Friday, January 17, 2014

David Brooks Reframes The Income Inequality Problem

Its a mistake to focus on the problem of income inequality according to Brooks.  That is because income inequality is a consequence of other factors.  We will always have the poor with us because they are deficient in human capital.  It is passed on from generation to generation.  Unless we take steps to improve their human capital the problem can't be solved.  Moreover, we can't do much to alter the fact that the top 5% are being rewarded highly for their work, and there is no reason to focus on reducing their incomes.  That is because the share of income going to the top 5% does not affect the incomes at the bottom.  Democrats and Republicans agree that we should make an effort to improve human capital formation so we should work on improving human capital formation and stop all of this nonsense about growing income inequality.  Above all we should not advocate solutions to the problem that are unrelated to the causes of income inequality.  Raising the minimum wage is a bad idea because he selected two studies, out of numerous studies on the minimum wage,  which conclude that raising the minimum wage is unproductive.  It is also a mistake to argue that the unequal distribution of income leads to an unequal distribution of political power.  We should avoid at all costs any discussion of class power.  Apparently, we live in a country with growing income inequality that is unrelated to class power.

There are so many mistakes in Brooks' analysis of income inequality that is hard to know where to begin.  I have selected just a few of his most egregious mistakes for discussion.

Brooks frames the income inequality problem in a way that ignores the middle class. Median income growth has been stagnant for decades while almost all of the growth in income has gone to the 5%.  Even within the top 5%, the lion's share of income growth has gone to those at the very top of the pyramid.  Clearly, this is not a problem of inadequate human capital formation in the middle class.  If we were able to greatly improve human capital formation within the lowest 20% of the population they would be competing for a shrinking share of income going to the middle class.  In fact, I posted an earlier article by Brooks in which he argued that the real problem of income inequality was between middle class Americans who have more human capital than those in poverty.  Brooks has absolutely no interest in discussing the rapidly increasing share of the income pie that that is going to very top of the income distribution.  That would be class warfare, but it is not class warfare to discuss the advantages that middle class Americans have over those in poverty.

Brooks is correct in arguing that income inequality is growing across the globe.  Therefore, it is pointless to focus our attention on income inequality in America.  That is a serious error because it only applies to pre-tax income.  Income after taxes in the US is much higher than it is in other Western societies, with high pre-tax income inequality, because they have highly progressive tax systems.  Moreover, the US  tax system has become less progressive in recent years.  We have lowered the top marginal tax rate on earned income and we have greatly reduced the tax on capital gains and dividends.  Of course, according to Brooks this has nothing to do with the influence that the wealthiest Americans have over tax policy.  To argue otherwise would be class warfare because it directed against those at the top of the pyramid.  Class warfare according to Brooks in unidirectional.  Those at the top of the hierarchy never use their power to gain advantage over those below them.  However, any effort to restore the progressiveness of the tax system would be class warfare.

To summarize,  Brooks has done his job as well as he can.  He has reframed the discussion of income inequality in way that deflects our attention from the concrete problem of growing income inequality to the problem of human capital formation among our poorest citizens.  This also diverts our attention from two of the most effective means to reduce income inequality.  That is, raising the minimum wage and using tax policy to reduce post-tax income inequality.  His focus on human capital formation is also specious because he ignores the efforts of his favorite political party to cut spending on programs that might support human capital formation.  It is no wonder that Brooks has become one of our most visible opinion leaders.  He is more effective at defending the interests of his class than most of those on the right who lack his rhetorical skill.

No comments:

Post a Comment