Taxation and redistribution have been successfully resisted, branded as illegal frauds designed to soil the beds of welfare queens. Globalization and technological disruption are being embraced even as the institutions designed to protect the most vulnerable workers – unions and the minimum wage – are losing their ability to provide a dignified life. .
In this American story, underprivileged people, black, brown, and white, struggle to do the best they can, often falling into deep wells of misery. The wealthy indulge themselves far beyond what is seen in other wealthy, industrialized Western societies. But while poverty is obvious to all, recent research shows that the narrative built around it is incomplete at best.
This accepted narrative builds on groundbreaking research by Thomas Piketty, now at the Paris School of Economics, and Emmanuel Saez of the University of California, Berkeley, which argues that inequality is the fabric of society. It has been made clear to what extent it is permissible to tear apart the
Subsequent research by MIT economists David Autor, David Dorn of the University of Zurich, and Gordon Hanson, now at the Harvard Kennedy School, found that imports from China since roughly the early 1990s have It documented how the surge devastated communities across the country that depended on manufacturing. For nutrition.
Princeton University scholars Anne Case and Angus Deaton have argued that these dynamics are deadly, contributing to an epidemic of suicides and overdoses that they call “deaths of despair.”
“Inequality and death are the joint result of the forces destroying the white working class,” they write. “It is deeper forces of power, politics and social change that are driving both epidemics and extreme inequality.”
This story is consistent with a body of data demonstrating the poor health of American society, from the country's short life expectancy and high infant mortality rate to a poverty rate that exceeds that of other wealthy democracies. .
Still, this simple story could be wrong.
Critics have some blemishes over the “death of despair'' theory. They point out that opioid availability explains patterns of overdose deaths better than socioeconomic desperation. Mortality trends look different when adjusted for age. Increased mortality among less educated people is primarily due to cardiovascular disease, not suicide, alcoholism, or drug abuse. And it afflicts a small group of extremely disadvantaged Americans, not the working class as a whole.
The commonly accepted narrative that America's ills are intertwined is challenged more fundamentally by new research that suggests inequality may not be as evolved as most of us think. It is being Following the seminal work of Piketty and Saez, the most widespread story among economists is that as income becomes more concentrated in the hands of the wealthiest Americans, everyone else's share of the pie declines significantly. That is what it is.
But another recent estimate by Treasury economist Gerald Auten and David Splinter of the Congressional Joint Committee on Taxation shows that the share of income flowing to the top has remained roughly flat since 1960. Suggested.
Indeed, inequality has increased. However, after taking into account the effects of redistribution and the addition of taxes and government programs such as food stamps, Medicaid, and Social Security, the poorest fifth of Americans in 2019 earned about the same share of their income. This was discovered by scholars. About 60 years ago.
This new analysis is fueling a small academic quarrel over the true depth of America's inequality. And it raises poignant but important questions about how we can explain the fraying of the social contract if inequality is not rapidly increasing. The opposite cannot be true. It is difficult to fit short life expectancies, suicide, extreme obesity, and high incarceration rates into a narrative in which inequality is contained and despair is not fatal. It leaves America littered with scattered vestiges of disease without the connective tissue of the story.
In an honest effort to find a viable new synthesis, here is a suggestion: Inequality itself may not cause these symptoms. Rather, many of America's social ills stem from the strategies it has chosen to alleviate the lopsided income distribution that leaves its people extremely vulnerable.
The U.S. government has little influence over how markets allocate prosperity. Labor unions are weak. The federal minimum wage is becoming irrelevant. Retraining is spotty. When trade or sudden technological innovations make parts of the workforce redundant, there is little to help workers get back on their feet.
Therefore, most of the work must be done with redistribution. The U.S. government collects far fewer taxes than other Western democracies. But it's more gradual and falls hardest on those at the top. Basically, we mainly provide cash assistance. For example, the Earned Income Tax Credit is one of the most important tools for increasing the incomes of low-wage workers. Poor families with children benefit from the Child Tax Credit, which puts money in their pockets.
Europeans are more active in rebuilding prosperity. Their union is stronger. Workers' councils protect workers from market fluctuations. Labor laws provide more protection for incumbent workers.
Moreover, European redistribution is not only large in scale but also different. European governments are raising funds more regressively, relying more heavily on sales taxes that take even bigger bites out of the pockets of the poor. They use much of their money to pay for substantial, often universal, welfare programs such as universal health care, housing, child care, and early childhood education.
These institutional differences may help explain the gulf between the experiences of workers on either side of the North Atlantic. In Europe, greater job and wage protections have gone some way to preventing the spread of precarious, low-wage work that pervades the U.S. service sector. And their redistribution may have also been effective in preventing more serious social ills.
Cash is not a bad tool. Economists will tell you that it is actually the best, and that it has the power to increase welfare more than any other government service. Still, research shows that poverty negatively impacts financial decision-making. This could give rise to government paternalism in the European vein, an insistence on redistribution aimed at specific desired outcomes, rather than just supporting the incomes of the poor.
Europe's strategy is not without costs. Labor protection there shifts unemployment to young people. Still, it is debatable that European workers, and those in other rich economies, have survived global capitalism with fewer casualties, even though they have less money. Apparently not. The Earned Income Tax Credit may be a good way to support the incomes of vulnerable Americans, but it has proven unable to alleviate America's dysfunction.
This may seem like a minor academic quarrel. However, America's dysfunction is confusing politics. They may end up disrupting the world. It makes sense to figure out where they come from and try to fix them.