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Wednesday, Sep 17, 2014
Politics

Candidates seize on income disparity

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TAMPA ญญ— Florida Gov. Rick Scott is aiming his proposed $500 million tax cut at both businesses and consumers, saying its purpose is to “help Florida’s middle class.”

The Democrats’ response: Scott’s proposal amounts to “big giveaways to businesses at the expense of the middle class.”

Claiming the mantle of middle class champion is emerging as the moral high ground in politics, a likely campaign issue in the 2014 Florida gubernatorial race and future elections.

The battle for that ground is being fueled by troubling statistics.

They show a large and growing gap in income and wealth between the nation’s upper crust and all others, plus a development some consider even worse: increasing economic stratification that makes generations less likely to move up the ladder from their parents.

With a reputation as the land of opportunity, the U.S. by some measures is actually one of the least economically “mobile” societies among prosperous Western nations.

In 2012, the issue of middle class economic decline dominated the presidential campaign between Barack Obama and Mitt Romney. Obama argued that the wealthy “can pay a little more” in taxes to cut debt and maintain a safety net, and Romney insisted the problem is too many “takers” benefiting from government programs.

“In our polls and focus groups of voters at the beginning of 2011, it was absolutely clear that anxiety over losing an economic grip on the middle class was their top concern,” said former Obama campaign press secretary Ben LaBolt. “We built a campaign around establishing economic security for the middle.”

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Economist Doug Holtz-Eakin, domestic policy adviser for 2008 Republican presidential candidate John McCain, said he expects arguments over economic class issues to remain a dominant theme for coming election cycles.

“It’s been an issue in every campaign since 1992 at least, beginning as income figures began to spread out in the mid-1980s,” he said. “It’s become a staple of American political life.”

Florida is primed for a 2014 election focusing on economic class issues.

Scott, a wealthy health care executive who has emphasized tax breaks and deregulation to help “job creators,” could end up facing populist former Gov. Charlie Crist.

“In Tallahassee today, if you’re well off, you’re taken care of, but where are the people who are looking out for the little guy and gal?” Crist said. “It seems to be absent.” He called it “very likely” that economic fairness will be part of his campaign if he runs.

Former Crist strategist Danny Kanner, who works on gubernatorial races for the national Democratic Party, said 2014 campaigns including Florida’s will focus on the issue.

“Rick Scott crystallizes this issue in a way very few other politicians can,” Kanner said.

There’s “broad agreement” among economists that inequality of both wealth and income is significant and increasing in the U.S., said Scott Solomon, an expert in international economics at the University of South Florida.

A study published last week by University of California, Berkeley economist Emmanuel Saez found that in 2012, the share of all income reaped by the wealthiest 10 percent of U.S. families reached 50 percent for the first time since 1917 — higher even than during the “Gilded Age” preceding the Great Depression.

Wealth disparities are even greater.

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A Pew Research Center study found that in 2011, the share of all wealth owned by the top 7 percent of U.S. households rose to 63 percent. As of 2009, the top 20 percent of households owned 87 percent of all the nation’s private wealth, leaving 13 percent for the rest of the nation.

A greater concern to some is whether people can move from one end of the income scale to the other.

University of Ottawa labor economist Miles Corak says the U.S. is well down on the list of prosperous Western nations in economic mobility.

According to data he compiled, children have a better chance of rising above their parents’ economic level in Canada, Australia, Japan, New Zealand, most of Western Europe and especially Scandinavia, than in the U.S. Among the prosperous western nations, only in the United Kingdom and Italy are children more likely than in the U.S. to end up where they started economically.

A recent Pew Charitable Trust study said 43 percent of those born in the bottom economic fifth of U.S. society by income stay there; 70 percent remain in the bottom two-fifths. But 40 percent of those born in the top fifth stay there.

“There is a disconnect between the way Americans see themselves and the way the economy and society actually function,” Corak said. “Many Americans may hold the belief that hard work is what it takes to get ahead, but in actual fact the playing field is a good deal stickier than it appears.”

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Americans don’t seem aware of the inequality, according to a recent study by Duke psychologist Dan Ariely and Harvard marketing professor Michael Norton.

In a 2011 survey, they asked respondents what the nation’s wealth distribution ideally should be. The result was a breakdown similar to that of Sweden, with the top 20 percent owning about a third of the nation’s wealth.

Asked to estimate the actual U.S. breakdown, the respondents said they thought the top 20 percent owned about 60 percent of all wealth — still far less than the actual figure.

But if they agree the disparity exists, economists as well as politicians disagree about whether it’s a problem and whether the government should do anything about it, such as changing tax policy, said USF’s Solomon.

U.S. productivity and income gains were “widely shared” from about World War II until the mid-1970s and 1980s, when the current era of disparity began, Solomon said.

He said theories about the causes include:

The technological revolution and globalization, which increased the value of highly skilled work and cut the value of low-skilled work.

The “Reagan-Thatcher revolution” of the 1970s, which sharply cut government regulations and income tax rates at top levels.

The decline of unions.

The “financialization of the economy,” with growth in the share representing banking and financial services.

Liberals tend to put more of the blame on government policy while conservatives focus on globalization and technology.

Saez, for example, notes that among Western nations, the biggest cuts in top tax rates in the 1970s came in the U.S. and United Kingdom, which also have the largest share of income going to the wealthiest.

Corak argues that wealth and income disparities contribute to economic immobility.

The wealthy are able to outspend others on education and enrichment experiences for their children, helping maintain their position in society. They also can use their resources to influence government policy, preventing use of government resources to benefit the poor and middle-class.

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But Democrats can’t frame their arguments as an attack on the wealthy — an approach Obama carefully avoided, said LaBolt of the former Obama campaign.

“If a candidate did directly attack wealth or success, that’s not the sort of message that will attract American voters,” he said. “We framed it as providing people a fair shot, and the president as somebody who’s fighting on your side.”

Conservatives answer that income and wealth inequality aren’t really the problem.

The gap figures often quoted don’t usually include government transfer programs such as Social Security or the Earned Income Tax Credit, they note. Many dispute the validity of the data about mobility, saying comparisons among the nations with widely varying tax and safety net programs are virtually meaningless.

“Americans believe opportunity should be equal and fair, but don’t believe everyone should have the same income,” said Holtz-Eakin.

David Azerrad of the conservative Heritage Institute Economics said conservatives need to emphasize to voters that the economy “is not a zero-sum game. With free markets the pie can grow — I don’t have to lose a buck for you to make a buck.”

 

wmarch@tampatrib.com

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