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Extreme Inequality is Morally Wrong, UnAmerican, Bad for Democracy and Economy; So Why is it Getting Worse?
Extreme wealth concentration is now as bad as before the Great Depression. Why can't Americans get excited by this and do something politically? Read Paul Krugman...
By Ed Knudson
Not too many years ago my wife and I enjoyed an Easter dinner with friends who were fairly wealthy. After dinner I was asked: "Ed, do you think it fair that I be taxed twice on the same income?" He explained that he paid income tax each year but then after he died an estate tax would have to be paid on the same money he had earned and already paid tax on.
Notice my friend had framed the question as a "fairness" or justice issue. He was complaining that government was treating him unfairly. It happens that fairness is a very widely shared concern for all people. I believe that it is part of what is called "natural law" known by human beings through their conscience. So people can get upset and angry over mattes that seem unfair. And wonder of wonders, this kind of question on taxes by my wealthy friend, his appeal to justice, has been a motivating factor in the creation of the so-called Tea Party. It has been very wealthy individuals who have funded the Tea Party organizations whose purpose is to convince regular Americans that government is being unfair to the wealthy. The problem is, the Tea Party folks listen to what the wealthy folks are claiming, but don't think about it.
I asked my friend whether he agreed that the total wealth of the country was becoming more and more concentrated into fewer and fewer hands. Did he believe that the rich were getting richer and the poor were getting poorer? He said he didn't believe that. But this is not a matter of belief, it is something which can be studied empirically. And the fact is that economists who study these matters are finding that wealth is indeed being concentrated very considerably today.
So I asked my friend to consider whether it was a good thing, should it be true, to concentrate wealth in fewer and fewer hands, so that regular folks have less and less money to use to participate in the life of the community. It seems so simple to me; in a capitalist economy people need money to buy goods and services; if only a few have all the money then regular folks will not have much money; so they will not be able buy the stuff that wealthy corporations make. Wealth inequality is thus really bad for the economy.
And I asked my friend at what level of concentration of wealth the government should become concerned and try to install an estate tax policy to mitigate that concentration. Now, this is where my friend sought to change the topic entirely and the conversation was over.
That is, my friend would not even debate the question when I raised it as a factual question. But justice questions are always quantitative to some degree, how big a piece of the pie do you deserve in relation to others? If one member of the family has 90% of the pie and the other ten members of the family have to share only the remaining ten percent, is that really fair? That is, there would have to be some 'justification' for such an unjust distribution.
Notice I put the word 'justification' in quotes because it is a very big, important word, both in ethics and theology. For example, unequal wealth distribution is often justified by saying that some people work harder than others. My wealthy friend had made the comment that he should be rewarded more than others because he was willing to risk his wealth invested in financial projects. And, I agree with both these reasons, I told him.
But, then, I said to him, we have to ask a question of scale also. That is, how much more reward does a hard-working person deserve over against a less hard-working person? There are always limits to how far these justifications can take a person and these limits have to be installed in actual government tax policy in order to have a just tax system.
But, as I said, my friend had decided to leave the conversation as soon as I began to ask clear questions about facts. If I wouldn't accept his premises for discussion, he would not debate me. And that's where the politics of income inequality are today. The people who have all the money don't want to debate, they just want everyone to believe they are the good guys and we should believe what they say. And even Democratic politicians often go along with this. Only now, since inequality is growing to such massive levels, finally the Obama administration is beginning to talk about inequality.
Paul Krugman wrote an article about this in The New York Times. I think this is especially helpful because he makes it perfectly clear that concern over wealth distribution has been an important political issue in this country for a very long time, it is not just terrible leftists and socialists who have raise this as an issue. Read the article below:
Paul Krugman - 3/28/2014
As inequality has become an increasingly prominent issue in American discourse, there has been furious pushback from the right. Some conservatives argue that focusing on inequality is unwise, that taxing high incomes will cripple economic growth. Some argue that it’s unfair, that people should be allowed to keep what they earn. And some argue that it’s un-American — that we’ve always celebrated those who achieve wealth, and that it violates our national tradition to suggest that some people control too large a share of the wealth.
And they’re right. No true American would say this: “The absence of effective State, and, especially, national, restraint upon unfair money-getting has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power,” and follow that statement with a call for “a graduated inheritance tax on big fortunes ... increasing rapidly in amount with the size of the estate.”
Who was this left-winger? Theodore Roosevelt, in his famous 1910 New Nationalism speech.
The truth is that, in the early 20th century, many leading Americans warned about the dangers of extreme wealth concentration, and urged that tax policy be used to limit the growth of great fortunes. Here’s another example: In 1919, the great economist Irving Fisher — whose theory of “debt deflation,” by the way, is essential in understanding our current economic troubles — devoted his presidential address to the American Economic Association largely to warning against the effects of “an undemocratic distribution of wealth.” And he spoke favorably of proposals to limit inherited wealth through heavy taxation of estates.
Nor was the notion of limiting the concentration of wealth, especially inherited wealth, just talk. In his landmark book, “Capital in the Twenty-First Century,” the economist Thomas Piketty points out that America, which introduced an income tax in 1913 and an inheritance tax in 1916, led the way in the rise of progressive taxation, that it was “far out in front” of Europe. Mr. Piketty goes so far as to say that “confiscatory taxation of excessive incomes” — that is, taxation whose goal was to reduce income and wealth disparities, rather than to raise money — was an “American invention.”
And this invention had deep historical roots in the Jeffersonian vision of an egalitarian society of small farmers. Back when Teddy Roosevelt gave his speech, many thoughtful Americans realized not just that extreme inequality was making nonsense of that vision, but that America was in danger of turning into a society dominated by hereditary wealth — that the New World was at risk of turning into Old Europe. And they were forthright in arguing that public policy should seek to limit inequality for political as well as economic reasons, that great wealth posed a danger to democracy.
So how did such views not only get pushed out of the mainstream, but come to be considered illegitimate?
Continue reading the main story RECENT COMMENTS
T Straus 1 minute ago Whether it is due to the points outlined in Dr Krugman's article or something else, why is it that we as a nation are not able to do the... Baron95 6 minutes ago Ted Roosevelt was addressing *unfair* money-getting. Not money-getting in general. He was addressing monopoly, trust and collusion to... mather 19 minutes ago After looking at some of the comments I find one thing that's absolutely amazing. An awful lot of people who in all probability are living... SEE ALL COMMENTS WRITE A COMMENT Consider how inequality and taxes on top incomes were treated in the 2012 election. Republicans pushed the line that President Obama was hostile to the rich. “If one’s priority is to punish highly successful people, then vote for the Democrats,” said Mitt Romney. Democrats vehemently (and truthfully) denied the charge. Yet Mr. Romney was in effect accusing Mr. Obama of thinking like Teddy Roosevelt. How did that become an unforgivable political sin?
CONTINUE READING THE MAIN STORY 798 COMMENTS You sometimes hear the argument that concentrated wealth is no longer an important issue, because the big winners in today’s economy are self-made men who owe their position at the top of the ladder to earned income, not inheritance. But that view is a generation out of date. New work by the economists Emmanuel Saez and Gabriel Zucman finds that the share of wealth held at the very top — the richest 0.1 percent of the population — has doubled since the 1980s, and is now as high as it was when Teddy Roosevelt and Irving Fisher issued their warnings.
We don’t know how much of that wealth is inherited. But it’s interesting to look at the Forbes list of the wealthiest Americans. By my rough count, about a third of the top 50 inherited large fortunes. Another third are 65 or older, so they will probably be leaving large fortunes to their heirs. We aren’t yet a society with a hereditary aristocracy of wealth, but, if nothing changes, we’ll become that kind of society over the next couple of decades.
In short, the demonization of anyone who talks about the dangers of concentrated wealth is based on a misreading of both the past and the present. Such talk isn’t un-American; it’s very much in the American tradition. And it’s not at all irrelevant to the modern world. So who will be this generation’s Teddy Roosevelt?
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