Wealth distribution in America

Here's an interesting article in Slate about the perceived and actual wealth distribution in the United States:

Earlier this month I published a 10-part Slate series (PDF; serial version; slide show) about the 30-year rise in income inequality that Princeton's Paul Krugman has dubbed "The Great Divergence." In the first installment, I noted that in 1915, when the richest 1 percent accounted for about 18 percent of the nation's income, the prospect of class warfare was imminent. Today, the richest 1 percent account for 24 percent of the nation's income, yet the prospect of class warfare is utterly remote. Indeed, the political question foremost in Washington's mind is how thoroughly the political party more closely associated with the working class (that would be the Democrats) will get clobbered in the next election. Why aren't the bottom 99 percent marching in the streets?

One possible answer is sheer ignorance. People know we're living in a time of growing income inequality, Krugman told me, but "the ordinary person is not really aware of how big it is."

The above graph, from the same article, shows wealth distribution, not income. But it still shows that we're remarkably bad as guessing the extent of inequality in America. Republicans and Democrats alike greatly underestimate inequality in America and, oddly enough, both view as ideal a level of inequality far, far less than it really is. In fact, we say that we want wealth distribution more like Sweden's.

Norton and Ariely also asked respondents what they thought the ideal distribution of wealth should be, and found, again, little difference among income groups, or between Bush voters and Kerry voters. Most favored a wealth distribution resembling that in … Sweden! But when you examine Norton and Ariely's method, that particular finding gets a little shaky. They showed respondents three unlabeled pie charts. One depicted utopian equality, with wealth distributed equally among five groups. The second depicted the United States, with wealth distributed very unequally among five groups (one of which gobbled up 85 percent—Norton and Ariely put it at 84 percent, but let's not quibble). The third depicted Sweden, where the top quintile accounts for 35 percent of the nation's wealth. Neither the Swedish pie chart nor the U.S. pie chart was identified by nation. Norton and Ariely were astonished that 47 percent of respondents—remember these were all Americans—chose the pie chart depicting Sweden. But surely most survey-takers, when presented with two extreme options and one that lies in the middle, will instinctively gravitate, like Goldilocks, toward the middle option. More surprising to me was that second place went to Utopia (43 percent). Only 10 percent voted for the pie chart depicting the country the respondents actually live in.

Americans' ignorance about wealth (and, probably, income) distribution is encouraging in the sense that it offers hope that most voters might opt for government policies more conducive to equality if only they knew how unequal things were. But it's dismaying in the sense that people who occupy a position of relative privilege seem to go out of their way to avoid acknowledging it. A recent example is M. Todd Henderson, a law professor at the University of Chicago whose annual household income exceeds $250,000, putting him comfortably ahead of 98 percent of his fellow Americans. Henderson was foolish enough to write a blog post venturing that even though he and his wife earn more than $250,000, his Hyde Park neighbor Barack Obama shouldn't raise his taxes because "we can't afford it" after paying the mortgage, the kids' private school tuition, the nanny, etc. You can imagine the response he got. Henderson, who promptly took the post down (futile in this era of Web caches) used the occasion to excavate deeper wells of self-pity ("The electronic lynch mob that has attacked and harassed me—you should see the emails sent to me personally!—has made my family feel threatened and insecure…. You have caused untold damage to me personally"). Henderson said he was sorry—not for making asinine claims about how much money you need to get by in America, but for violating his wife's privacy by splashing details of their financial lives all over the Internet. (He said his wife "disagrees vehemently with my opinion." Sensible woman.)

Only ten percent of Americans favor the kind of wealth distribution we actually have in this country, but most of us express horror at the thought of any kind of wealth redistribution (which is, basically, what progressive income taxes are all about). What's up with that? I keep hearing, "Why do we want to punish the wealthy?"

But I don't want to "punish" anyone. It's just that people who are doing really well in America should be able to pay more than people who aren't - not just more in absolute terms, but a larger percentage of their income, too. And the last thing we want in this country is a hereditary aristocracy of wealth. That whole campaign against "death taxes" has been the biggest scam ever perpetuated on the American people. (Even my elderly mother worries about estate taxes, while her estate won't have anywhere near that amount of money.) And why should you never have to work a day in your life, just because your grandfather was financially successful?

More importantly, why should children get poor nutrition and terrible schools, just because their parents are poor? We can't give every child an equal start to life, but we should still do our best. We should still give every child a decent start. And to do that takes money. Yes, I'll even use that dirty word, taxes. It takes taxes. We do good things, necessary things, with tax money.

There is waste, of course. There's always waste and there's always going to be waste. We should continue to work to minimize it, but it's a fantasy to think that we'll ever end waste entirely. And think about it. Nothing has more waste than the U.S. Department of Defense, but you never hear critics wanting to dismantle that, do you? No, waste is generally just an excuse the right-wing uses.

Once we had a War on Poverty. Republicans claim that it was a failure. But in fact, it worked. Poverty dropped to its lowest level to date in 1973. Unfortunately, that's when we surrendered. Yes, we surrendered while we were winning the war. (Contrast that with the War on Drugs.) I'm sorry to say that this was at least partly because of the perception that it was helping black Americans, and white people weren't willing to pay for that, especially since they were all too easily convinced it was lazy black welfare queens picking up their checks in Cadillacs. Well, it's easy to believe the worst of "those people," isn't it? After all, they're clearly not like "us."

But although poverty has increased since then, not every government program was gutted, and poverty generally hasn't returned to historic levels (although we've had a large increase during the current recession, of course). Most of the improvement has been among elderly Americans, due to such "socialist" programs as Social Security and Medicare. In fact, they've seen a really dramatic improvement.

Seniors used to be the poorest demographic in America, and now they're the wealthiest. But ironically, those are the people who lead the opposition to such government help for everyone else. So now children are the poorest demographic in our nation. Well, there's a lot I don't understand about my fellow Americans.

Incidentally, I got the link to that Slate article from Tom Toles, who also has a nice comment on another subject I've covered just recently:

Here we go. Commenters enjoy hurling their "You just think everybody is stupid" line of attack against me. Well, what is somebody supposed to make of a new survey that shows that people know fewer facts about their OWN religion than atheists do? I don't think stupid is the right word, but let's face it, the culture we live in kind of gives comfort and leeway to the incurious and uninformed. See also: our last president.
But let's leave religion out of the public debate for a minute, if only we could, and look at something else people don't know about that is hurting all of us. The rich ARE getting richer and the poor poorer. The poverty rate is skyrocketing, yet in this recession-that-isn't-anymore the wealthy CONTINUE to gain. "Oh, we know all about that!" you reply. Same as it ever was! WRONG.

How do I know that's wrong? Survey says! This is the non-smoking gun right here of what's misfiring in American political discourse. People just have NO IDEA how drastically the wealth distribution is skewing in this country, and therefore can't even begin to think about the ways we are becoming a Third World country. This kind of wealth disparity is toxic to a democracy and will poison it irreparably if we let it. Don't think so? Don't be stupid.