#13 - Income Inequality in America and the Shining City on the Hill, [ How I Moved from Leaning Right to Leaning Left - Part 3 ]

In the closing scene of Star Trek II - The Wrath of Kahn, Chief Science Officer Spock, half-Vulcan, half-human, enters the radiation filled engine room to fix the ship's engine with the fate of the entire crew at stake.  He knows when he enters the room, he will not come out.  When his friend and commanding officer, James T. Kirk, rushes up from the ship's bridge, in a vain attempt to help, Spock reminds him of their earlier conversation where he had advised his friend, that "the needs of the many, outweigh the needs of the few."  Spock had done the math and knew his action was the only solution to the equation. 

Captain Kirk would later eulogize his old friend and acknowledge that of all the souls he has met in all of his travels, his Vulcan friend's, was the most human.  In his final act, Spock had seamlessly reconciled a life based on logic and one based on humanity.

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 I don't remember exactly when I first ran across the statistics on income inequality. I know it was before Obama won his first Presidential election, so it was sometime before Elizabeth Warren moved to Massachusetts and Bernie Sanders had any name recognition outside the Green Mountain State. So it was probably in 2007 or early 2008, but I know it was not a discussion point in the mainstream media.  I do recall it as a "Holy Shit" moment of realization for me.  At the time, the statistics covered a 25+ year period, and they proved that our country was headed in the wrong direction.  For an entire generation, the rich had been getting progressively richer and the poor, well they weren't going anywhere.  And the most surprising point was, that no one seemed to notice.

That's the biggest problem with any trend which happens over an extended period of time.  If you are living through it, day to day, month to month, year to year, you really don't even know that its happening.  The changes are too small, too incremental, to even notice.   Then all of a sudden, you stop to look back, you go to take inventory and then, "Holy Shit" the realization sets in that despite your hard work, your haven't been going anywhere.   There is no validation, and you can lose hope.   Sadly, this would be true for many Americans.  The graph below does a good job painting the picture. For the post WWII period from 1950 to 1980, the country moved together in lock step.  Despite the conflicts in Korea and Viet Nam, the country established its economic footing and everyone's family income grew at a steady pace, whether you were very well off or were just living pay check to pay check.  Everyone, everyone was moving forward.  This was our form of capitalism, and it was good.  But in 1980 a small separation began to occur and it would get progressively worse over the next 35+ years. During this time families in the 95th percentile saw their real income grow 75%, while the real income for those in the 20th percentile hardly budged.

The Greatest Generation, as Tom Brokaw called them, got us through the Depression, WWII and the post war years with dignity and with a sense of equality, but as the Baby Boomers began to establish themselves in the world, America began to change.

Even more telling are the statistics on Wealth Accumulation, which effectively represents the accumulation of family income over multiple years less expenses during that time.  In 1980, the top 1% of families owned 25% of the country's wealth, 35 years later that same 1% now owned 42% of the country's wealth.

Maybe this wasn't the best of times and the worst of times, as Charles Dickens described the years leading up to the French Revolution, but it was directionally accurate.  If this trend continues, there is no telling where it will take us, but it not unreasonable to observe that the election of Donald Trump as our President is the first indication of a shift underway.  Americans who feel left behind are clamoring for change, any change, and at any cost.    

So what happened?  How did we get here?  Why didn't we see this coming? Why didn't we realize we were going down the wrong path and just change direction?.  What factors contributed to the slow moving force of income inequality?  I am sure that real experts on this topic probably have a very long list of factors, but here are my top four:

1.     Advances in technology

2.     Globalization of trade

3.     Failure of our educational systems to keep up with the needs of the workforce

4.     Republican driven tax cuts of 1981 under Ronald Reagan and 2001 under George W. Bush.  

1) Advances in technology - There is no stopping the wheels of progress.  If you stand still you are dead, and this was no more apparent than in the last 35+ years.   IBM introduced the first real PC on August 12, 1981 and PC's would come into their own over the next decade, the Internet took hold in the mid-nineties and smart phones led the way in the new millennium.  Technology was driving efficiencies and disrupting the status quo.  I remember holding up my pre-smart phone era Blackberry (I still miss that wonderful tactile feel...) which could be used to make calls, send email, manage my calendar, take notes, and write letters, and saying "this used to be a secretary".  And before the aforementioned "Holy Shit" moment in my life,  I would say it with the callousness of a businessperson cloaked in the smugness that he knew the world was moving forward, and that it was all good. Later, I would hold up my (now) I Phone, and use the same words, but they would now carry my acknowledgment that the advancement in technology had a darker side I had not previously appreciated.

There is no solution to this particular cause of income inequality.  No one can stop these advances in technology, and no one should try.  It is a runaway train and everyone has to do their best to jump on board.  Corporations and individuals, Democrats and Republicans should embrace its benefits and do their absolute best to keep ahead of the challenges it creates.

 2) Globalization of trade  - The benefits of globalization were supposed to accrue to everyone. Competition would increase, goods would cost less, opportunities would increase, business and capitalism would in turn promote democracy, different countries and cultures would develop new ties. With everyone's interest now in alignment, we could even tackle issues around the environment and stop global warming. It was the next stage in the development of Planet Earth, and it was inevitable, and it was good.   That's what they said anyway.   To be fair, some of these things did occur and given time others may come to be, but in the interim, globalization has led to a clear separation between big winners and big losers.  Large, multi-national corporations (more typically represented by Republicans in our country) were in the best position to exploit the real benefits of globalization. They could go wherever they wanted to make their products, and sell those products into large new markets and sometimes take advantage of tax havens located outside the country. While some segments of the US work force thrived, many workers in the US (more typically represented by Democrats), especially in manufacturing, saw their jobs simply disappears. The luckier ones would be forced to take pay cuts.

The chart below shows that as Globalization took hold in the early eighties, the US trade deficits began to soar.  This was exactly the same time that the winners and losers of income inequality were taking shape.  

As is the case with the advance of technology, we will not stop globalization.  That is not to say that we should not negotiate better trade deals or improve our own tax structure to benefit Americans who have been hurt the most, as Donald Trump has indicated he will do.   While actions we may take now, may have the impact of slowing down or muting the impact of globalization, the genie is already out of the bottle on this one.  If we are not part of this process, America will lose ground to other countries.

3) Failure of our educational systems to keep up with the needs of the workforce-  This is a topic which would be best addressed by individuals who understand the complexity of the issue so much better than me.   And it can't possibly be distilled into a few paragraphs, so I won't really try.

I will just observe that despite the fact that good Republicans and good Democrats alike have sincerely tried to deal with this problem and despite the allocation of significant money and resources to the issue over several decades, the gains have been few.  Compounding the matter, our educational system has been battered by outside forces including, but not limited to, shrinking resources from government cutbacks in the wake of the 2008 financial crisis, expanding requirements thrust upon them by state and federal governments alike, and the growing stress placed on families since the 1980s.  The growth of single parent households and dual income households reduces the opportunities for parents to sit down with their children every night to review their homework.  The impact of this last point is difficult to quantify, but we know there is a direct correlation between the strength of a student's network of support or lack thereof, and the success of their educational journey. 

The overarching problem we now face is that specifically because of the effects of technology growth and the globalization of trade, our educational system has to do more than just stand still. It has to keep pace and grow along with these forces around them.       

4) Republican driven tax cuts of 1981 under Ronald Reagan and 2001 under George W. Bush. (which I fully supported during my years of leaning right).  While all Americans benefited, including corporations and individuals, the biggest winners here, were the ones who needed it the least.  It was a very politically astute approach.  Offer everyone something, make them feel good, but distract them enough so they don't see the Man behind the curtain, pulling the strings, making life so much better for the Man.                                                               

Under Reagan, the top individual tax rate was reduced from 70% to 50%.  Reaganomics represented the beginning of the Trickle Down Economics, the concept of providing tax benefits to the wealthy which would accrue down to the poor.  Reagan's eventual VP candidate George H.W. Bush would call this Voodoo Economics.  Whatever you call it, it started the same year we started to see the divergence in income gains between the wealthy, the middle class and the poor.  You do the math, but the only thing that trickled down to the masses was a bunch of empty promises.

Under George W. Bush, as reported by the Economic Policy Institute, the average middle-class family received one-eighth of the tax breaks that a family in the top 20 percent of income earners received.  More dramatic was the fact that the average tax cut received by the top 0.1 percent of Americans, those making more than $3 million a year. That is over 450 times the tax cut received by an average middle-class family.

                                 

The non-Partisan Congressional Research Service (in the Library of Congress) issued a report in 2012, analyzing the effects of tax rates from 1945 to 2010. The CRS concluded that top tax rates have no positive effect on economic growth, saving, investment, or productivity growth; reduced top tax rates do, however, increase income inequality.  The report stated that top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution.

Of my four major reasons for the causes of income inequality, the only one we have complete 100% control over is tax policy. This needs to be fixed, and it needs to be done in a way where the neediest gain the most.  The Republican perspective on this has been uniquely warped to the betterment of a large slice of their constituency, and they continue to pursue this goal with a fervor that seems out of place especially in light of increasing budget deficits, the massive growth of the country's debt, the ongoing and costly battle against terrorism and the country's financial overhang from Wars in Afghanistan and Iraq.  It represents one of the primary reasons I now lean Left, after leaning Right for many years.   The one issue we can control is the one thing we screwed up, all by ourselves.

In 1980, on the eve of his first Presidential election, Ronald Reagan, the Great Communicator, would speak of America as the Shining City on a Hill.  It was a beautifully simplistic vision which both reminded us of who we were, and where we were going, all in a single image.   It resonated with all Americans, and it made us feel good.  And over the next few decades some would be able to make the climb and reach this Shining City, but many would not, and some would remember the image as deep betrayal that their country had left them behind.

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For those of you who don't know, Mr. Spock was miraculously reborn in Star Trek III - The Search for Spock.  When his remains were sent out to space, they were caught in the waves of the Genesis Project which was attempting to jump start life on a dying planet and he became an indirect beneficiary (its all very logical, really).  For Trekkie fans everywhere, this Christ-like raising from the dead was a time to rejoice.  The most unique character on the show, who quietly inspired those around him with his unique DNA of logic and humanity, would continue to impact their lives in the future.   For the crew members of the Starship Enterprise, The Search for Spock was more than the search for their friend, it was also a metaphor for the search for their better selves, it was a search for their souls.

I view the need to solve our problem of income inequality as a selfish act of patriotism.  If we love America, and everything it has stood for in the world, then selfishly we want it to move forward and grow.  And if the current trend continues unabated for another 35+ years, while we can't know what exactly will transpire, our own understanding of history and our own logical views tell us, that things will not end well.

On the Democratic side, the battle has begun and the banner for this issue has been carried by Elizabeth Warrren and Bernie Sanders.  I absolutely applaud their effort on this issue, but I have to admit that both of their personalities grate on me somewhat, and if they grate on me, think how roughly 40%+ of the population probably feels.  On the Republican side, some believe Donald Trump will carry the banner, but I have my doubts, for me, his first month in office is anything but, reassuring.  No, this will require the effort, focus and commitment of moderate Republicans and moderate Democrats everywhere.  I know they are out there, but they must raise their hands and be counted, and they have to move past the partisan behavior that has dominated our country in the new millennium.

So now, if we want our country to succeed and grow and thrive, long after we are gone, we must recognize that the needs of the many, outweigh the needs of the few, that we want and need a strong middle class, and we want and need a lower socio-economic class that believes they can achieve more.  We need them to be able to harness the benefits of capitalism to move forward. We need them to have an honest chance where the deck is not stacked against them.  We need them to climb the hill and reach the Shining City.   If we do the math, it is the only logical solution and it is also the most humane.

I am optimistic we will get there.  I am optimistic we will find a way.  In the process we will put our children and grandchildren in a position where they all might have the opportunity to ...live long and prosper.  

Thank you, Mr. Spock, thank you.

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