Long Division: The Perils of Income Inequality

Article excerpt

American thinkers have long perceived a connection between robust democracy and a relatively egalitarian distribution of wealth. For all their differences, John Adams and Thomas Jefferson agreed that property begets power, and both expressed anxiety about excesses of the former unbalancing the latter. In 1785, Jefferson wrote that the consequences of "enormous inequality" were so pernicious that "legislators cannot invent too many devices for subdividing property." Over a century later, Teddy Roosevelt urged the government to take on "a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power." "The really big fortune," he said, "by the mere fact of its size, acquires qualities which differentiate it in kind as well as in degree from what is possessed by men of relatively small means."

For several decades now, such worries about the corrosive impact of inequality have been largely absent from our politics--even as economic inequality in the United States has increased dramatically, reaching levels not seen since the height of the Gilded Age. Studies on the eve of the 2008 financial collapse showed the top one percent of American households earning over a fifth of the nation's total income, twice as much as thirty years earlier--and the top one-tenth of one percent taking home six times as much as before. In terms of income distribution, the United States now more closely resembles the highly stratified societies of Latin America than the egalitarian countries of Western Europe.

There is no consensus about why this has happened. Some economists point to structural changes in the economy, such as the rise of the information sector and growth in global trade, while others blame tax policy and the decline of labor unions. There is also disagreement about how, or indeed whether, to respond. For most of his first term, President Barack Obama largely ignored the issue, while on the political right the mere expression of concern about inequality elicited howls of "class warfare" or "socialism." Some conservatives have argued that we should focus on what the poor are actually able to consume and not worrv so much about the pattern of wealth distribution. The Heritage Foundation's Robert Rector has observed that since the late 1970s, even as economic inequality steadily increased, the number of poor American households with air conditioning has nearly doubled. This improving standard of living, he suggests, and not relative inequality, is the proper focus of our economic analyses and policies.

But there are reasons to be worried about economic inequality even if the poor can buy appliances. Excessive inequality can distort the political process in ways that undermine democratic institutions. Using data drawn from Senate voting records, Princeton political scientist Larry Bartels has shown that senators arc far more responsive to the priorities of their wealthy constituents than to those of the middle class and poor. "The views of constituents in the upper third of the income distribution received about 50 percent more weight than those in the middle third," he writes, "while the views of constituents in the bottom third of the income distribution received no weight at all in the voting decisions of their senators." Bartels's Princeton colleague Marty Gilens has used different data to reach very similar conclusions. "When Americans with different income levels differ in their policy preferences," he argued in a 2005 article, "actual policy outcomes strongly reflect the preferences of the most affluent." Gilens says that "the most obvious source of influence over policy that distinguishes high-income Americans is money and the willingness to donate to parties, candidates, and interest organizations." In shorty the battle to be heard--unlike the market for air conditioning--is dominated by those with an advantage in purchasing (i.e., donating) power. …