wealth creators will move to other countries with their money if we raise their taxes.” First off, they won’t move unless they are truly stupid, in which case they are probably playing with family money that was actually earned when the top brackets were much higher.

Depending on where you live, your first $40-50K of income goes to non-discretionary need: food, heating, rent, clothes, transportation. As we make more and more money, our discretionary and luxury spending increases. Why should we treat the two the same? That’s what flat taxes and “9-9-9” would do.

The tax laws need to be reset.

» on 11.15.11 @ 01:34 PM

I love the “we tolerated” comment.  Really?  This type of comment comes from those who believe that other people’s money is actually theirs to do what they want with.

The problem isn’t taxation, and never was.  The issue is expectation.  As people become more and more dependent upon the government to meet their needs, the demand goes up resulting in higher taxes and fees.  This phenomena has been written about for centuries.  As soon as people figure out that they can get what they want by pressuring the government to give it to them or they will misbehave we start moving down a slippery slope.

What you end up with is opposing world views.  Conservative libertarian types want the government out of their lives.  Liberal socialist types want the government to be the almighty provider.  Throw in a few power hungry progressives on both sides and it gets real interesting from a political point of view, but sucks for citizens.

The fact remains that Americans and American wannabes have a voracious appetite.  They have learned that they can vote themselves just about anything they want, even to their own demise.  Much like the growing girth of many waistlines.  It’s time to go on a diet, not order more food.

» on 11.15.11 @ 01:59 PM

My God this guy never quits. What assault on the New Deal policies are you referring to David? Huh? They are still there. They are a massive ponzi scheme and you and your democrats have raided it to pay for other give aways.

Now then what the hell is income equality David? Why should anyone be paid the same for unequal levels of effort, skill or ability? We have one of the most progressive tax systems in the world and it’s still not enough. You won’t be satisfied until the rich are no more and everyone is poor.

As for your model of utopian European socialism, if you haven’t noticed, it’s collapsing at a very fast rate now under tremendous debt. You can only borrow prosperity for so long and then WHAM, suddenly your loan is called and you have grown fat, dumb and useless and have no way to pay back. Oh, and I love the way you cherry picking liberals love to point out that SOME European countries are doing just find under the ominous weight of oppressive nanny state socialism. Yep so is Canada. But unfortunately you have no clue why. Scandinavian countries are net exporters as is Canada, Germany is reversing 50 years of socialist economic policies as fast as they can and Poland has the lowest corporate taxes in the western world. All the rest are sucking the more successful countries down like a giant whirlpool, but hey moron you just keep believing in income equality because you’re to stupid to think otherwise.

Further, for your information there is no upward mobility in Europe and hasn’t been for decades. One of the never mentioned benefits of having wealthy elites usher in a socialist economy is it prevents competition, no, not at the business level, but rather at the income level. Europe’s wealthy elite are a protected class under socialism and they never have to worry about anyone threatening them. But you just go on believing there are no rich in Europe and everyone is upper middle class, idiot!

As for you Rambler you know better. What a company pays its employees is that company’s business, not yours, David’s or the governments. The whole idea of a business is to make friggen money, and I for one am sick and tired of you lunatic Marxists thinking the world owes you something just for being alive. No one owes you a damned thing. You want a piece of the economic pie then go out and earn it. I may not like Wall Street bankers, parasites all of them, but at least they worked for it. Contrast that to your parasite demonstrators who just want to sit around and like their equally useless brethren in Europe, have the government confiscate it and hand it out.

Oh, and I agree, a flat tax would be a good thing and I love the 9-9-9 plan. No more parasites. Everyone pays the same damned rate from top to bottom, everyone. If you are getting benefits from the government then you also have to pay. No free lunch and then have the ability to vote to raid the treasury.

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