The Nation: Inequality is Still the Defining Issue of Our Time
Fierce battles over trade, labor rights, and executive compensation will determine whether we can really narrow the gap.
In 2011, President Obama, speaking in the wake of Occupy Wall Street, called inequality the “defining issue of our time.” Now Jason Furman, chair of the Council on Economic Advisors, argues that Obama “narrowed the inequality gap” more than any president in 50 years. The nonpartisan Congressional Budget Office echoes the observation that income inequality after taxes is no higher than it was in 2000, and that Obama’s policies have done more to reduce inequality than any other policies on record.
Don’t take down the barricades. Inequality remains extreme and continues to widen. And the populist uprisings that have roiled American politics have clear opportunities to tackle the core problem after the election.
As James Kwak at Baseline Scenario notes, the council’s report measures Obama’s reductions against what inequality would have been if George Bush’s policies had been sustained through the Great Recession. The progress comes largely from progressive tax changes. Obama raised taxes marginally on the very wealthy (allowing the Bush tax cuts to expire for very rich, particularly the 15 percent tax on capital gains, and taxing investment income under Medicare to help pay for health-care reform) and increased tax subsidies to low-wage workers (expanded child tax and expanded earned-income tax credits.) These advances, while praiseworthy, don’t come close to reversing the regressive tax polices of the past decades.
As Emmanuel Saez has shown, the richest 1 percent continue to pocket the bulk of the rewards of growth. The income share of the top 1 percent before taxes fluctuates with the business cycle, but it has been rising over time. Despite recent increases, household income for the vast majority of the population has still not recovered from the Great Recession. These rewards largely reflect the underlying economic structures that determine what Jacob Hacker has dubbed predistribution (the pre-tax distribution of income): globalization, bargaining power of labor, executive pay structures, demand for skills, etc. As Kwak concludes, “It’s hard to point to anything [Obama] did that affected the underlying economic factors producing the increase in inequality.”
This elevates the importance of fierce political battles that will occur after the November elections. First, President Obama plans to join with the business lobby to push the Trans-Pacific Partnership Treaty through the lame-duck session of Congress. The TPP is another in the corporate trade and investment deals that have proved so devastating to American workers. Even trade-accord advocates now admit that our globalization strategy has contributed directly to growing inequality, putting American workers in competition with low-wage and repressed labor abroad, with no sensible industrial or comprehensive strategy for impacted communities and workers.
Read more in the Nation.