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Sunday, July 21, 2013

Inequality and Politics

At The Daily Beast, Lloyd Green writes:
Five years into the Obama presidency, we are further from the Great Recession but also closer to a new normaleconomic dystopia.

Yes, the unemployment rate has edged down to 7.6 percent, but America is well on its way to becoming a nation of part-timers and full-time temps. According to the Bureau of Labor Statistics, the number of involuntary part-time workers rose by 322,000 to 8.2 million in June, while the ranks of temporary-help services employees have swelled to a record 2.68 million. Meanwhile, the employment-population ratio, the percentage of adult Americans who hold a job, has dropped nearly 2 percent to 58.7 percent since Barack Obama took office.

Remarkably, both political parties are accommodating to this new reality of “Brazilification,” a term coined by Douglas Coupland in his 1991 novel Generation X and defined as the “widening gulf between the rich and the poor and the accompanying disappearance of the middle classes.” On a good day, Brazilification looks like the Metropolitan Museum of Art’s Costume Institute Gala, a party for the well-heeled, well-dressed, and well-coiffed under the dazzle of blinding lights. But, on a bad day, Brazilification is bankrupt Detroit, post-Katrina New Orleans, or the shuttered mining and mill towns 24/7, except bleaker.
An anonymous viral video contrasts perceptions of wealth inequality with the data:

Back in March, Danielle Kurtzleben wrote at US News and World Report:
"If you're a very corrupt, cronyist type economy like Argentina or Mexico, you have a huge degree of income inequality and it's driven by the fact that the elites control the levers of power," says Dan Mitchell, a senior fellow at the Cato Institute, a libertarian think tank.
Meanwhile, a less-corrupt, high-inequality, but fast-growing economy--Marshall uses the example of Hong Kong--might be healthier, more stable, and more likely to have a rising tide of growth lifting all boats, even if it's lifting some boats more than others.
In other words, as long as everyone is benefiting, albeit to different degrees, he says, that's one key test of whether inequality is "good" or "bad."
In recent decades, incomes rose for all quintiles of U.S. earners, according to a recent CBO study. However, those at the top reaped far more benefits than those at the bottom. The lowest quintile's average inflation-adjusted income moved from around $16,000 to $23,000. The top quintile, meanwhile, went from $99,000 to nearly $172,000 over that same period. (It should be noted that these numbers represent inequality in incomes, not the more-heavily-skewed wealth inequality, which is the focus of the popular video.)
As for the question of where U.S. inequality is coming from, Mitchell says he fears that corporate influence in Washington may be creating inequality of what he might call the Mexican or Argentinian type. That is, he believes that big banks and healthcare companies are skewing the system in their own favor via legislation like Dodd-Frank and healthcare reform.