Sent: Friday, November 12, 2010 11:08 PM
Subject: Info that needs to be hammered in
http://www.nytimes.com/2010/11/07/opinion/07kristof.html?nl=todaysheadlines&emc=tha211
Our Banana Republic
By NICHOLAS D. KRISTOF
NY Times Op-Ed: November 6, 2010
In my reporting, I regularly travel to banana republics notorious for their
inequality. In some of these plutocracies, the richest 1 percent of the
population gobbles up 20 percent of the national pie.
But guess what? You no longer need to travel to distant and dangerous
countries to observe such rapacious inequality. We now have it right here at
home — and in the aftermath of Tuesday's election, it may get worse.
The richest 1 percent of Americans now take home almost 24 percent of
income, up from almost 9 percent in 1976. As Timothy Noah of Slate noted in
an excellent series on inequality, the United States now arguably has a more
unequal distribution of wealth than traditional banana republics like
Nicaragua, Venezuela and Guyana.
C.E.O.'s of the largest American companies earned an average of 42 times as
much as the average worker in 1980, but 531 times as much in 2001. Perhaps
the most astounding statistic is this: From 1980 to 2005, more than
four-fifths of the total increase in American incomes went to the richest 1
percent.
That's the backdrop for one of the first big postelection fights in
Washington — how far to extend the Bush tax cuts to the most affluent 2
percent of Americans. Both parties agree on extending tax cuts on the first
$250,000 of incomes, even for billionaires. Republicans would also cut taxes
above that.
The richest 0.1 percent of taxpayers would get a tax cut of $61,000 from
President Obama. They would get $370,000 from Republicans, according to the
nonpartisan Tax Policy Center. And that provides only a modest economic
stimulus, because the rich are less likely to spend their tax savings.
At a time of 9.6 percent unemployment, wouldn't it make more sense to
finance a jobs program? For example, the money could be used to avoid laying
off teachers and undermining American schools.
Likewise, an obvious priority in the worst economic downturn in 70 years
should be to extend unemployment insurance benefits, some of which will be
curtailed soon unless Congress renews them. Or there's the Trade Adjustment
Assistance program, which helps train and support workers who have lost
their jobs because of foreign trade. It will no longer apply to service
workers after Jan. 1, unless Congress intervenes.
So we face a choice. Is our economic priority the jobless, or is it
zillionaires?
And if Republicans are worried about long-term budget deficits, a reasonable
concern, why are they insistent on two steps that nonpartisan economists say
would worsen the deficits by more than $800 billion over a decade — cutting
taxes for the most opulent, and repealing health care reform? What other
programs would they cut to make up the lost $800 billion in revenue?
In weighing these issues, let's remember that backdrop of America's rising
inequality.
In the past, many of us acquiesced in discomfiting levels of inequality
because we perceived a tradeoff between equity and economic growth. But
there's evidence that the levels of inequality we've now reached may
actually suppress growth. A drop of inequality lubricates economic growth,
but too much may gum it up.
Robert H. Frank of Cornell University, Adam Seth Levine of Vanderbilt
University, and Oege Dijk of the European University Institute recently
wrote a fascinating paper suggesting that inequality leads to more financial
distress. They looked at census data for the 50 states and the 100 most
populous counties in America, and found that places where inequality
increased the most also endured the greatest surges in bankruptcies.
Here's their explanation: When inequality rises, the richest rake in their
winnings and buy even bigger mansions and fancier cars. Those a notch below
then try to catch up, and end up depleting their savings or taking on more
debt, making a financial crisis more likely.
Another consequence the scholars found: Rising inequality also led to more
divorces, presumably a byproduct of the strains of financial distress. Maybe
I'm overly sentimental or romantic, but that pierces me. It's a reminder
that inequality isn't just an economic issue but also a question of human
dignity and happiness.
Mounting evidence suggests that losing a job or a home can rock our identity
and savage our self-esteem. Forced moves wrench families from their schools
and support networks.
In short, inequality leaves people on the lower rungs feeling like hamsters
on a wheel spinning ever faster, without hope or escape.
Economic polarization also shatters our sense of national union and common
purpose, fostering political polarization as well.
So in this postelection landscape, let's not aggravate income gaps that
already would make a Latin American caudillo proud. To me, we've reached a
banana republic point where our inequality has become both economically
unhealthy and morally repugnant.
I invite you to comment on this column on my blog, On the Ground. Please
also join me on Facebook, watch my YouTube videos and follow me on Twitter.
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