Inequality Hurts Us All

Editorial

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Published October 25, 2012, issue of November 09, 2012.

Biblical Judaism knew what to do about income inequality: observe the sh’mitah, the sabbatical year. Every seven years, according to the laws of Leviticus, debts are to be forgiven and all agricultural activities — plowing, planting, pruning and harvesting — are to be suspended. The gap between rich and poor, those who have and those who do not, would not so much disappear as recalibrate, pushing the reset button, as it were. The poor would be released from their debts and the land only maintained, not improved.

And if the trees bore fruit, it could be picked by anyone.

This utopian vision serves a spiritual purpose: to emphasize egalitarian principles and the belief that men and women are stewards, not owners, of the land and what it produces. Even though this idea seems quaint and unworkable in today’s nonstop global economy, it does exert a certain moral power. It seems right that the playing field be equalized every so often, and that the poor get another chance. It appeals to our American sense of fairness.

In this endless election year, when improving the economy remains the highest priority and deepest obsession, the issue of income inequality is raised as a moral argument, if it is discussed at all. Or occasionally it is bandied about in an Occupy context, with one side contending that the concentration of wealth in the hands of a few will lead to social unrest and polarization, and the other side responding with accusations of class warfare.

No wonder it’s more fun to talk about Big Bird and bayonets.

Both the moral and the civic arguments are true and sound, but they are not the only case for addressing income equality. There’s something even more basic: The widening gap between the very rich and everyone else is hampering economic growth and adding to social distress. This is referenced sometimes by Democrats and largely ignored by Republicans, even though a growing body of research argues the point persuasively.

“Some moral philosophers address inequality by invoking principles of justice and fairness,” wrote Robert H. Frank, an economic professor at Cornell University, in a New York Times article. “But because they have been unable to forge broad agreement about what these abstract principles mean in practice, they’ve made little progress. The more pragmatic cost-benefit approach… has proved more fruitful, for it turns out that rising inequality has created enormous losses and few gains, even for its ostensible beneficiaries.”

Even the International Monetary Fund has begun sounding the alarm, warning the United States that economic growth accompanied by increasing income inequality is more fragile and unstable, and therefore less likely to be maintained.

How large is the gap? The Congressional Budget Office issued a long-awaited report last year showing that between 1979 and 2007, the incomes of the wealthiest 1% nearly tripled at 275% and the next richest grew by 65%. But middle class incomes grew just under 40% during those decades, and for the bottom fifth of Americans by only 19%. While it is true that the wealthiest suffered during the subsequent Great Recession, history shows that they bounce back quite nicely, thank you. Not so for everyone else.

That’s because the wealthiest 1% get to keep more of their money, paying the smallest proportion of their income in federal taxes than anytime since the end of World War II. This isn’t some political rhetoric. It’s a statement of fact based on a new report by the Congressional Research Service, a nonpartisan government group.



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