Chronicles of Inequality—”The Sequester” & other manufactured crises [March 4, 2013]

National Priorities Project/ A site all about “bringing the federal budget home,” helping Americans understand “sequestration” and all the other games that only the rich seem to know how to play.

Could an inequality this stark ever take root in the United States? Luxury fortress life, suggests new work from the Brazil Center at the University of Texas, may actually be closing in upon us. If current trends continue, Center director Fernando Luiz Lara calculates, the United States will probably “be as unequal as Brazil” before the end of President Obama’s second term.

Two trends are driving this “convergence.” The first: Brazil’s most desperately poor have become less poor. New government social programs have halved the number of Brazilians living in “extreme poverty.”

The second: Income in the United States has continued to concentrate. Since 2009, the latest stats show, top 1 percent incomes have jumped an average 11.2 percent. Bottom 99 percent have slipped 0.4 percent.

Economists typically measure inequality with a statistic called the “Gini coefficient.” A nation with all income divided equally would have a Gini of 0.0. The reverse, one person grabbing everything, would leave the Gini at 1.0.

The world’s most equal nations have Gini ratings that hover around 0.3. Outrageously unequal nations hover around 0.6. Brazil’s gap has dropped from that 0.6 to just over 0.5, and the U.S. Gini, just 0.35 in the early 1970s, now sits at 0.477. The current trajectory, notes Fernando Luiz Lara at the University of Texas, has both nations converging at just under 0.5 by “2015 at the latest.”

Neither nation, unfortunately, seems likely to nudge the Gini needle down from there, mainly because neither nation has made much progress shrinking the income share that goes to the richest of its residents.

Wealth and income in both Brazil and the United States remain concentrated at the top. And with that concentrated wealth comes concentrated political power, enough power to derail policy moves that might roil the rich.

And what sort of policy moves might do this roiling? A neat list has just surfacedin South Africa, where working families are struggling to get by in a society thatmay now rate as the world’s most unequal major nation.

In South Africa, as in the United States and Brazil, elected leaders these days are talking cutbacks in the public services and benefits that help narrow gaps in income and wealth. But COSATU, South Africa’s labor federation, is pushing back, demanding no more squeezing on South Africa’s poor.

COSATU wants more money invested in jobs, health, and education. And that funding, says the labor group, should come from tax initiatives ranging from a new tax rate on the super rich to a “solidarity tax” to “cap the growth of earnings of the top 10 percent and accelerate the earnings of the bottom 10 percent.”

COSATU is also seeking a new “land tax to aid the process of land redistribution” and a stiff tax on financial transactions to “encourage productive investment” and “discourage hot money.”

In South Africa, COSATU adds, top CEOs are averaging 1,728 times the average income of South African workers. COSATU is calling for a new tax on firms that continue to be “stubborn in closing the wage gap.”

And to fight “wage theft,” an escalating problem in the United States as well, COSATU is demanding a tax on firms that pay below the statutory minimum and “the distribution of such tax proceeds back to the workers concerned.”

Fernando Luiz Lara from the University of Texas sees one possible plus from the impending inequality “convergence” between the United States and Brazil. Americans, he notes, “will probably be quite disturbed (and correctly so) by becoming as unequal as Brazil.”

This embarrassment, suspects Lara, just might “trigger a national conversation” about how to move toward greater equality. If that conversation takes place, maybe COSATU should sit at the table.

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Amia Srinivasan,Dependents of the State,New York Times, February 26, 2013. A philosopher riffs on how the wealthy rely on government support for their fortunes.

Jamelle Bouie, The Titanic Wealth Gap Between Blacks and Whites,American Prospect, February 27, 2013. A new study documents a tenfold disparity between black and white wealth, the widest such gap ever.

Chris Arnade, Why It’s Smart to Be Reckless on Wall Street, Scientific American, February 27, 2013. A delightfully witty explanation of how Wall Streeters make themselves fabulously affluent.

Bartlett Naylor, Oxymoron alert: No one cares about CEO pay, CitizenVox, March 1, 2013. Corporate flacks say the SEC should not require firms to disclose their CEO-worker pay ratio — because no one cares!

Peter Dreier, Who Are the Billionaires Trying to Defeat Steve Zimmer?Huffington Post, March 3, 2013. A March 5 school election in Los Angeles has national implications for public education.

Read the Intro to the new book by Too Much editor Sam Pizzigati, then order at the publisher’s discount.

Washington University’s Steven Fazzari and Barry Cynamon, an economist now working at the Federal Reserve Bank of St. Louis, may not be the first analysts to tell this story. But their latest analysis adds into the mix a wealth of useful new data on America’s top 5 and bottom 95 percent. Their numbers directly link the Great Recession “to the trend toward rising income inequality.”

If households in America’s bottom 95 percent had maintained their 1980 income share over the next quarter-century, the two analysts note, the Great Recession either “would not have happened” or “would have been much less severe.”

Real recovery from Great Recession, their data suggest, simply won’t be coming “with the kind of income inequality that now prevails in the U.S. economy.”

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