Conservatives Want Less Inequality

Top 1% income versus the rest of us

Top 1% income versus the rest of us

Conservatives are starting to worry about income inequality. For real.

Well, at least some are:

The conservative IMF (International Monetary Fund) has warned:

Put simply, a severely skewed income distribution harms the pace and sustainability of growth over the longer term. It leads to an economy of exclusion, and a wasteland of discarded potential.

Or this, from a Wall Street Journal article (no liberal rag):

Stagnant incomes have restrained the American consumer for years, creating a vicious circle that has left businesses waiting for stronger spending before they rev up hiring and investment.

Goldman Sachs CEO and Chair, Lloyd Blankfein, worries that income inequality is destabilizing the economy and “responsible for the divisions in the country.”

Bill Gross, founder of the investment firm PIMCO, continues the theme:

Eventually (income inequality) will be destabilizing.

And libertarian, Alan Greenspan, calls income inequality the most dangerous trend in America.

President Obama wants to do something about this problem. In his State of the Union address Tuesday night he proposed:

  • A $500 credit for middle-class families where both spouses work
  • Increased paid leave for workers
  • Expanded child care tax credit
  • Free community college for students who maintain a strong GPA

But how to pay for this?

  • Eliminate a trust fund loophole
  • Raise the tax rate on investment income
  • Levy fees on the few financial companies with assets over $50 billion

These policies could help reverse years of redistributing income from the middle-class to the rich via things like:

  • A low, 15% tax rate on capital gains investment income (money that “makes itself” while you sit on your butt)
  • Legal tax shelters
  • “Right to work (for less)” laws trumping laws that support high union wages
  • A low minimum wage
Wealth distribution: the ideal, what we think, and actual reality

Wealth distribution: the ideal, what we think, and actual reality

The current redistribution of wealth from the middle to the top leaves plenty of middle-class folks paying higher tax rates than the rich. Meanwhile, managers and owners pocket corporate profits, instead of sharing with the workers who helped create them.

And: We’ve got these laws because political campaigns depend on rich contributors. So politicians pass laws that make their funders happy.

Meanwhile, the middle-class is shrinking. And that’s not good for America.

When people don’t have money to spend they cut spending, which cuts sales, which cuts payrolls. Which means even fewer people have money to spend, and so on.

As The Wall Street Journal put it:

As incomes have stagnated over the past half decade… families (are forced) to cut back spending on everything from clothing to restaurants.

That’s why the middle-class are the real job creators.

These days, populism is being spouted on the left and right, alike. In some cases it’s all talk. Look to see what politicians are actually doing, and not just what they’re saying.

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About BroadBlogs

I have a Ph.D. from UCLA in sociology (emphasis: gender, social psych). I currently teach sociology and women's studies at Foothill College in Los Altos Hills, CA. I have also lectured at San Jose State. And I have blogged for Feminispire, Ms. Magazine, The Good Men Project and Daily Kos. Also been picked up by The Alternet.

Posted on January 23, 2015, in politics/class inequality and tagged , , , , , , , . Bookmark the permalink. 17 Comments.

  1. Among other stuff they do for sure… Romney still wants to earn his mormon sky through charity acts!… Well that’s something eloquent, right!….
    Regards Georgia. Aquileana 😀

  2. Political elections have become all about who has the most money and that’s sad because then money rules the game… and then there’s not likely be changes made… If the middle class disappears, then what? I hate to think what that would mean for the US!

    • I think that’s why even some conservatives are starting to worry. When you start seeing how one thing relates to another — like middle class interests helping business interests — you can suddenly become interested in helping the middle-class. I’m hoping more people will figure this out because we are trending more toward third world status.

  3. Further taxing capital gains would decrease the amount of money available to firms and therefore may limit economic growth. While its true the proposed initiative would increase spending by putting more money in lower and middle-class people’s pockets, companies could find themselves hamstrung by exorbitant borrowing costs as fewer people are willing to invest owing to the increased tax. The end result is ambiguous – it’s hard to say which effect will dominate.

    Capital gains are hardly made resting on one’s butt: they are the result of prudent financial planning and exposure to the risk of capital loss. Furthermore, capital gains may be the only means whereby investors in certain instruments see a return – for instance, not all stocks yield dividends. In fact, investors are penalized for choosing companies that opt to expand rather than distribute profits to the shareholders. This distortion is another mechanism whereby an increased capital gains tax may result in less economic growth.

    • The so-called reason for a low capital gains tax rate is to ensure that there will be enough money available to make investments. But right now there is a ton of money sitting around waiting to be invested. It’s sitting around instead of being invested because demand is so low. And demand is so low because we are losing our middle-class, and our spending power. That’s why a number of conservatives are now concerned that inequality is hurting the economy and business profits. And why they are worried that things will only get worse.

      The real reason for a low capital gains tax is because rich people make big campaign contributions and then come up with an excuse “we need an incentive to save so that there will be money to invest” which works as a handy excuse for both themselves and the politicians who are basically being bribed via big campaign contributions.

      Also, income from capital gains does “make itself.” In the very best case scenario, people who actually go out and make a living work harder.

  4. And not to mention that Obama’s proposals in the state of the union were probably made with good intentions but it doesn’t adress one of the major challenges for todays middle class; outsourcing. In a global economy corporations have outsourced or offshored a lot of traditional administrative clerical positions that used to be held by members of the middle class. Government alleviations alone won’t solve it.

  5. Yup, the eradication of the middle class has started all over the western world. Perhaps to a greater extent in the US, but you’ll see the signs over the pond as well. In some ways this process is helped by federalist forces within the EU that have made attempts to establish federal laws and even a european constitution that would set rules that play straight into the hands of the people that are already resourceful, superseding national laws that protects the middle class. Another factor is of course globalisation, where corporations implementsbusiness models that focus on hiring staff from low cost countries to evade laws protecting employment terms or even choose to migrate operations to these countries.

    • Over here a huge problem is allowing billionaires and big corporations to give huge campaign contributions, which leads to laws in their favor — and against everyone else. How much of a problem is that across the pond?

      • That problem is probably bigger in the US, but you’ll find many examples of corporate sponsored actitities here as well, at least during election prefaces. I guess lobbyism and paid votes are problems in most part of the world.

  6. I believe the largest cause of this issue has been government interference in the economy. Corporate America and its supporters have gotten Washington to write laws that contribute or directly caused this problem. This along with corp welfare is huge.

    According to Simpson-Bowles, there is roughly $1.5 trillion (that’s right TRILLION!!!) worth of subsidies and tax breaks in our tax code. Eliminating half of them would eliminate our annual budget deficit!!!! Most of these tax breaks and subsidies go to corps and the wealthy. So, you have the taxpayers subsidizing the highest earners. Crazy!!

    The sad reality is both political parties are in on this behavior. Regardless of what President Obama says, his party takes in as much of this money from lobbyists and corporations as the Republicans. We need to make changes to our Constitution: 1) term limits, 2) balanced budget amendment, 3) ban on lobbying,…..

    The other issue is pure greed. Business owners, executives, etc simply feel they have a right to a certain pay level. If this means holding employee wages down so they can “get theirs” they are doing so.

    The solution must be LESS government. The role of government is to create the rules of the market place. Not to play favorites.

    Former Secretary of Labor Robert Reich has done a superb job on this issue. Check out this wonderful video. But, watch the documentary by him. Very lucid and easy to understand.

    The man is very passionate about this and so am I. Our Republic cannot survive unless we address this issue.

    Great job!!!

    • It really depends on how government is used. Everything – Well almost everything – you say above is true. And yet the time when America was at its best, the 1950s, was a time when the government was working very much in favor of the average citizen. Things like the G.I. Bill, Free college education, and government support for unions helped create the middle class.

      A lack of government tends to create a few rich and many poor.

      • Well, I really do not understand why our country is in deficit when all the government can do is print new money. A friend of mine from San Diego told me that our government burns old money away, so why does that happen. Billions are still spent on the United States military weapons and for what ? There is a higher percent of Americans that have minimum wage jobs today because it does not look like they have a choice. The president is kind of a puppet and is doing nothing but the same small things over and over.

      • If you just print new money you end up with inflation. I’m not sure what your friend is talking about so I can’t give you an answer. And yeah you’re right on why so many people are only making minimum wage. Pretty much all politicians are puppets of moneyed interests who fund their campaigns. But I wouldn’t be surprised if Pres. Obama would actually sign the bills he proposes if Congress actually passed them. After all, he isn’t running for office again. But like I said, look at what they do, not what they say

  7. I guess it’s good that the problem is being more recognized on both sides but you are right, what are they going to do about it? That is what matters beyond the chatter. Let’s hope something….

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