The Nossiter Net
The net that shall enmesh them all
Edited, Written, and Published by J.C. Nossiter
The Morning Mendacity
Thursday, August 19th, 2004
The Nossiter Net is cast  to snare some of  the riper rascalities of the day.  Comments?  editor@nossiter.net
Leigh Strope of the Associated Press sent a telling statistic over Tuesday’s wire. In 1973, the top 20% of income earners accounted for 44% of US income.  In 2002, the top earners' share was 50%.  Meanwhile, the bottom 20% of earners once pocketed 4.2% of national income.  Their share, thirty years later, has fallen to 3.5%.  These may not seem like huge shifts, but in percentage terms they tell a grim tale.  In thirty years, the richest’s share of the national pie has increased 14%, while the poorest’s has declined 17%.

When economists don’t have a good answer, or have an answer whose implications they don’t like, they blame “structural” factors.  When unemployment remained stubbornly high throughout the 70’s and 80’s, economists said the cause was structural, implying that the economy had evolved in such a way that high unemployment was unavoidable if inflation were to be averted.  When the unemployment rate dropped in the 90’s, without a resurgence of inflation, that explanation was quietly forgotten.

Hence Mr. Sung Won Sohn, chief economist at Wells Fargo, on the growing gap between the rich and poor: "This really has nothing to do with Bush or Kerry, but more to do with the longer-term shift in the structure of the economy."  Mr. Sung invokes that old standby, structural causes, to explain that high paying jobs have moved out of the country, leaving in their wake burger flipping and Walmart box pushing jobs that pay less, thus dragging down the incomes of the bottom 80% of wage earners.  This is a view prevalent among professional economists.

But wait.  Aren’t all those outsourced, off-shored jobs supposed to be in businesses like telemarketing and textiles, not exactly high paying professions?  That also is the conventional wisdom in the economic fraternity.  To a non-economist, these two different views would seem contradictory, and the non-economist would be perfectly correct.  He would have merely overlooked one of the central truths of economics:  put five economists in a room, and you’ll get six different opinions.

Opinion doesn’t enter into this discussion though, because Mr. Sung and his fraternity are simply wrong.  Growing income disparity between rich and less rich began slowly, with high unemployment in the neglected minority workforce.  Immigration contributed a little, adding to the stock of low-paid workers.  And the stock market boom of the 90’s accelerated the trend, enriching the haves, doing little for the have-nots. 

But the principal reason why the rich have gotten richer and everybody else has not is government policy.  Mr. Reagan’s historic breaking of the air traffic controller’s union in 1981 began a dramatic decline in labor union power that has helped keep wage growth stagnant at the lower end of the earnings scale.  At the other end, changes in the tax laws have consistently favored those with high wages, property, and securities.  That too began with Mr. Reagan, whose “tax cut” shifted the burden of taxation from the upper to the middle classes by lowering the top tax rates and greatly increasing payroll taxes.  The trend, as documented in David Cay Johnston’s excellent book,
Perfectly Legal: The Covert Campaign to Rig Our Tax System, has been hugely accelerated by the Bush tax “cuts”, whose major benefits have flowed to the rich, leaving crumbs for everybody else.

Mr. Sung and his ilk sing out of tune with reality.  The shameful growth in income disparity between rich and poor has everything to do with Mr. Kerry and Mr. Bush.  The wonder is why anyone earning less than $300,000 a year would consider shooting himself in the wallet by voting Republican.
©J.C. Nossiter 2004
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