Judging by a number of remarks I heard throughout the weekend at the Conservative Summit, Jim Webb's response to the State of the Union really grinded a lot of conservative gears. One reason for this is that Webb went hard after an issue that conservatives very much don't want to talk about: economic inequality.
The broader philosophical question is why we should worry about inequality — of any kind — much at all. Life is not a race against fellow human beings, and we should discourage people from treating it as such. Many of the rich have made the mistake of viewing their lives as a game of relative status. So why should economists promote this same zero-sum worldview? Yes, there are corporate scandals, but it remains the case that most American wealth today is produced rather than taken from other people.Ramesh Ponnuru makes the same argument in the February 12 edition of the National Review, which was published to accompany the Summit:
What matters most is how well people are doing in absolute terms. We should continue to improve opportunities for lower-income people, but inequality as a major and chronic American problem has been overstated.
Conservatives generally think that an unequal distribution of wealth and income is not, per se, a bad thing [...]In other words, inequality is not unjust, so it should only be a concern when it has the practical effect of threatening the system itself.
We should care about reducing the number of people living in poverty ... But inequality should matter only if it reaches the point where it threatens popular support for a market economy. It is nowhere near that point. [Print only: p. 22]
Over the last few years, political scientists have been converging on the view that massive disparities in wealth and income really do distort the democratic process--by allowing a tiny segment of the population to wield outsized influence in the political realm.The wealthy, Plumer points out, vote more (perhaps because they feel the system responds to them), make more political donations (which dramatically increases access to policymakers), and are almost exclusively represented in the ranks of elected officials. The result is a situation in which an activist government actually works for the elites, distributing wealth upwards. This broad imbalance in democratic representation means that some citizens end up being more equal than others. If inequality is left unchecked, "the very idea of 'equal citizenship' will continue its long erosion."
Much of the measured growth in income inequality has resulted from natural demographic trends. In general, there is more income inequality among older populations than among younger populations, if only because older people have had more time to experience rising or falling fortunes.Thus, inequality comes about mostly thanks to "relaxed bohemians" in their yurts, and old folks unable to stop buying all that crap on HSN.
Furthermore, more-educated groups show greater income inequality than less-educated groups. Uneducated people are more likely to be clustered in a tight range of relatively low incomes. But the educated will include a greater range of highly motivated breadwinners and relaxed bohemians, and a greater range of winning and losing investors. A result is a greater variety of incomes. Since the United States is growing older and also more educated, income inequality will naturally rise.
Data from the Bureau of Economic Analysis through the third quarter of 2006 show that a historically high share of corporate income is going into profits and interest (i.e., capital income) rather than employee compensation. And a newly released Congressional Budget Office (CBO) analysis of household incomes shows that a greater share of this capital income goes to the richest households than at any time since the CBO began tracking such trends. In other words, our economy is producing more capital income and that type of income is more likely to go to those at the very top of the income scale.This, despite what conservatives would like us to believe, is unjust. It is unjust when American workers, the most productive in the world, create additional wealth only for that wealth to be sucked away into corporate profits. If my hard work is rewarded by a situation where my boat rises only a little bit, so that your boat can rise a lot, then an injustice has been done. It is a zero-sum equation.