Political Corruption Has Created Our Inequality

Charles Wolf, Jr., and Charles Godges, of the RAND Corporation, state that we are debating American inequality, when we should be focusing on the source of the inequality. This is a false premise, one I reject, because we already know where our inequality comes from.

From Wolf and Godges’ article “Income Inequality”:

  • According to the best U.S. government data estimating Gini coefficients around the world, the Unites States falls in the middle of the range (between 0.45 and 0.49). European countries show less inequality than the United States, as do Japan, South Korea, India, Turkey, and Israel. Several rapidly growing developing economies, including Brazil, show greater inequality.
  • But whether any level or change in the Gini coefficient is “good” or “bad” cannot be inferred from the coefficient alone. The crucial question is what accounts for the inequality? For those with more income, is it due to greater work effort, higher labor productivity, innovation, entrepreneurship, better technology, more efficient management; or, instead, to favoritism, nepotism, collusion, bribery, fraud, insider trading, special privilege, other forms of corruption, or unequal opportunity? If the explanation lies in higher productivity and better management, then the income inequality warrants encouragement. If, instead, the inequality is due to nepotism and corruption, it should be combated and reversed. If the answer is a combination, which explanation predominates? And how can the positive factors be encouraged, while the latter are reduced?

The questions the authors pose are beside the point. An individual has no significant effect on the Gini coefficient, and a class of people do not suddenly have vast improvements of intelligence and ingenuity. There is no possibility that gifts to the rich could do anything other than increase inequality. What created these gifts to the rich is corruption, pure and simple, and these gifts can only increase inequality.

What tax gifts to the rich do is
increase inequality. Every time.

An article by Chye-Ching Huang, “No Evidence That High-End Tax Cuts Help the Economy“, analyzed tax cuts and capital gains taxes back to 1945. These gifts to the rich did nothing to boost GDP, private savings, investment, or growth in labor productivity. What they did do is increase inequality, every time.

Increases in inequality occur on every occasion that the tax changes embraced by conservative Republicans have become law, showing that, a priori, this alone is the source of income inequality. The supposed social benefits they tout simply do not occur. They never have, and because the quantity of wealth is finite, and redistributing it from those millions who need it most to those very few who need it least will automatically increase inequality.

In addition, I would argue that whether a Gini estimate is good or bad depends not on how it came about, as Wolf and Godges claim, but on the degree and direction of change. Increasing inequality can only be bad, and it is unimaginable that the whole class of self-proclaimed “job creators” can suddenly improve themselves or equality in any aspect.

Tax gifts to the rich
redistribute the finite quantity of wealth
from those millions who need it most
to those very few who need it least.

Our inequality, as measured by the Gini Index, is increasing, and doing so at a rate far in excess of any normal progress of economic change. The question of where our inequality comes from can only be answered in negative terms. It is due to political corruption, to tax gifts for the rich passed by Republicans, to the virtual control of Congress by moneyed interests that have no counterbalance for the rest of us, to the outrageous Citizens United decision by the Supreme Court, to the Koch boys’ manipulation of Republican state legislatures via ALEC, and to all the other corrupting influences that have been extensively documented in recent years.

This belief, that gifts to the rich can do anything other than increase inequality, has again and again been proven false. It has been disproven numerous times with logic, statistics, and historical data, all of which appear to mean nothing to conservative Republicans.

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4 CommentsLeave a comment

  1. John, excellent post. While I thought most of the RAND essays on the election issues were quite good, this essay was for me the greatest disappointment. Charles Wolf (no relation) and Charles Godges coughed up a lame apologia when they should have stayed silent.

    Three comments.

    First, while I too am troubled by the growing concentration of wealth, I think we need to alter the terms of debate on inequality. What most of camped out on the right side of the American political centerline worry about when liberals decry inequality is that the hidden agenda is to push America’s Gini coefficent to zero, or something close to it. What we need to have is a discussion about how much inequality we are willing to tolerate as a society, and why that is the case.

    Second, I and many other Republicans think that Grover Norquist and his ilk are ideological extremists who have no business making grownup policy. We cannot have zero taxes, and we cannot have a tax system that is fundamentally regressive, but we cannot go back to the days of 95% marginal tax rates on high revenue earners. We need instead to find a workable middle ground. Where should that middle ground lie? Who should pay how much?

    Finally, I can say that more of the country, and even some of the fat cats, would feel better about paying taxes if we had the least confidence that our elected representatives, appointed administrators, and career government employees were working as hard to save our money as we all are working to earn it. If we would worry a lot more about the effectiveness of our programs and less about their optics, I’d be happy to cough up a larger chunk of my paycheck. But we’re not even talking about that.

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    • It seems to me that the topic of how this concentration of wealth came to be is more important than how much is paid in taxes. Few people other than socialist extremists expect perfect equality, which we can easily evaluate by looking at Cuba. Generally, people realistically expect some people to be wealthy, and approve of it. But any inspection of wealth distribution readily shows an enormous rise in the wealth of the top percentiles, and little or even negative income change for the lowest. To me it seems obvious that this occurs because the very wealthy systematically control the terms and the laws under which they make their money and pay taxes. Worse, their millions control Congress and state legislatures. This must cease if we are to have democracy.

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      • John, whatever our differences, you and I agree that the country has slipped into the hands of a functional plutocracy, and it likely happened even before Citizens United. The challenge we face now is how to rectify the situation without falling afoul of the Constitution.

        As much as I would like to concentrate on the Vanities of Wall Street, the concentration of wealth there is a symptom rather than the disease. The real issue is that the influence that wealth gives them. Campaign finance reform is a good first step. What else?

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      • David, I think we probably agree more than disagree. As for Wall Street, the symptoms you mention result from the manipulation of the legal process by those who can afford to spend millions every day, in my opinion. I agree, it’s the undue influence that must be stopped. I wish I had more answers, but the tsunami of billionaires’ money enveloping politics makes mere democracy seem weak. Great wealth has always tried to buy political influence, and its gains are always anti-democratic. It would be nice if we could fight back with something short of armed revolution, or at least arrange a few good laws that could not be subverted with the infusion of more money. But even Glass-Steagall was done away with as a favor to the market gods.

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