Income Inequality Deniers

Nice article by Jonathan Chait in New York Magazine this week about Income Inequality Deniers, I highly recommend giving it a read.  The complete article can be found here. 

Some highlights:

Rising income inequality, like climate change, is an ideologically inconvenient issue for conservatives. They would prefer not to discuss it altogether. If forced to discuss it, they will generally either deny its existence or simply carry on as if it doesn’t exist.

The underlying facts, like the facts of climate change, are stark. Over the last few decades, income growth for most Americans has slowed to a crawl, while income for the very rich has exploded. That’s a reversal of the three decades following World War II, when all income groups got richer, with the poor and middle class rising at a faster rate than the rich. Crucially, the Congressional Budget Office’s new analysis shows that changes in government policy over this period have made inequality worse. (In CBO-speak: “The equalizing effect of transfers and taxes on household income was smaller in 2007 than it had been in 1979.”)

We’re not having a debate about how to reverse or even stop the growth of inequality. Nobody has a real plan to do that. The Democratic plan is to slightly arrest the growth of inequality by hiking taxes on the rich a few percentage points, so as to minimize the need to cut the social safety net. The Republican plan is to slash taxes for the rich and programs for the poor, thereby massively increasing inequality.

That is a hard position to defend in the context of exploding inequality, and conservatives would rather not defend it. Instead the right’s response has been to persistently deny or ignore the facts. Rick Perry, pressed by a reporter to explain why he was proposing a tax plan that would widen income inequality further, replied, "I don’t care about that." The Wall Street Journal editorial page today dismissed the Tax Policy Center, whose calculations persistently show the ways in which various Republican tax proposals would widen inequality, as “liberal.” It didn’t even pretend to dispute the substance of the calculations. Eric Cantor gave a speech about income inequality centering on stories about how his grandmother worked hard and pulled herself up by the bootstraps in the old days. It was a nice speech if you like stories about plucky grandmothers. It failed to grasp the central dilemma, which is that it was a lot easier for poor people to move up sixty years ago, when tax rates on the rich happened to be far higher, than it is today. 

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Right, so Obama favors “punitive” tax rates, he promotes resentment of the rich, and he opposes any spending restraint whatsoever. Ryan produces no evidence to support these statements, because none exists. In reality, Obama never attacks the rich, he constantly insists that he respects economic success and merely wants to lessen the burden of budget cuts on the most vulnerable, and he agreed to reduce spending by more than a trillion dollars just this last summer. Ryan repeatedly accuses Obama of favoring “equality of outcome,” which is absurd.

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It’s “stunning,” says Ryan, because it relies on zero-sum math. More tax hikes on the rich means less spending cuts. Ryan finds this stunning because he believes in supply-side fairy tales in which cutting taxes for the rich will produce enormous growth. Never mind that the last two presidential administrations have disproved the supply-side theory about as conclusively as a real world experiment can do. (Bill Clinton raised taxes on the rich, conservatives predicted disaster, and instead we experienced a long boom; George W. Bush lowered taxes on the rich, conservatives predicted a huge boom, and instead we got an weak recovery with no income growth for anybody save the very rich.)

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    Obama quotes Reagan as saying that bus drivers shouldn’t pay a higher effective tax rate than millionaires. Well, that’s a no-brainer. Nobody disagrees with that.

Nobody disagrees with that? How about Paul Ryan? His tax plan from 2010 would exempt all investment income from taxes, meaning that large segments of the rich would pay nothing at all. The average federal tax rate on households earning more than a million dollars a year, under Ryan's plan, would be well under 13 percent, compared with a 19.5 percent average federal tax rate for households earning $50,000 to $75,000 a year.