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Monday, November 17, 2014

NY Times: The Opinion Pages | Contributing Op-Ed Writer; Inequality, Unbelievably, Gets Worse by Steven Rattner

The Opinion Pages | Contributing Op-Ed Writer

Inequality, Unbelievably, Gets Worse

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THE Democrats’ drubbing in the midterm elections was unfortunate on many levels, but particularly because the prospect of addressing income inequality grows dimmer, even as the problem worsens.

To only modest notice, during the campaign the Federal Reserve put forth more sobering news about income inequality: Inflation-adjusted earnings of the bottom 90 percent of Americans fell between 2010 and 2013, with those near the bottom dropping the most. Meanwhile, incomes in the top decile rose.

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Declining Incomes, But Not at the Top

Percent change in median family income, 2010-2013.

All U.S. families

Figures are change in median pretax income in each percentile range. Adjusted for inflation.
Source: Federal Reserve

Perhaps income disparity resonated so little with politicians because we are inured to a new Gilded Age.

But we shouldn’t be. Nor should we be inattentive to the often ignored role that government plays in determining income distribution in each country.

Here’s what’s rarely reported:

Before the impact of tax and spending policies is taken into account, income inequality in the United States is no worse than in most developed countries and is even a bit below levels in Britain and, by some measures, Germany.

However, once the effect of government programs is included in the calculations, the United States emerges on top of the inequality heap.
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Doing Less to Redistribute Income

The U.S. ranks favorably in the Gini coefficient, a measure of inequality — until taxes and government transfers are factored in. Then, among these countries, it is the worst.
*Transfers include programs such as Social Security, unemployment insurance, food assistance and housing allowances.
Source: Janet Gornick, Luxembourg Income Study, 2013
That’s because our taxes, while progressive, are low by international standards and our social welfare programs — ranging from unemployment benefits to disability insurance to retirement payments — are consequently less generous.

Conservatives may bemoan the size of our government; in reality, according to the Organization for Economic Cooperation and Development, total tax revenues in the United States this year will be smaller on a relative basis than those of any other member country.
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Bottom of the Heap

U.S. tax revenues, as a percent of G.D.P., are the lowest of O.E.C.D. countries.
Includes taxes and user fees collected by all levels of government.
Source: Organization for Economic Cooperation and Development
And income taxes for the highest-earning Americans have fallen sharply, contributing meaningfully to the income inequality problem. In 1995, the 400 taxpayers with the biggest incomes paid an average of 30 percent in taxes; by 2009, the tax rate of those Americans had dropped to 20 percent.
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The Low American Tax Burden

Effective tax rates on gross income of $100,000 in 2012.
Source: KPMG
Lower taxes means less for government to spend on programs to help those near the bottom. Social Security typically provides a retiree with about half of his working income; European countries often replace two-thirds of earnings.

Similarly, we spend less on early childhood education and care. And another big difference, of course, is the presence of national health insurance in most European countries.
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Low-Vacation Nation



Source: Center for Economic and Policy Research
To his credit, President Obama has succeeded in keeping income disparities from growing even wider, by such measures as by forcing tax rates on the wealthiest Americans up toward fair levels.
Meanwhile, on the programmatic side, among the many meritorious aspects of the much-maligned Affordable Care Act are its redistributionist elements: higher taxes on investment income and some health care businesses are being used to provide low-cost or free health care to a projected 26 million Americans near the bottom of the income scale.

But much more can and should be done — like raising the minimum wage nationwide and expanding the earned-income tax credit (a step supported by Republicans).

Helping those in the middle, whose incomes have been battered by globalization, will be harder and take longer. Expanded training programs and better education should be the centerpiece of any strategy to improve the lives of the middle class. A more robust economic recovery will also help the middle class, as will pro-growth policy initiatives like investment in infrastructure.

Critics from the right argue that doing more to level the income pyramid would hurt growth. In a recent paper, the International Monetary Fund dismissed that concern and suggested that a more equal distribution of income could instead raise the growth rate because of the added access to education, health care and other opportunities.

While some believe that the recent elections will stimulate both parties to make progress on the mound of challenges, in my view, that’s a bit of a fantasy. But we can’t stop talking about the problem of inequality, because then there really would be no hope.

NY Times: The Opinion Pages | Op-Ed Columnist When Government Succeeds by Paul Krugman

The Opinion Pages | Op-Ed Columnist


When Government Succeeds





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The great American Ebola freakout of 2014 seems to be over. The disease is still ravaging Africa, and as with any epidemic, there’s always a risk of a renewed outbreak. But there haven’t been any new U.S. cases for a while, and popular anxiety is fading fast.

Before we move on, however, let’s try to learn something from the panic.

When the freakout was at its peak, Ebola wasn’t just a disease — it was a political metaphor. It was, specifically, held up by America’s right wing as a symbol of government failure. The usual suspects claimed that the Obama administration was falling down on the job, but more than that, they insisted that conventional policy was incapable of dealing with the situation. Leading Republicans suggested ignoring everything we know about disease control and resorting to extreme measures like travel bans, while mocking claims that health officials knew what they were doing.

Guess what: Those officials actually did know what they were doing. The real lesson of the Ebola story is that sometimes public policy is succeeding even while partisans are screaming about failure. And it’s not the only recent story along those lines.

Here’s another: Remember Solyndra? It was a renewable-energy firm that borrowed money using Department of Energy guarantees, then went bust, costing the Treasury $528 million. And conservatives have pounded on that loss relentlessly, turning it into a symbol of what they claim is rampant crony capitalism and a huge waste of taxpayer money.

Defenders of the energy program tried in vain to point out that anyone who makes a lot of investments, whether it’s the government or a private venture capitalist, is going to see some of those investments go bad. For example, Warren Buffett is an investing legend, with good reason — but even he has had his share of lemons, like the $873 million loss he announced earlier this year on his investment in a Texas energy company. Yes, that’s half again as big as the federal loss on Solyndra.

The question is not whether the Department of Energy has made some bad loans — if it hasn’t, it’s not taking enough risks. It’s whether it has a pattern of bad loans. And the answer, it turns out, is no. Last week the department revealed that the program that included Solyndra is, in fact, on track to return profits of $5 billion or more.

Then there’s health reform. As usual, much of the national dialogue over the Affordable Care Act is being dominated by fake scandals drummed up by the enemies of reform. But if you look at the actual results so far, they’re remarkably good. The number of Americans without health insurance has dropped sharply, with around 10 million of the previously uninsured now covered; the program’s costs remain below expectations, with average premium rises for next year well below historical rates of increase; and a new Gallup survey finds that the newly insured are very satisfied with their coverage. By any normal standards, this is a dramatic example of policy success, verging on policy triumph.

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One last item: Remember all the mockery of Obama administration assertions that budget deficits, which soared during the financial crisis, would come down as the economy recovered? Surely the exploding costs of Obamacare, combined with a stimulus program that would become a perpetual boondoggle, would lead to vast amounts of red ink, right? Well, no — the deficit has indeed come down rapidly, and as a share of G.D.P. it’s back down to pre-crisis levels.  

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The moral of these stories is not that the government is always right and always succeeds. Of course there are bad decisions and bad programs. But modern American political discourse is dominated by cheap cynicism about public policy, a free-floating contempt for any and all efforts to improve our lives. And this cheap cynicism is completely unjustified. It’s true that government-hating politicians can sometimes turn their predictions of failure into self-fulfilling prophecies, but when leaders want to make government work, they can.

And let’s be clear: The government policies we’re talking about here are hugely important. We need serious public health policy, not fear-mongering, to contain infectious disease. We need government action to promote renewable energy and fight climate change. Government programs are the only realistic answer for tens of millions of Americans who would otherwise be denied essential health care.

Conservatives want you to believe that while the goals of public programs on health, energy and more may be laudable, experience shows that such programs are doomed to failure. Don’t believe them. Yes, sometimes government officials, being human, get things wrong. But we’re actually surrounded by examples of government success, which they don’t want you to notice.