Rekha Basu: Inequality is the new status quo

There were almost more sponsoring organizations for a recent screening of the unsettling documentary “Inequality for All” than students in the university auditorium where it played. Most in the audience were on the other side of middle age, which underscored a key point economist Robert Reich makes in the film: U.S. income inequality rose sharply in the late 1970s. The generation now in college has grown up with that as the norm.

But the empty seats also tempered Reich’s source of optimism: that things will change back when young people organize and demand different policies from their government. How can they imagine what they have never known, what some of us born in the 1950s took for granted: that laws, budgetary and taxation policies should be designed to equalize opportunities for people born into poverty, not expand the pockets of those at the top?

The numbers don’t lie. These were some shared on film by Reich and speakers at the Des Moines screening:

• Incomes of the wealthiest 1 percent of Americans rose by 275 percent in the 30 years that ended 2007. Those at the middle grew by 40 percent, and those at the lowest end by only 18 percent. The top 20 percent that year had a greater combined income than the other 80 percent.

• The top marginal tax rate on the wealthiest Americans was 91 percent in the mid-’50s, but only 35 percent in 2010 – and inequality was lowest when top tax rates were highest.

• During the 2009 recession, the top 1 percent lost 30 percent of their income, but gained back 31.4 percent. The bottom 99 percent lost 11.6 percent of theirs but have only gained back 0.4 percent.

These aren’t just partisan talking points reflecting “envy” or “class warfare,” as some politicians who support the status quo contend. They reflect shifting government priorities and changing rules, from workers’ rights to unionize to corporations’ ability to influence election outcomes. Beyond the immorality of America, with its immense wealth, ranking 64th in income equality, how can an economy like ours, 70 percent of which depends on consumer spending, survive without a thriving middle class?

You might assume, as I did, that spending by the wealthiest makes up for that. But according to Reich, who has advised presidents of both parties, they invest their money, wherever it can get the highest returns, including abroad. The 400 Americans whose combined wealth is greater than that of 150 million Americans can only use so many cars, pillows and flat-screen TVs.

To those who argue that government should leave the “free market” alone, Reich responds, “There is no free market because government sets the rules.” And those rules, as Iowa State University economics professor Herman Quirmbach says, “should help the poor more than the rich.”

Social Security, for example, has dramatically helped the elderly poor. But the working poor, who help pay for it through payroll taxes, have fallen behind. The decline of unions that began when President Reagan fired striking air traffic controllers has played a big part. Unions helped keep wages and working conditions up. Only 11.3 percent of America’s workers are in unions today, compared with 35 percent in the mid-’50s, and attempts to unionize are vigorously fought.

Consider this anecdote. Dean Eckerman, 77, a Des Moines retiree, told of shopping last year at a Wal-Mart, where he struck up a conversation with a stranger, first about sports and weather, then unions. “I asked his opinion of unions and what effect they might have on Wal-Mart,” said Eckerman, who once belonged to a federal employees’ union. As he was checking out, he said, two off-duty police officers and two store security officers arrived and told him to “stop talking to people and leave the store.” The stranger was in Wal-Mart management.

There are many pieces to the growing inequality problem. Efforts to raise the minimum wage, expand the Earned Income Tax Credit, fund child care, preschool and college assistance or invest in job training could all help. But those issues get pushback from lobbyists for businesses and anti-tax groups, which help fund politicians’ campaigns. Under the Supreme Court’s Citizens United decision, corporations or labor unions have free speech rights to influence election outcomes. Yet perversely, if Eckerman’s story is true – a Wal-Mart spokeswoman said she had no information on it – a citizen can’t even exercise his speech rights to talk to another person in a Wal-Mart store.