In explaining how the rich get richer by staying hidden, Henry Grabar tells of Star Island (near Miami Beach), where "a vacant lot sold for $10 million this summer:"
It's rare to come face to face with such heights of personal wealth in this country. The grandest homes are squired away, Biltmore-style, on large estates. The next class of mansions hides behind walls, gates or dense horticulture.
As "the top end of the country's wealth spectrum has grown more and more obscure," he writes, "Opulence lurks unseen:"
That may be one reason Americans don't seem to rally around inequality as a political issue: It's hard to see. The tremendous concentration of wealth at the upper end of America's income spectrum isn't reflected in our daily experience of the world. On paper, this may be another Gilded Age. In person, it doesn't look like it.
Meanwhile, the finance industry is gorging itself because, thanks to compound interest rates, "those who wield the power of debt, wields enormous economic power:"
In our society we've given that power to private financial corporations, and they've done a masterful job in pushing us to the brink of debt peonage.
"Therefore," the piece observes, "key to controlling runaway inequality is to dramatically curtail the power of high finance:"
Before 1990, the average consumer limited household debt to about 40% of disposable income (income we can spend after we pay our taxes). But after modern financial engineering invaded the housing and credit card markets (making it possible even for dead people to obtain mortgages) household debt soared to nearly 160% of household income.
The more households paid to service their growing debt, the more money flowed into the financial sector. Rising inequality followed.
The effects of tax rates on inequality are well noted here:
Throughout the ages, the wealthy would rather loan the government money than pay taxes. The reason is simple. When the wealthy loan money to governments (historically to fight wars) they stand to make more money in return. Not so if they are taxed.
In the modern era, this is even more true since government debt instruments pay interest that often is tax deducible. The rich benefit by loaning money to government and having the rest of us pay it back through our taxes, not theirs.
On the income side of the ledger, Naked Capitalism's Ed Walker explains what the market says you're worth:
Even as more low paid workers take to the streets to demand an increase in the minimum wage, there are plenty of people ready to tell you that labor markets pay you what you are worth, so if you get $9.35 per hour for 30 random hours a week, that's what you are worth. I hear this from lots of people who should know better, college-educated people holding well-paying jobs in the corporate world, even women who must know that on average women are paid less than men doing the same job. One reason people believe this obviously false idea must be the theory of marginal productivity of labor taught for decades in colleges and high schools.
He asks, "if most economists think so little of [marginal productivity theory], why does it survive?"
Maybe it's because the distribution it describes is supposed to arise from the operation of Natural Law. As such, it fits neatly with Invisible Hand mumbo-jumbo. Natural Law isn't a testable or usable theory. Instead, it is a normative theory. It tells you what the writer thinks is the moral and righteous position. People who tell you marginal productivity theory is true want you to think that current distribution of income is natural and just, and that any other distribution would be unjust, unfair to someone.
That's what that Natural Law stuff means: the income you get from the labor market is what it Should Be, and if you get more, you're taking it away from someone. Maybe that someone is another worker, but more likely, you're stealing from the owners of the things used in production: the return to which the capital owner and the land owner are entitled by virtue of the Natural Law.
Paul Krugman looks at presidents and the economy, observing that "serious analyses of the Reagan-era business cycle place very little weight on Reagan, and emphasize instead the role of the Federal Reserve, which sets monetary policy and is largely independent of the political process:"
Reagan got the political credit for "morning in America," but Mr. Volcker was actually responsible for both the slump and the boom.
The point is that normally the Fed, not the White House, rules the economy. Should we apply the same rule to the Obama years?
For one thing, the Fed has had a hard time gaining traction in the wake of the 2008 financial crisis, because the aftermath of a huge housing and mortgage bubble has left private spending relatively unresponsive to interest rates. This time around, monetary policy really needed help from a temporary increase in government spending, which meant that the president could have made a big difference. And he did, for a while; politically, the Obama stimulus may have been a failure, but an overwhelming majority of economists believe that it helped mitigate the slump.
Since then, however, scorched-earth Republican opposition has more than reversed that initial effort. In fact, federal spending adjusted for inflation and population growth is lower now than it was when Mr. Obama took office; at the same point in the Reagan years, it was up more than 20 percent.
I enjoyed his concluding remarks: "Do those who were blaming Mr. Obama for all our economic ills now look like knaves and fools? Yes, they do. And that's because they are."
Salon summarizes that "conservatives have egg on their faces," but the Red Staters no doubt consider it a black mark against liberals who aren't patriotic enough to wear egg.