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Is Income Inequality the New Climate Change?

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Jim Pethokoukis writes: If you dare question the alarming claims about income inequality made by progressives and Democrats, including President Obama, does that make you a “denier” — akin to climate change “deniers” — whose arguments should no longer be taken seriously?

In a recent post, “Yes, Rising Inequality is a Problem,” excellent economics blogger Ashok Rao is sharply critical of Manhattan Institute scholar Scott Winship. Rao describes Winship as “a representative agent of those making the best arguments that progressives overstate the costs of inequality.” I myself have frequently quoted Winship or used his careful research in my blog posts and columns. It’s also worth noting that Winship’s profile has risen dramatically recently due to his role advising House Budget Chairman Paul Ryan, who may run for president in 2016.

Rao has a number of problems with Winship’s arguments, but his core criticism is that Winship sets an unnecessarily high bar for evaluating the “mountain of evidence” that rising inequality is a real phenomenon deserving of redistributive policy action. Rao:

Winship’s argument against inequality being a problem is a value judgement–a value judgement that those of us with a strong theoretical ex antecase must amass an enormous amount of high-quality, expensive, detailed evidence that rising inequality has in fact had the obvious consequences before we are allowed to even have a conversation about the subject, let alone make the case for policy changes. This does strike me as similar to some of the most sophisticated forms of climate-change denialism, which also focus not on reading the evidence we have differently but rather setting up a very different prior from the rest of us, and so redistributing the burden of proof. … Let us hope the future debate about inequality and its consequences does not mirror that on climate change.

Income inequality is an important issue deserving of honest and open debate. But if you’re worried about the issue becoming politicized and hopelessly muddied, Winship is hardly a concern. Unlike many center-right folks, he had conceded that high-end inequality likely has risen dramatically in recent decades. Winship, however, is highly skeptical of the supposed deleterious economic impact and disagrees with claims that middle-class incomes have stagnated since the 1970s.

These are views which receive virtually no media coverage. Winship has received a grand total of four mentions in New York Times articles, for instance. Two other like-minded and highly regarded inequality researchers, Cornell University’s Richard Burkhauser and the University of Chicago’s Bruce Meyer, have five combined mentions. By comparison, economists Thomas Piketty and Emmanuel Saez — whose research forms the core of the left-liberal argument that inequality is a mega problem — have a combined 168 mentions. This oversight might be particularly egregious in the case of Burkhauser whose cutting-edge analysissuggests it may be necessary to rethink whether inequality has been increasing. “Those who read Burkhauser and remain certain the top 1 percent has really pulled away from “the 99 percent”—or who deem it unnecessary to engage his research—are not as empirically-minded as they believe,” Winship recently wrote.

Fact is, if there is anyone who risks poisoning the debate it’s Obama. Despite a smart economic team at his disposal, he continues to present a highly distorted, partisan, and ideological version of the inequality-is-a-problem argument. Does the president take the issue seriously or just view it as a handy way of justifying polices — higher taxes, higher minimum wage, higher spending — that Democrats typically promote and of attacking pro-market “trickle-down” economics. Even the Washington Post finally slapped him on the hands for suggesting that the typical US family is no better off today than 30 years ago. (The CBO by the way, pegs the increase in after-tax income at 40% since 1979.) Listening to Obama’s recent inequality speech, one would be forgiven for thinking that it was pretty much de-unionization and the Reagan tax cuts that led to rising inequality rather than technology and globalization — or that at least the blame should be equally divided. And does Obama really think the counterfactual — no “neoliberal” reform in the US as in Japan and France — would have  America in a better place. today?More equality maybe, but also less economic dynamism. And it sure would be nice if Obama mentioned the role of family breakdown on the economic troubles in working class America.

3.) There is growing recognition on the right that whether or not income inequality has been a problem in the past, it very well may be one going forward as accelerating automation radically alters labor markets. Compensation may more resemble a power curve than a bell curve. Tyler Cowen’s Average is Over depicts a scenario where the tech-savvy 15% get rich, everyone else gets free Internet. And plenty on the right worry about the worsening economic circumstances for lower-skilled Americans, both in terms of market income and mobility.

The good news here is that many of the policies needed to deal with inequality, mobility, and stagnant wages are pretty good ideas anyway and could eventually attract bipartisan support if they don’t already: education reform, taxing consumption rather than income, wage subsidies, making it easier to start a business, universal savings accounts, more high-skill and entrepreneur immigration, decoupling benefits from jobs, patent reform, making it easier to build more urban housing, reducing traffic congestion, reforming Social Security so poorer Americans get more benefits and richer Americans less.

But doing any of those things will be harder if folks on the right, who generally think more about wealth creation than redistribution, are told it’s insane to challenge the moment’s progressive consensus in any way. It’s also not helpful if in making the case for action, progressives engage in revisionist history to score ideological debating points. Winship gets the last word here:

When conventional wisdom coheres around some accepted truth and most of the non-adherents are easily debunked, it becomes that much easier to casually dismiss any challenge as unserious and unimportant. However, a commitment to empiricism means not only refuting sketchy claims but taking seriously well-supported ones.

Follow James Pethokoukis on Twitter at @JimPethokoukis, and AEIdeas at @AEIdeas.

James Pethokoukis is the Money & Politics columnist-blogger for the American Enterprise Institute. Previously, he was the Washington columnist for Reuters Breakingviews. Pethokoukis has written for many publications including USNews & World Report, The New York Times, The Weekly Standard, Commentary, USA Today, and Investor’s Business Daily.

AEIdeas.

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3 Comments on “Is Income Inequality the New Climate Change?”

  1. Richard M Nixon (Deceased) says:

    Reblogged this on Dead Citizen's Rights Society.

  2. […] Pundit from another Planet Jim Pethokoukis writes: If you dare question the alarming claims about income inequality made by […]

  3. […] View Original: Is Income Inequality the New Climate Change? […]


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