What's That Up Ahead?

If [the wealthy citizens’ wealth] or the great bulk of it, is off-limits, then it’s impossible to see any good resolution of the current US crisis. It’s unsurprising that lots of voters are unwilling to pay higher taxes, even to prevent the complete collapse of public sector services. Median household income has been static or declining for the past decade, household wealth has fallen by something like 50 per cent (at least for ordinary households whose wealth, if they have any, is dominated by home equity) and the easy credit that made the whole process tolerable for decades has disappeared.

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By contrast, in a society like that of the 1950s and 1960s, where most people could plausibly regard themselves as middle class and where middle class incomes were steadily rising, the big questions could be put in terms of the mix of public goods and private income that was best for the representative middle class citizen. The question of how much (more) to tax the very rich was secondary – their share of national income was already at an all time low.

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Meanwhile, most of the anger created by the collapse of middle class America is being directed not at the rich but at those who don’t look, sound or pray like Americans of the vanished golden age.

When I was at the American Economic Association meetings in January I went to a session where a group of Very Serious Economists (Holtz-Eakin, Elmendorf and others) discussed the US budget problem, which comes down to the fact that on a structural basis US public expenditure exceeds revenue by something like 7 per cent of national income. I made the comment that this gap was almost exactly equal to the increase in the share of income going to the top 1 per cent of households over the last decade or so. The Very Serious Guys declined to respond, and waited for a serious question.

  Quiggin

A new survey found that 64% of the public doesn't have enough funds on hand to cope with a $1000 emergency. Wages are falling for 90% of the population. And disabuse yourself of the idea that the rich might decide to bestow their largesse on the rest of us. Various studies have found that upper class individuals are less empathetic and altruistic than lower status individuals.

This outcome is not accidental. Taxes on top earners are the lowest in three generations. Yet their complaints about the prospect of an increase to a level that is still awfully low by recent historical standards is remarkable.

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Would you trade a shorter lifespan for a much higher level of wealth? Most people would say no, yet that is precisely the effect that the redesigning of economic arrangements to serve the needs at the very top is producing. Highly unequal societies are unhealthy for their members, even members of the highest strata.

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And the costs of living in more unequal societies extend beyond health, although that impact is particularly dramatic. If you look at broader indicators of social well being, you see the same finding: greater income inequality is associated with worse outcomes.

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If you've visited some rich areas in Latin America, particularly when times generally are bad, marksmen on the roofs of houses are a norm. Living in fear of your physical safety is not a pretty existence.

Japan, which made a conscious decision to impose the costs of its post bubble hangover on all members of society to preserve stability, has gotten through its lost two decades with remarkable grace. The US seems to be implementing the polar opposite playbook, and there are good reasons to think the outcome of this experiment will be ugly indeed.

  Salon

Click that chart.

....but hey, do what you want....you will anyway.