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«The Politics of Economic Inequality Timothy P. Carney Presented to Free Market Forum Hillsdale College Center for the Study of Monetary systems and ...»

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The Politics of Economic Inequality

Timothy P. Carney

Presented to Free Market Forum

Hillsdale College Center for the Study of Monetary systems and Free Enterprise

Indianapolis, Indiana

October 24, 2014

In late 2013, President Obama previewed his intended political strategy for the 2014

election year with a speech in Southeast D.C. “I believe this is the defining challenge of

our time: Making sure our economy works for every working American,” Obama said.

“It’s why I ran for President.” Obama in that speech called inequality “a fundamental threat to the American Dream, our way of life and what we stand for around the globe.” Inequality and immobility became a theme of his State of the Union address a month later.

Around this time, reviews of Thomas Piketty’s Capital in the Twenty-First Century dominated every magazine, website, and newspaper in Washington, D.C.

But by election season—by the beginning of Autumn 2014—Obama had dropped that talk. “Income inequality seems like it’s on the back burner now—at least in terms of their rhetoric,” Jim Kessler, senior vice president for policy at Third Way, a centrist Democratic think tank, told the Washington Post in July. Democrats were back to “War on Women” talk, and actually campaigning on their support for corporate subsidy programs such as the Export-Import Bank.

Still, Democrats kept up their billionaire-bashing, and their relentless call for an increase in the minimum wage.

This shift in posture—and this nuanced approach to questions of wealth, poverty, fairness, and inequality was nearly uniform across the party, and it reflected an interpretation of public opinion polling. It reflected a sophisticated read of the American attitude towards inequality.

To understand the role the issue of inequality plays in American politics today, it’s instructive to review public polling, and also to study the political positioning by some of the most message-disciplined candidates in the country—the Democratic nominees in the top-tier U.S. Senate races.

Such a review suggests an American public that cares about inequality, but not as a top-tier issue. It also suggests Americans’ concerns about inequality are grounded in an understanding of fairness, and nuanced understanding of earned wealth versus unearned wealth.

Polling Data Polling data generally shows that Americans see economic inequality as growing, and they dislike the current level of inequality. But they don’t care very intensely about it— and there’s a serious limit to what most people are willing to do about it. This gives inequality a real, but limited role in U.S. politics.

First, most Americans think inequality is getting worse.

Four in five Americans “feel the rich get richer and the poor get poorer,” in a 2013 Harris Interactive poll. “The gap between the rich and the poor in the U.S. is getting larger,” said 75 percent of Americans in a CBS News poll in January 2014. Only 5 percent said the gap was getting smaller.

“The gap between the rich and everyone else in the U.S. has increased,” said 65 percent of those polled by Pew that same month—compared to only 8 percent who said the gap had shrunk.

Second, most Americans think inequality, at its current levels, is bad.

Only 7 percent of respondents told Gallup in January 2014 that they were “Very satisfied about the way income and wealth are distributed in the U.S.” while 39 percent called themselves “very dissatisfied.” In a January 2012 Gallup poll, Americans were more likely to say the economy was unfair (49%) than fair (45%). Consistently about 60 percent tell Gallup that “Money and wealth should be more evenly distributed.” Interestingly, this number dropped (and the view that “Distribution is fair” rose) just after stock market collapses in 2000 and 2008.

The trickier question is what government should do about inequality. Public opinion polls in this area are mixed and more evenly split.

When Gallup asked in early 2014 “how important is it to you that the president and Congress deal with [The distribution of income and wealth] in the next year?” 57 percent said it was extremely important or very important.

“When it comes to reducing income inequality between the rich and poor, do you want to see the government more involved than it currently is?” NBC News and the Wall Street Journal asked in January 2014. More than one third said yes. But a combined 46 percent said “less involved” or “not involved at all.” Gallup sometimes puts the question of redistribution very directly, asking respondents if they believe “Our government should redistribute wealth by heavy taxes on rich.” Even with this stark wording, the public is pretty evenly split, with 52 percent favoring redistribution in an April 2013 survey.

“In thinking about the gap between the rich and everyone else,” Bloomberg News asked in June 2014, “do you think it would be better for the government to implement policies designed to shrink that gap, or better for the government to stand aside and let the market operate freely even if the gap gets wider?” Slightly more respondents said “let the market operate freely” than called for government action. In general, poll questions like this find an evenly divided American public.

The final question is how much of a priority this should be. When the AP asked respondents to list up to 10 problems they would “like the government to be working on in the year 2014,” there was very little interest in inequality. Only five percent of those polled brought up “Income inequality/concerns about poor and/or middle class.” Taken together, polls show this picture: Americans see inequality as growing, which is a problem they would like government to address—but not as a top priority.

Inequality in Election 2014

Given the majority support for action on inequality, it’s no surprise President Obama kicked off the current election year using inequality as a theme. But the theme has largely disappeared from the campaign rhetoric of Democrats running for major offices this year.

Examining the scripted rhetoric of politicians reveals their understanding of the electorate. U.S. Senate candidates in competitive races don’t rely on their own gut feeling to discern the views and moods of the electorate—they benefit from the polling and focus-group work of their national party. Given how much is at stake in a competitive U.S. Senate race, the parties pour significant resources into studying the public mood. This information is shared with all of their candidates, and so you can often see uniform shifts in the rhetoric and emphasis from all the Senate candidates of one party, across many states. This is evident this year among Democratic candidates, on their handling of inequality issues.

Senate candidates’ websites almost always have an “issues” page. Savvy candidates don’t make these pages comprehensive, but instead use them as a way to lay out the policy views they most want to convey to voters. A review of the issues pages of Democratic Senate candidates this fall finds almost no mention of inequality.

Of the 12 most competitive Senate races, nine had an “issues” or “priorities” page, with an average of nine and a half top-line issues or issue categories. “Inequality” and poverty didn’t show up in any of them. (A few campaigns included “equality,” but this was about gay marriage and anti-discrimination laws, and not about wealth or income equality.) The closest was Iowa Senate candidate Bruce Braley, who included “wages” as a top-line issue. That page called for a higher minimum wage and legislation to close the gender pay gap.

In their more detailed discussions of economic issues, only two of the Senate candidates in a top-tier Senate race uses the word “inequality” to refer to income or wealth disparities between the wealthy and the non-wealthy: Gary Peters, in Michigan, in arguing for an increase in the federal minimum wage, and Rick Weiland in South Dakota, who is running a uniquely populist campaign.

The Senate candidates do address issues that are close to the matter of inequality:

Mostly, they advocate preserving some aspects of the safety net (but not expanding it), raising the minimum wage, and battling the political influence of big money. When the Coloradoan asked Sen. Mark Udall about inequality, he called it a “vexing challenge,” and proposed four things: raising the minimum wage, increasing Pell Grants and student loan subsidies, legislating equal pay for equal work, and hiking taxes on companies that offshore jobs.

Udall’s response reflected his party’s polling on the matter and it reflected his understanding of the place inequality holds in American politics today: people think inequality is too great, and they generally favor the idea of action on inequality, but the specific policies they favor aren’t actually redistribution. Udall’s four proposed solutions fit into two categories: fairness arguments, and government aid to people just above the median income—that is, government aid to swing voters.

Sen. Chuck Schumer, a member of the Democratic leadership tasked with fundraising

and crafting party messaging, explained the party’s thinking on the matter this year:

Both the White House and the Senate agreed that the decline of middle-class incomes was the most serious issue we face in this country, but the focus had to be on how to get middle-class incomes up, rather than drive other people’s incomes down. There are some who believe it’s better to talk about the negative parts of wealth that people have accumulated, but our polling data show people care less about that and more about how we’re going to help them.

Following this approach, Democratic Senate candidates enter to the arena of inequality by addressing the two themes Udall did: fairness, and economic support for middle- and upper-middle-class voters. Mostly absent: talk about the poor, or about the rich.

Most Democrats in competitive Senate races are campaigning on increasing the minimum wage, and like Udall, they pivot to this when asked about inequality.

The notion that hiking the minimum wage would ameliorate inequality is not a matter of economic consensus. Increasing the minimum wage, much economic research suggests, helps a few workers get higher wages, while raising prices for consumers, and, much of the data suggest, increasing unemployment among lower-wage workers.

Some costs of a minimum-wage hike will come out of corporate profits (thus a progressive transfer from shareholders to workers), but the industries that pay minimum wage are generally the industries that operate on the slimmest profit margins. Much of the cost will be borne by consumers and those workers whose jobs are cut or not created—hardly a cure for inequality.

The party unity in favor of a minimum-wage hike should be seen less as an attempt to ameliorate inequality, and more as an attempt to appeal to voters’ idea of fairness.

For example, Democratic Senator Mark Warner of Virginia “expressed concerns … about raising the federal wage floor to $10.10 an hour,” Bloomberg News reported just before the Senate’s February vote on the matter. Warner thought the size and speed of the hike could increase unemployment and prices. Yet he voted for the hike the next day, and emailed his supporters declaring the hike “the right thing to do.” This is what Democrats signal with proposals to increase the minimum wage: fairness towards those at the bottom of the income scale—though not necessarily more money.

And for those at the top of the income scale, Democrats have the same sort of prescription: no real redistribution, but plenty of gestures towards fairness. Democrats don’t attack Republican efforts to repeal the estate tax. They aren’t campaigning on raising the capital gains rate to equal income tax rates. Not a single one of the top Democratic candidates’ websites calls for higher individual income tax rates.

Instead of going after billionaires’ wealth, Democratic politicians in the 2014 cycle are going after their political clout. Sen. Hagan in North Carolina has made it a main theme of her campaign to point out how groups funded by conservative billionaires Charles and David Koch are supporting her opponent. Al Franken in Minnesota and Gary Peters in Michigan are campaigning in the same vein. Visitors to Peters’ website land on a page in which the candidate criticizes the Supreme Court’s ruling in Citizens United v. FEC, which opened avenues for organizations and wealthy individuals to spend more on politics.

As with the minimum wage issue, this is not a call for redistribution, but more an appeal to fairness—it is just not fair that people with more money should have more of a say in politics.

Just what do billionaires do with this unfair say in politics? Democratic candidates often don’t delve into that. The undue influence of the wealthy is itself the problem.

Given the consistency of this theme among Democratic candidates, it is safe to assume the party has developed this message in accordance with polling data and focus group tests. Public polls suggest the same themes.

During Occupy Wall Street in 2011, Pew conducted a poll about views towards Wall Street, inequality, and the fairness of America’s economic system. On all these questions, the greatest consensus was found on the question of whether, “there is too much power in the hands of a few rich people and corporations.” About 77 percent of respondents said yes.

The Democratic attacks on the Kochs don’t focus on the Kochs’ businesses, or how they got rich, but on how much they are spending on politics, and the ways in which they are influencing politics.

I saw this first hand at Occupy Wall Street. In the early days of that protest, I spent the night on the sidewalk of Zuccotti Park. In the morning, I took a census of the various signs. By far, the public policy mentioned most was campaign finance regulation. It was more prevalent than discussions of bailouts, taxes, regulations, or war. Democracy and disenfranchisement were more common themes than redistribution.

Democrats’ campaigns, and the occupiers’ interests reflect the general American view towards wealth: We don’t mind rich people being rich; we mind rich people having undue influence.

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