Robert Samuelson actually wrote the following as the concluding paragraph of his column today:
Still, the present concentration of income and wealth instinctively feels excessive. It understandably stirs resentment. We’d be better off if the rich were less so and other Americans were more so. But it’s doubtful that political action to force this transformation would be similarly beneficial. Class warfare is bruising; today, it would degrade the confidence needed for a stronger recovery.
Let’s look at this:
Premise A: less income inequality would be better.
Premise B: political action to create less income inequality would not be better.
Conclusion: Since A does not equal B, confidence fairies, ponies, and rainbows.
If you don’t want higher taxation on the rich, you should just say so. No rationale is really required. But to present this as a logical argument is beyond embarrassing. It’s a preference.
Insofar as there is any logic to it, the argument is that the government cannot take action to lower income inequality because that would “bruise” rich people and cause them to lose confidence, which would cause them to withdraw from investment opportunities, which would lessen economic growth, which would hurt everyone and solve nothing.
One problem with this argument is that Samuelson acknowledges that there was a time when income inequality wasn’t so great in this country:
In 1954, American economist Simon Kuznets (1901-85) argued that income inequality would fall as societies modernized. Workers would move from low-paid farm jobs to better-paid industrial jobs. Gaps would narrow.
This seemed to have happened in the United States. From the 1920s to the 1950s, the income share of the richest 10 percent fell from around 50 percent to about 35 percent. But now it’s rebounded to the late 1920s’ level. This stunning fact, published previously in academic journals, helped make inequality a big political issue.
What happened policy-wise in the period between the 1920’s and the 1950’s? That happens to correspond exactly with FDR and Truman’s five terms in office. Therefore, it also corresponds with the apogee of labor power and the introduction of strong regulatory and redistributive schemes that have been systematically weakened since that time. If you look an income distribution as a grandfather clock, the pendulum has swung all the way back to where it began in the 1920’s.
Remember that Mr. Samuelson wrote that it “would be better” if there were less income disparity. Either he doesn’t really believe that or he expects some kind of magic to solve the problem. But we have at least a rough blueprint for how to tackle the problem. Obviously, times have changed and we can’t expect to just slap 1930’s solutions onto 2010’s problems and get the exact same results, but we also don’t need to reinvent the wheel.
Before we can do anything, however, we have to admit that policy has the power to address the issue.
