The Art of Class War

In this article in the Washington Post, Sebastian Mallaby offers his thoughts on class in America. Mallaby points out that Republicans in Congress are voting to slash spending on "Medicaid, food stamps, free school lunches and child-care subsides," while leaving Bush's massive tax cuts untouched. He then goes on to make a number of points about class in America, none of which seem to quite fit together, but some of which are good points.

First, he points out that the top 20% of Americans made 11.4 times as much as the bottom fifth in 2001, as opposed to 7.7 times in 1980. My initial response is the one that modern liberals are increasingly taking: Who cares? As long as that bottom fifth is making better real wages then they used to (which they may or may not), why does it matter whether they make 1/7 or 1/12 what the rich people make?
Also, it is well-known that, when an economy is growing, the incomes of the rich increase faster than the incomes of the poor. This may be because:
1. Rich people save (invest) more of their money than poor people do, and
2. Rich people earn a better percentage on the money they save, because they can afford to take more risks and because they know more about investing.
So the increase in income inequality might be an inevitable result of the fact that the U.S. economy has grown so much since 1980. So far, Mallaby doesn't have me worried.

He then tells us that this inequality matters because:

Inequality is socially acceptable and even economically desirable to the extent that it reflects differences in talent, risk-taking and hard work. But if it reflects the circumstances of birth, it is immoral and wasteful. The problem with the 50 percent jump in the inequality ratio is that it gives the offspring
of the rich such fundamentally different education, health care and social horizons that it's hard for the rest to catch up. Sharper class differences mean more rigid class differences as well. Talent is squandered.

Mallaby has made a leap here, it seems to me. He offers no reason to believe that the jump in inequality between 1980 and 2001 was substantially due to circumstances at birth. Also, he does't explain why this wealth differential translates into an increased differential in social horizons or education. I have a feeling he's right on some counts, but the argument is slippery.

Next, Mallaby quotes some statistics on income mobility. But his data seem a little funny:

A classic study of children born between 1942 and 1972 found that fully 42 percent of those born into the poorest quintile ended up there also. But this immobility has grown worse: One Federal Reserve study found that in the 1970s, 36 percent of families remained in the same income bracket throughout the decade; in the 1990s, 40 percent were static.

Wait a second...in the thirty years from 1942-1972, 42% of the poor stayed poor for the entire 30 years...but in the 1990s, only 40% stayed in their income quintile over just 10 years? He doesn't mention how the poorest quintile fared during the 90s, but if their mobility was equal to the average, it looks a lot better than in the mid-century!

The rest of Mallaby's article is mainly devoted to dissecting various Democratic suggestions for helping the poor. He concludes by saying that "The core problem [in America] is class, which increasingly is destiny." This article has offered very little in the way of proof for that notion.

I'm not denying that such proof exists. It does (subscription required for link). But Mallaby has confused the fact of rising income inequality with the far more difficult-to-prove proposition that mobility (or potential mobility) has decreased.

And what should Democrats, and liberals in general, do about income inequality? Mallaby's single suggestion is to "let individuals navigate the shift from sunset industries to sunrise ones," which is a great idea and will involve education reform. He also implies that the inheritance tax shouldn't be eliminated, and again I agree (allowing unearned wealth decreases incentives for the children of the rich to develop valuable skills to earn their own money). To that I'd add: help clean up the social problems that keep poor people in poverty, cut subsidies for big but unproductive corporations, and balance the budget.

I may not agree with Mallaby's lines of reasoning about inequality, but I agree that strengthening meritocracy could only help the country. And cutting school lunch programs is just pointlessly mean.

BONUS READING GUIDE - Another story about America's most pressing problem, the decline in foreign talent coming to study here.