The Great Divergence: 8 Ways to Help Reverse Income Inequality

Eonomics isn’t an easy study to interpret. Economists and politicians constantly disagree about the economy. However, there is one undisputable fact that all economists on both sides of the political spectrum can agree upon. Since the 1980s, income inequality in the United States has dramatically increased and has done so at a much faster rate than in other developed nations. Income shares have risen disproportionately for the nation's top 10 percent and in particular, the top 1 percent. America’s richest 1 percent possess 24 percent of the nation’s pretax income. By virtually every metric, the United States ranks worst in the world for income inequality among developed nations.

Economics isn’t particularly good at predicting the future, but it does exceptionally well at documenting and interpreting the past. In his 2007 book The Conscience of a Liberal, Nobel Prize-winning economist Paul Krugman termed the age of inequality “The Great Divergence”. It began in 1979 and is when income distribution began to diverge. The period before this was termed the Great Convergence and started shortly after the Great Depression from 1932. The phenomenon of income inequality was further explored in Timothy Noah’s exhaustively researched 2012 book, The Great Divergence. The Great Depression cause severe income inequality in America. However, the economy recovered and incomes became increasingly more equal over the following decades. This was in no small part due to FDR’s New Deal program and the powerful industrial stimulus of the Second World War. It was also a time that saw the zenith of power in the labor movement.

There were many factors that contributed to The Great Divergence, but among the major ones was the corporate deregulations that occurred in the 80s under president Reagan that enabled corporations to amass incredible wealth. It was also, not surprisingly, at this time that saw a dramatic increase in the number of corporate lobbying groups in Washington that continues to this day. Regan was also the first president to adopt an openly anti-union stance on a time when unions were already in decline.

During The Great Divergence, the structure of the U.S. economy drastically changed. It went from a primarily manufacturing economy to a service one. Also, the economy has been revolutionized through automation and computers. And of course globalization has changed how products are created and distributed.

So what can we do about it? We’re not talking about redistributing wealth 100% equally as in some communist utopia, but rather to reverse the trend increasing income inequality. In The Great Divergence, Noah offers several suggestions:

1) Tax the Rich

Tax rates on the rich are at historic lows. Billionaire Warren Buffet himself suggested creating new tax brackets for the rich, those earning over $1 million and $10 million annually. Noah proposed yet another bracket for those earning over $20 million. Also, we must reform the tax system, eliminating s-corporations and other shelter schemes and loopholes that unjustly benefit wealthy corporations. How would this new tax wealth be used? Well, it wouldn’t necessarily reduce income inequality directly, but could be used to reduce the budget deficit. This is also important and would eliminate the need for large budget cuts to other government services that would likely increase inequality.

2) Increase the number of Federal Jobs

In 2010, there were 4.4 million federal employees. Yet, despite citizens and politicians alike complaining about the size of the U.S. bureaucracy, this is in fact far lower that the number of federal employees in 1962 at 5.4 million. Why not create more government jobs? Use the  Works Progress Administration as a model. During the Great Depression, President Roosevelt’s WPA program created 3 million jobs per year at a cost of $71 billion in today’s dollars. Its predecessor, the Civil Works Administration created 4 million jobs in only 4 months for less than $1 billion. This is far better than President Obama’s job stimulus package that from 2009-2011 created 3,6 million jobs for $221 billion. The government should put people to work to repair America’s aging a dilapidated infrastructure. It would be much more cost effective to create jobs and pay people directly from the government.

3) Import More Skilled Labor

Former director of the Fed, Alan Greenspan recommended removing visa barriers for highly skilled laborers as a way to reduce income inequality. Making it easier for foreign engineers, doctors, and professors to enter the United States and eliminating native-biased protectionist policies would help make hospitals and universities more competitive. It would also help stimulate innovation and investment and likely create more jobs across the economy.

4) Universal Preschool

The early 20^th century saw the high school movement that made high school standard across America and improved the education of the workforce. We should do the same thing with preschool/kindergarten today. Now, early education is largely elective, but there are big potential benefits to making preschool standard. A 2011 Harvard study showed a 1% score increase in kindergarten final scores resulted in a nearly $100 increase in annual wages.

5) Impose Price Controls on Universities

In the last few decades, demand for college degrees by companies has increased significantly, but so has the cost. Between 1981 and 2006, the average yearly college tuition after inflation more than doubled. The problem today is that universities can charge pretty much whatever they want because they know a college degree is as necessary today as a high school diploma was 50 years ago. The fact is that universities experience almost no serious market pressure to control prices. The government should take steps to rectify this. There is a similar situation today in healthcare, where costs are spiraling upwards out of control.

6) Regulate Wall Street

During The Great Divergence, there were big changes on Wall Street and the financial sector. Deregulation led to consolidation of banks into huge entities, especially in the 90s and naughts. There was also a trend for banks to move away from traditional banking and focus more on trading. There was a shift towards a high risk, high gain mentality. Then came the 2008 financial crisis and the subsequent Wall Street bailout by the government. The Banks were so big, they felt encouraged to take risks because they knew the government couldn’t allow them to fail and bail them out. This led to instability in the market and the crisis. In 2009, Alan Greenspan said about the banks, “If they’re too big to fail, they’re too big.” The government should break up the banks. The same was done with Standard Oil in 1911, and the separate parts became more valuable than the whole.

7) Elect Democratic Presidents

In his 2008 book Unequal Democracy, political scientist Larry Bartels convincingly showed that the bottom 95 percent of income distribution experienced greater income gains under Democratic presidents. All politicians want the economy to do well, but they differ in who they want to benefit. In the 80s, again under Reagan, supply side economics, which later became known as trickle-down economics came into vogue. The idea was if you give tax breaks and policies favorable to corporations and the wealthy, it will result in better wages down below. Production did increase and the economy grew, but more equal raises in income did not materialize. Generally speaking Democrats are more concerned about unemployment, siding with labor and Republicans are more concerned about inflation, siding with management. 

8) Revive the Labor Movement and Workers Unions.

Today, unions almost seem like something belonging to the past. It’s true that unions have significantly helped reduce income inequality in the days before The Great Divergence, not just for union workers, but society as a whole. In 1945, President Harry Truman convened a labor management conference three months after the end of WWII. Its purpose was to create an agreement governing the postwar economy’s conversion back to a civilian one. This was a time when Labor had immense influence and power, sitting down with the Federal government and national business leaders on more or less equal footing. Such a situation is hard to imagine today. Over the years, anti-union legislation passed that greatly reduced labors power. Union membership reached its peak in 1954 at 28 percent of the workforce and if you add non-union workers who were covered by union contracts it’s closer to 40 percent. In 1979, union membership represented about 21 percent of the workforce. Today, it’s about 12 percent and if you exclude federal workers unions, it’s only about 7 percent of the private sector workforce. Large corporations, especially retailers like Wal-mart are famous for being aggressively anti union. In 2007, Harvard economist Richard freeman calculated that the decline in unions explained about 20 percent of The Great Divergence among all workers. We generally think of unions for manufacturing or construction jobs, but there’s no reason other industries couldn’t be unionized. Corporations aren’t just going to raise worker’s wages out of the goodness of their hearts. Rights have to be fought for and the fact is that unions are a powerful tool to secure better wages and benefits for workers.

None of these strategies is simple or would be easy to implement. It would take a lot of work and cooperation among lawmakers, but there is no time to waste. With a billionaire businessman in the White House, Trump's budget and tax plans will likely only increase inequality among Americans and keep money and power in the hands of the top 1%. America has done better in the past and other countries are doing better now.  The only thing worse than trying and failing is to do nothing.

Track The Voting Record of Your Local Representatives in Congress

I think most of us watched the 2018 Midterm Elections with extreme interest. Now that the 116th Congress has been sworn in, you'll want to know what they are doing and most importantly how they are voting on issues that affect you. I wanted to let you know about a great website you can track the voting records of anyone in Congress. GovTrack.us. 

The site keeps track of all bills and votes and lets you search by representatives in your area or by categories of different types of legislation. The site features a trove of information and also articles and analysis. It is a non-government website so you know they report non biased data. 

Keep track of your representatives and let them know what you think of their voting record and on the issues important to you.They working for you. Participate in your democracy.

Discrimination is Discrimination, even to Sarah Sanders

Ok, this isn’t new news, it’s old news, but it’s something that’s been bothering me for a long time and I need to get it off my chest, so bear with me.

At the outset, let me just say that I’m no fan of President Trump or his administration. Nor am I a fan of White House Press Secretary Sandra Huckabee Sanders. Actually, this has less to do with her and more with how we should treat one another.

On Friday, June 22^nd, 2018, Sarah Sanders arrived at the Red Hen restaurant in Lexington, VA. She was the last to arrive to a table of 8 including her husband. Soon afterward, the owner, Stephanie Wilkinson arrived at the restaurant after being informed that Ms. Sanders was there. Shortly after being served, Wilkinson came over and asked to speak to Ms. Sanders outside. She is quoted as saying her establishment,

“has certain standards to uphold such as honesty, compassion, and cooperation. I’d like to ask you to leave.” To which Sanders responded, “That’s fine, I’ll go.” Sanders soon left without incident along with everyone at the table. They were not asked to pay, being told their order was, “on the house.” The owner had consulted the other staff before speaking to Ms. Sanders. “Tell me what you want me to do? I can ask her to leave.”, she said. They said, “Yes”.

The owner had her reasons. Having several LGBT workers on her staff, she sited the Press Secretary’s comments defending President Trump’s ban on transgender personnel in the military. This was also at a time when The White House was under extreme criticism both at home and abroad over its controversial policy of criminally prosecuting every undocumented immigrant crossing the Mexican border, a policy that led to over 2,300 children being separated from their families.

I personally agree with Ms. Wilkinson’s feelings on these matters. That policy was inhumane and wrong. But asking Ms. Sanders to leave for no other reason was also wrong.

The next day, Sanders spoke about the incident on twitter.

“Last night I was told to leave by the owner of Red Hen in Lexington, VA. to leave because I work for @POTUS and I politely left. Her actions say far more about her than me.” She was later accused of violating federal ethics laws over the tweet and maybe she did, but this is beside the point.

The owner later said that since Sanders was a White House official and not a normal citizen, it was somehow OK. That is irrelevant. Sanders was not there in any official capacity, she was just going to dinner with her family and friends.

At around this time, the news was ripe with stories of restaurants calling the police on black patrons just waiting or chatting. That was wrong, too. Media outlets universally condemned these acts.

Of course, there was a huge backlash after the Red Hen incident including Sander’s tweet. Many protested the restaurant as prejudiced and many others came to the owner’s defense. All of this led to the restaurant being temporarily closed.

This is in sharp contrast to a similar incident that happened a few weeks later at the beginning of July. Embattled by multiple scandals, disgraced head of the EPA Scott Pruitt was confronted by a mother as he was eating in a restaurant. The woman chastised him over his failure to uphold the values of his office and protect the environment and she urged him to resign. Pruitt didn’t respond and left without incident. He resigned not long after. Good riddance I say. This situation was different however. The woman was another patron and she was exercising her right of freedom of speech. More importantly, Pruitt wasn’t forced to leave by the establishment.

If someone is being disruptive or abusive to other patrons or staff, they should be asked to leave. However, if the owner refuses service or asks someone to leave based solely on the color of their skin, their religion, their sexual orientation, their political beliefs, or who they happen to work for, we have a word for that; it’s called discrimination.

If I was a conservative owner of a restaurant and a famous liberal politician came in and if I then asked him to leave for that reason, that would be equally wrong.

Unfortunately, it appears the courts may support business’ right to chose who and who not to serve. In the same month, the U.S. Supreme Court sided with a Colorado baker who had refused to bake a wedding cake for a gay couple based on his religious beliefs.

I find this trend disturbing. I believe religion and politics should be left out of business and service industries. Following this line of thinking, what’s next? Will we have liberal only and conservative only restaurants? Muslim only or Christian only stores? Gay only or straight only businesses? It feels like we’re going backwards. All should be treated and served equally.

I understand that many viewed the owner’s decision to ask Sanders to leave as a symbol of the people fighting back against a corrupt and immoral government. I agree with the sentiment. But we shouldn’t have a double standard. If we want to protect the rights of those we agree with, we must also protect the rights of those we don’t agree with.

I don’t know. Maybe it’s just my Midwestern bias, I’m from Kansas. Or it might be the fact I’ve been living in Japan where politeness is so important. I just felt it was disrespectful and…well, rude.

Sources:

Sarah Sanders kicked out of restaurant because of work for Trump BBC

Virginia restaurant that kicked out Sanders reopens The Hill

The owner of the Red Hen explains why she asked Sarah Huckabee Sanders to leave The Washington Post

Sarah Sanders tweet about being kicked out of restaurant violates law, former White House ethics chief says The Independent

US Supreme Court backs Colorado baker's gay wedding cake snub BBC

The Great Wall of Trump

The great wall of China stretches over 5000 miles long. It’s one of the greatest engineering feats of the ancient world and a great symbol of China.

Trump’s border wall on the other hand won’t be nearly so grandiose in scope. It will only be…well let’s see, nobody really knows. Anyway, despite a lack of details, Trump’s wall is also a symbol. It started as a symbol of xenophobia and immigration fears of Trump’s conservative base. It quickly became a symbol of change and a centerpiece of Trump’s campaign.

Over the course of his presidency, the wall has been a safe haven for Trump. Whenever under attack, whether it be the Muller probe, his revolving door administration, more “fake news”, or the plethora of lawsuits and indictments against him, he always had the wall to fall back on. If things were going badly, he’d start harping about the wall again for two reasons;

1)    It’s a distraction from attack or a diversion to draw your attention away from some agenda he’s trying to push through.

2)    It’s a sure fire way to stoke up support in his base and make him feel loved again. They believe in the wall.

Is illegal immigration a problem? Yes it is? Do illegal immigrants sometimes commit crimes in the US? Yes they do. Does border control need more support and upgrades? Maybe, but it sure the hell doesn’t need $5Bn wall and congress is calling him on it.

There is no emergency. There is no crisis at the border. The wall is, for lack of a better word, bullshit.

First of all, research shows that illegal immigration in the USA has actually been declining. According to 2016 data from The Pew Research Center, the illegal or undocumented immigrant poplulation was about 10.7 million. That was the lowest number since 2007. Furthermore, the number of undocumented immigrants in the US workforce has declined during the same period. According to the Customs and border patrol, in 2018, approximately 400,000 illegal immigrants were apprehended and an additional 125,000 presented themselves at ports of entry. This makes about 525,000 people. However, this is far smaller than the 1.6 million that were apprehended in 2000.

Also, the overwhelming majority, about two thirds of undocumented immigrants have lived in the US for over a decade. Many immigrants become illegal when their visas run out, not because of a great influx from the border. One study from MIT Sloan suggested that the illegal immigrant population may be much higher than 10.7 million, as much as double, but the authors were quick to point out it does not indicate an increase in recent years. In fact, a larger immigrant population would mean crime rates are actually lower per capita among immigrant communities.

As far as crime, the State department did find that for federal crimes, undocumented immigrants made up a disproportionately higher number of federal inmates. However, the vast majority of crimes (over 90 percent) are dealt with at state and local levels where jurisdictions rarely record immigration status of prisoners. In addition, numerous studies have shown that crime rates in areas with high immigrant populations actually decrease.

After two years and without a single brick in place, what began as a symbol of change has become a symbol of something else. To his supporters it’s a symbol of failure to live up to his campaign promises. To his critics, it’s a symbol the Alice-in-Wonderland like fantasy world where Trump resides. And it’s becoming more and more a liability to his administration. In a recent interview, outgoing Chief of Staff John Kelly said, in stark contrast to Trump’s statements, “To be honest, it’s not a wall.”, instead calling it “fencing”, “a barrier”, or “steel slats.” He went on to say, “Illegal immigrants overwhelmingly are not bad people.” This is coming from the former secretary of Homeland Security and a retired four star general.

Trump’s wall has been the center of the gridlock over the government shutdown, Feeling increased pressure from the right and criticism from the left, Trump finds himself deeper and deeper in a hole he himself dug. As the shutdown continues, and even after the President's National address, the fog is clearing and the people can see Trump's wall for what it is, a politically motivated sham.

Sources:

5 facts about illegal immigration in the U.S.  Pew Research Center

Study: Undocumented immigrant population roughly double current estimate  MIT Management Sloan School

Is the US in an 'illegal' immigration crisis? Border patrol data suggests otherwise  The Guardian

Is Illegal Immigration Linked to More or Less Crime?  Factcheck.org

Outgoing chief of staff John Kelly says Trump's 'wall' won't actually be a wall: 'To be honest, it’s not a wall' 

America: Blue Skinned, Red Hearted

Wikipedia

I think most foreigners don’t have a realistic idea of what America is like. Being an expatriate(I’ve never really liked that word) gives me the unique perspective of being on the outside looking in. If you look at America from the outside, watching the media, movies, celebrities, etc., you get the impression that America is a very liberal, progressive country, but what you don’t readily see is that America at its heart is a very conservative place.

This is why so many people in other countries, and a lot of Americans too were surprised when Trump won the 2016 presidential election. A large segment of society, largely unseen, felt they were losing their country. They felt unrepresented in modern America and they wanted change. Why Trump got elected is pretty simple, Hilary Clinton represented the status quo, more of the same. Trump represented change. Never mind what kind of change, but change nonetheless.

On the other hand, if you look at it historically, it shouldn’t be that surprising. The pendulum of history swings back and forth. It seems only natural that a two-term democratic president would be followed by a republican.

Last November, I watched the mid-term elections very closely. I was more engaged because it was the first time I voted since moving to Japan nearly 20 years ago. I felt there was more at stake this time.

The democrats did well and got a pretty good “blue wave” winning a majority in The House of Representatives. This includes from my home district as well, Sharice Davids, one of two Native American women elected to congress for the first time in history. For that I’m glad.

But again, looking at only the election results from the outside, it appears America is a very liberal place. This is somewhat misleading. For me, one of the most revealing things to come out of the election was the congressional results map. If you want to see the true heart of America, look no further.

With districts won by republicans in red, and those won by democrats in blue, it was a sharp contrast. Most of the country is red with blue islands and outcrops here and there. Of course, the blue areas mostly represent big cities and urban areas with higher population density. Red districts take most rural areas. The results are clear, democrats win by population, but republicans by territory. This is nowhere more apparent than my home state of Kansas. District three is the smallest in the state, but has the largest population.

If you were to land at random anywhere in America, you’d most likely land in areas that embrace more traditional, conservative values. That’s the irony of America, it looks blue on the outside, but is red at heart.

Who wins our Rights, Citizens or the Military?

The other day, I was standing in front of the kitchen sink staring out the window, lost in my own world.

“Jason.”, my wife said. “What are you doing?”

I abruptly snapped out of it. “Oh, nothing.”, I said and went back to washing the dishes. It’s my job to wash the dishes after dinner, but I had been immersed in thought. Actually, that’s when I do some of my best thinking.

I had been thinking about a lot of the things I’d been reading in the news of late.

First, was the controversy surrounding then San Fransisco 49ers player Colin Kaepernick kneeling during the national anthem at NFL games. The first time I saw the report on the news I wasn’t sure what to think. As a gut reaction, I didn’t like it. A lot of people said he was insulting the flag and indirectly, all the men and women who have served or are serving in the US military. They had a point. I felt it was disrespectful and couldn’t imagine myself doing that. I remember thinking somewhat cynically, “What a hypocrite, an NFL player earning millions of dollars protesting the flag over racial inequality.” But deep inside was a seed of doubt. To be honest, I really didn’t understand what he was protesting about. But I started to read more about why he was kneeling, specifically, to protest police brutality and police killings of people of color. Kaepernick explained,

“I’m not going to stand up and show pride in a flag for a country that oppresses black people and people of color…To me this is bigger than football and it would be selfish on my part to look the other way. There are bodies in the street and people getting paid leave and getting away with murder. “

The protest had become associated with the Black Lives Matter movement. The more I saw him and other players peacefully protesting, the more I understood and I came to respect and support what they were doing.

I was even more deeply impressed when I learned that it was a former NFL player and veteran, Nate Boyer, who helped give Colin the idea to kneel in the first place. In the beginning, Kaepernick only sat during the anthem. When Boyer, a former Green Beret saw this on TV, he felt insulted and angry. He later penned an open letter to Kaepernick stating his opinion. Later, the two men met to discuss their opposite views. One of the first things Kaepernick did was thank Boyer for his military service. This surprised and impressed him. Over the course of their conversation, as the two men respectfully listened and talked to one another, the idea of kneeling came up. We kneel to pray or grieve a fallen comrade. It was a compromise. Kaepernick would protest the injustice he felt but at the same time show more respect to those in uniform. Afterward, Boyer was quoted,

“I told him if they knelt, I would be next to them with my hand on my heart, because I support your right to peacefully protest in this country. That’s what I fought for.”

The protest gained even more recognition after he started kneeling with athletes from many sports joining in.

All of this was put into a new perspective after watching the now famous speech by then, Texas senatorial candidate Beto O’Rourke. In the video that soon went viral, O’Rourke, at a town meeting is asked what he thought about athletes kneeling at games. In an impassioned response, he said, “I can think of nothing more American.” O’Rourke went further and put taking a knee into a larger context and compared it to protests during the civil rights movement of the 60s.

“The freedoms that we have were purchased not only by those in uniform…but also by those who took their lives into their hands riding those Greyhound buses, The Freedom Riders in the deep south.”

It made me realize there’s a lot more to freedoms and rights than what’s stated in the Constitution.

These are the things I was mulling over as I stood there in front of the kitchen sink. Thinking about this and other rights movements I had a realization, what Samuel L. Jackson would call a “moment of clarity":

1)    Rights and privileges are not given freely, but must be fought for.

2)    With the exception of the Revolutionary and Civil wars, American rights and privileges have not been gained by the American military. Men and women in uniform fight to defend and protect these rights, but new freedoms are won by contentious American citizens exercising their rights of free speech and peaceful assembly on American soil.

Activists are met with hostility and criticism. This is often because their views are ahead of the curve of public opinion and not yet accepted by the mainstream. And I’m not just talking about the 60’s either. Many movements have helped secure American rights throughout our history.

In May, 1886 several people died in Chicago as a result of protests for a 8 hour work day. This was part of the labor movement in America and worldwide that helped win basic rights for workers like a 40 hour work, health insurance, and a two day weekend. It's hard to imagine a world where people fought and died to work 8 hours a day and have Saturday and Sunday off.

Women only won the right to vote everywhere in America in 1920 after decades of struggle in the women’s suffrage movement. Today it's taken for granted.

Today, same-sex marriage is universally protected in all 50 states, but was legal in only one state in 2004. It would have been hard to imagine this even 30 years ago. That’s how much public opinion has changed. All these rights we enjoy today were fought for over years on street corners, on the floors of legislators, in the voting booths, and in the courts.

We owe a great debt not only to men and women in uniform, but to average citizens who took a stand and took risks to make their world a better place. We can’t all be activists, but we should all be engaged in politics on a national and local level. Pick a side, take a stand, vote, participate in your democracy. I can think of nothing more American.

Sources:

Taking a knee: Why are NFL players protesting and when did they start to kneel?