Cognitive Dissonance

Many Americans drive around and see prosperity. Nice shops, nice houses, nice communities. It’s a pleasant sight––but it’s not their life. If you are prosperous and feel your prosperity is secure this is nice and reassuring. Life is good! If you are financially insecure or you have friends or family who are struggling it isn’t reassuring at all. How many of those you see walking and driving amid all the visible prosperity see it as an insult or a threat: “These people are fine and I am not.” Narrow prosperity is all show, and the system––the economy, the justice system, money-based politics, even the larger churches––only serves and protects the few. The economy is increasingly excluding working people from prosperity; for them these visible riches are an insult. We watch the affluent on TV and read about them in glossy magazines. Is this entertainment? They are not us and we will never be invited to their party. We have become the pathetic figures in old movies, the ones pressing their noses hungrily to the window of the restaurant watching others eat. This set piece from old movies is the one that comes just before the hungry individual throws a brick, or a bomb. Vast inequalities are a recipe for violence. But before the violence erupts where we live we spend years ignoring how dysfunctional and impractical and inefficient these disparities are.

After a few decades of Kiss Up, Kick Down economics, the kicked may begin to hit back. Here are some relevant stories from the NC News Observer, The Guardian, The Washington Post and Salon.

In NC black voters are required to take a spelling test to vote; whites aren’t.

In FL the anti birth control crowd think that elementary schools and dentists and podiatrists can fill the gap created by their shutting down reproductive health centers.

The burden of taxes removed from the lucky people who own for a living is shifted onto the people who work for a living in the shape of penalties and fees, which are compounded if they haven’t got the ability to pay.

Want to start a new business? Better be rich.

Before you eat that shrimp cocktail realize that it’s probably the product of slave laborers.

Vast Income Disparity is Bad for Business (Someone Tell Mitt)

In yesterday's New York Times, Annie Lowrey wrote about new findings by the International Monetary Fund economists (not a radical or lefty bunch by any means), laying out the clear and present danger the current disparity in incomes and wealth presents to the American economy and the global economy.

This is what the president was addressing during the debate the other night, and Romney was denying. Romney has built his fortune on the basis of income inequality, squeezing pay and benefits out of company after company, loading them with debt and looting pensions to enrich his small group of investors.

Turns out it's bad for business and bad for the broader economy––no real surprise––because employees of one company are the customers of other companies. It doesn't help the economy when one man's wealth is derived from another man's poverty. It's against the American grain.

Lowrey writes:

Since the 1980s, rich households in the United States have earned a larger and larger share of overall income. The 1 percent earns about one-sixth of all income and the top 10 percent about half, according to statistics compiled by the respected economists Emmanuel Saez of the University of California, Berkeley and Thomas Piketty of the Paris School of Economics.

For years, economists have thought of such inequality in part as a side effect of policies that fostered the country’s economic dynamism — its tax preferences for investment income, for instance. And organizations like the World Bank and the I.M.F., which is based in Washington, have generally not tackled inequality in the world head on.

But economists’ thinking has changed sharply in recent years. The Organization for Economic Cooperation and Development this year warned about the “negative consequences” of the country’s high levels of pay inequality, and suggested an aggressive series of changes to tax and spending programs to tackle it.

The I.M.F. has cautioned the United States, too. “Some dismiss inequality and focus instead on overall growth — arguing, in effect, that a rising tide lifts all boats,” a commentary by fund economists said. “When a handful of yachts become ocean liners while the rest remain lowly canoes, something is seriously amiss.”

But it's worse than "Oh well, bad things happen to some people". Maybe the investor class that is backing Governor Romney will pay attention when the numbers people spell out how their pet tax cuts and cozy pay deals actually harm their outlook. Shouldn't businessmen be concerned when their own behavior is bad for business?

The concentration of income in the hands of the rich might not just mean a more unequal society, economists believe. It might mean less stable economic expansions and sluggish growth.

That is the conclusion drawn by two economists at the fund, Mr. Ostry and Andrew G. Berg. They found that in rich countries and poor, inequality strongly correlated with shorter spells of economic expansion and thus less growth over time.

And inequality seems to have a stronger effect on growth than several other factors, including foreign investment, trade openness, exchange rate competitiveness and the strength of political institutions.

And the kicker...

“What worries me is the idea that we’re in a vicious cycle,” said Joseph E. Stiglitz, a Nobel laureate in economics who has studied inequality extensively. “Increasing inequality means a weaker economy, which means increasing inequality, which means a weaker economy. That economic inequality feeds into political economy, so the ability to stabilize the economy gets weaker.”

Unfortunately, wrongheadedness is a habit with some people. Paying taxpayer funded tribute to rich people is a behavior that's hard to unlearn. It took a long time to convince people the world isn't flat.

Not All Bootstraps Are Created Equal

The sting is in the tail of this short piece:

"One of the most remarkable findings from the Pew Charitable Trusts' Economic Mobility Project is that a child from a family in the top income quintile who does not get a college degree is more likely to wind up in the top income quintile himself than a child from a family in the bottom income quintile who does get a college degree." (There's a link to the data.) Money flows from advantage more than from hard work or ability. Especially in our new and very unequal economy.

Lane Kenworthy writes a blog from Arizona that questions many of the conservative talking points. Worth visiting. Conservative mantras serve their masters by addressing the simpler minded with simple nostrums, often misleading ones. Here is one that unravels given a little scrutiny. Short but hard to squeeze into a soundbite.

Often the "evidence" offered for giving greater and greater reward and advantage to the people at the top is bad evidence, or distorted evidence. Which causes a person to wonder: who pays the sifters of evidence? Is this just another advantage owned by the people at the top? The thinkers and sifters, the judges and lawmakers, the lenders and credit raters, the newspapers and other media that inform us, all belong to them.

I wish the New York Review of Books spent more time on books and less on policy, but what the MSM won't tackle, they must. And they do it intelligently.

I dislike it when the very advantaged and comfortable, many of whom succeeded with a leg up from their families or connections, wonder aloud why the poor and the less fortunate aren't trying harder. It's hard work being poor, with none of the rewards. They should try it.