Steven Pearlstein, who usually has a tepid, establishment take on things, sounds kind of shrill, even, perhaps, liberal when he talks about income inequality. Pearlstein does a good job of laying out the facts of inequality (and how it’s become worse), but it’s the implications of inequality that are worth citing (italics mine):
Concentrating so much income in a relatively small number of households has also led to trillions of dollars being spent and invested in ways that were spectacularly unproductive. In recent decades, the rich have used their winnings to bid up the prices of artwork and fancy cars, the tuition at prestigious private schools and universities, the services of celebrity hairdressers and interior decorators, and real estate in fashionable enclaves from Park City to Park Avenue. And what wasn’t misspent was largely misinvested in hedge funds and private equity vehicles that played a pivotal role in inflating a series of speculative financial bubbles, from the junk bond bubble of the ’80s to the tech and telecom bubble of the ’90s to the credit bubble of the past decade.
As Pearlstein notes, income inequality bids up prices of inelastic goods, and thereby diminishes the quality of life for people lower down on the economic totem pole.
I’ve discussed how income inequality drove the massive increase in college tuition before, so I won’t rehash it here. But Pearlstein bumps into a point that typically isn’t raised about progressive taxes. They don’t really help the middle-class and lower-middle class that much (keep in mind that the median income in the U.S. is around $50,000). Most proposed progressive tax schemes wouldn’t really narrow the gap between someone who makes $50,000 per year and someone who makes $100,000.
Where the after-taxes income gap really would narrow would be between high income families, such as between one that makes $150,000 annually versus $350,000. Likewise, the couple facing ‘hardship’ at $450,000 per year–and who wants to live as if they earned $1 million–would be, after a more progressive tax, a lot closer in income, and therefore, lifestyle to the millionaire if there were a more progressive income tax.
Yet these are the groups that most vehemently oppose a significant increase in the upper tax brackets, never mind the paltry one Obama is pushing. I guess it just goes to show that rich people can be fucking morons too.