NOT BY CHANCE BUT BY CHOICE: INEQUALITY IN UNITED STATES

There's a number of truths about the economy that ought to be continually emphasized. One of which is this: Today's level of income and wealth inequality is downright obscene and represents an ever growing threat to any semblance of democratic governance. The existence of such inequality, and the economic distress that so often accompanies it, is fertile soil for the emergence of demagogues and faux populists who specialize in tapping into real economic grievances-- and equally real anti Black racism-- and riding that into positions of power.

And make no mistake about it: Inequality in income and wealth is definitely a thing. Just take, for instance, a Census Bureau report that dropped toward the end of 2022. One of the things that report does is to use a well-known metric--the Gini Coefficient-- to measure and track changes in income inequality. The Gini Coefficient varies between 0 and 1, with the former indicating that income is equally distributed across the population, while a coefficient of 1 would mean all of the nation's income is held by a single person.

The more evenly distributed income is, the closer the coefficient is to zero; in contrast, the more unequally income is distributed, the closer the Gini coefficient is to 1.

Likewise, if the Gini coefficient is increasing in value over time, that's an indication of growing income inequality; a Gini coefficient that's moving closer to zero over time would, of course, be evidence that the income distribution is becoming less skewed and more evenly distributed.

According to the Census Bureau report, between 2020 and 2021 the Gini coefficient increased by 1.2%, from 0.488 to 0.494.

What's more, the report observes that "this represents the first time the Gini index has shown an annual increase since 2011."

After stalling out and remaining "stuck" at a high level, then, income inequality appears to back on its upward path.

Recent research by the Congressional Budget Office (CB0) further underscores the degree to which the United States political economy is characterized by a growing degree of income inequality. Take a sec and check out the following graph:

That graph shows the income trajectory for three different slices of the population: The poorest 20% of households, along with the richest 1% and 0.01 of all households. While each group experiences an increase in its average income between 1979 and 2019, the real run up is at the top.

The average income of the richest 1% of households skyrocketed by 178%, four times as much as the average income of the bottom 20%.

But if you think that's bananas, look at the comparison between the top .01% of households and the bottom 20%: Since 1979, the average income of the richest .01% has grown at an eye-popping rate of 424%, more than nine times as fast as the growth rate for the bottom 20%.

Data from the World Inequality Report offers yet another glimpse at the differing realities experienced by the rich and the rest. That report, among other things, examines the share of income and wealth that's held by three different household categories-- the bottom 50%, the middle 40%, and the top 10%.

When it comes to income, the report indicates that the bottom 50% of all households take less than 14% of all income (13.3%). 41.2% of all income flows into the households of the next or middle 40% of all households.

But the real kicker is that 10% of the highest earning households take home a whopping 45.5% of all income.

And when it comes to wealth-- the value of a household's assets minus the value of all of its liabilities-- the situation is even worse: 70% of the nation's wealth is concentrated in the hands of just 10% of all households.

No Matter how you cut it, the degree of income and wealth inequality is off the chart and, as economist Thomas Piketty and others have observed, the chasm between the rich and the rest--especially when it comes to the distribution of wealth-- is back to where it was at the opening of the twentieth century.

NOT BY CHANCE BUT BY CHOICE

Just to be clear: Ain't nobody suggesting that everybody and their mama ought to have the same level of income and/or wealth.

But world-wide inequality is wack and, amongst the richest nations, it's especially outrageous in the United States.

Yet, there's absolutely no reason to assume that high and growing levels of inequality are the inevitable result of some iron-clad law of economics. Nor is the level of income and wealth equality a matter of happenstance. Nor, for that matter, is it caused and sustained by the alleged financial illiteracy of poor folks. Or greater budgetary powers supposedly possessed by the rich.

The fact of the matter is, the high marginal tax rates on the richest Americans did a hell of a job in constraining the degree of inequality during the first few decades after World War II. In fact, between 1945 and 1980, inequality actually decreased, not increased.

Beginning in the late 1970s-early 1980s, marginal tax rates on the richest Americans began to decline and, as result, the trend of decreasing inequality reversed itself. The chasm between the rich and the rest began to widen again, and levels of inequality began to return to the heights that characterized the gilded era.

If this connection between marginal tax rates and inequality tells us anything, it ought to tell us this: Income and wealth inequality persist by choice, not by chance. It ought to remind us that this thing we call "the economy" is not something "out there" that we must figure out how to adapt to, tolerate, and fit in.

No. The economy, and economic outcomes, are indelibly shaped by rules, laws, practices, and customs that are fashioned and put into play by human beings.

The high degree of inequality that we observe in this country is the result of choice, not chance.

Powerful social, political, and economic forces have decided to tolerate the huge chasm between the rich and the rest.

Powerful social, political, and economic forces have decided to tolerate the existence of all kinds of tax loopholes, tax havens, and tax laws that favor capital over labor income.

But the good news is this: What is made by human choice can also be "un-made" by humans.

We can, should we so choose, imagine and fight for an economy other than that which exist.

We can, should we choose, imagine and fight for policies that'll do the work of decreasing the extreme degree of income and wealth inequality that characterizes the socio-economic landscape.

We can, should we choose, fight for increased wealth taxes.

We can, should we choose, fight to shut down the myriad tax avoidance schemes favored and used by the rich

We can, should we choose, fight for the right of workers to unionize

We can, should we choose, fight for an increased minimum wage that'll allow workers and their families to flourish.

We can do this--and much more-- should we so choose.

For, again, the extreme inequality in income and wealth that we see is a matter of choice, not chance.

Catch you on the flip side,

Doc Greene