Can we fix inequality without cutting the fortunes of the wealthy? Doubtful, says one economist

[marmar]

from TomPaine.com:


An Unlikely Class Warrior
Sam Pizzigati
June 14, 2007



Sam Pizzigati edits Too Much, an online weekly on excess and inequality.

Should average Americans really worry about the tens of millions pouring into CEO pockets? Or the hundreds of millions going annually to flippers and strippers inside the private equity industry? Or the $1.7 billion that last year went to America’s top hedge fund manager?

No angst necessary, says the lead article in this past Sunday’s New York Times Magazine special issue on inequality. “It’s not the rich people pulling away at the top who are the problem,” the Times intones, “it’s that so many have been stuck for so long at the bottom and in the middle.”

To fight inequality, in other words, let’s not obsess over what’s happening at the top. Let’s just concentrate on providing opportunity at the bottom.

Economist Robert H. Frank would beg to differ. To build a United States where average Americans can get truly unstuck, Frank advises in his important new book, Falling Behind: How Rising Inequality Harms the Middle Class, fewer dollars—far fewer dollars—need to be pouring into rich people’s pockets.

Frank’s perspective, in our contemporary political clime, smacks dangerously close to a declaration of “class war.” But Bob Frank makes for an unlikely class warrior. He teaches at Cornell University, in a top-notch Ivy League business school. He writes regularly for major media outlets. He does textbooks. His Principles of Economics may soon become an Econ 101 standard.

How eminently respectable is Bob Frank? His co-author on Principles of Economics just happens to be Ben Bernanke, the current chairman of the Federal Reserve Board.

Bob Frank, in short, swims in the mainstream. But he’s splashing out a message—we need to worry, big-time, about the wealth of our wealthy—that America’s mainstream national leaders have been rejecting ever since President John F. Kennedy started pushing for lower tax rates on America’s most fortunate.

Frank’s core point: Wealthy people spend more as they become wealthier. That increased spending, in a steeply unequal society, will eventually—and always—raise “the cost of achieving goals that most middle-class families regard as basic.” ......(more)

The complete piece is at: http://www.tompaine.com/articles/2007/06/14/an_unlikely_class_warrior.php

[ThomCat]

1. People at the top use their resources to stay there.

Mobility exist, but it's rare and not very extensive. We definitely need to stop wealth from getting sucked upward. x(

[ananda]

2. So.. what?

An rp goes down from 500m to 400m?
A billion to 800m?

Give me a break!

[leftofthedial]

3. send them all to gitmo and take their stuff

[DBoon]

4. That much money doesn't buy "stuff"

it buys power and influence over political and economic decisions

This isn't about another yacht for a wealthy guy - it's about a wealthy guy owning the political process

[RaleighNCDUer]

5. But it does --

"That increased spending, in a steeply unequal society, will eventually—and always—raise “the cost of achieving goals that most middle-class families regard as basic."

Look at housing. Middle-class neighborhoods being razed so that mini-mansions can be built in their place. I'm in my fifties, and make @$31,000. I will never own my own home, with new homes starting at $200,000 - I'm doing well to pay my rent. The wealthy wouldn't think of buying a $200,000 home. Their willingness, and capacity, for spending far more is dragging the entire housing market up, leaving millions of us behind.

Willingness and capacity to spend inflates value. A CEO makes 60 million, he's not going to think twice about spending 6 million on a house. He spends 6 million on a house, all other houses in the neighborhood go up in value. Soon, every house in that neighborhood is out of the range of the middle class - evenutally you wind up with mansions and slums, and nothing in between.