“…Governments are instituted among Men, deriving their just powers from the consent of the governed…” (Declaration of Independence)
“…We the people…” (First three words of the United States Constitution)
“The great object of the institution of civil government is the improvement of those who are parties to the social compact.” (John Quincy Adams)
“Government of the people, by the people, for the people, shall not perish from the earth.” (Abraham Lincoln)
In our hearts we want to believe that governments at all levels (local, state, national) exercise their powers based on some notion of what is good for “we the people”. Consequently, we believe, laws are passed with our best interest in mind and that they benefit society as a whole. There is no doubt many laws do in fact serve society well. Speed limits on highways, laws requiring the regular inspection and overhaul of airplanes, restrictions on dumping pollutants into the air and water, and limits on corporate monopolies all protect us in one way or the other. Using such examples we might assume government does actually work in the people’s interest.
An extensive 2014 study concluded otherwise. Researchers at two universities (Northwestern and Princeton) examined about 1,800 laws passed by the government in Washington over a twenty year period and compared those laws to the public’s preferences. They determined that government’s decisions rarely favor the “common” American but almost always favor the “economic elite” instead. They did find that policies (laws) are much more likely to pass when support is favored by groups from all economic levels, and this is frequently the case, so in those instances the common folks are represented. More significantly, however, if the elite class opposes a measure it has only an 18% likelihood of passing. They also conclude that “the average citizen or the ‘median voter’ has little or no independent influence on public policy” when average voters’ preferences contradict those of the wealthy elite.
The authors’ conclusions: “The central point that emerges from our research is that economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while mass-based interest groups and average citizens have little or no independent influence.”
Is this a surprise? Probably not. The argument certainly predates C. Wright Mills’ 1956 conclusion that “all the power’s in the hands of people rich enough to buy it” or Charles Beard’s 1912 conclusion that “The fundamental division of powers in the Constitution of the United States is between voters on the one hand and property owners on the other”. In fact our Founders themselves created a type of class system when they refused women and minorities the right to vote, had the president chosen by an electoral college over which voters had no influence, had the U.S. senators appointed by state legislatures rather than elected, and affirmed a system only allowing white male property owners to vote.
It would be difficult to argue that a great deal has changed.
- If you have ever fought with insurance companies over worker compensation claims you probably learned very quickly that the work comp laws favor the insurance companies (and were possibly written by them). My wife and I have personal experience with this.
- When large banks or major industries suffer catastrophic losses (frequently because of mismanagement) the government will often bail them out, but it doesn’t do so for small companies, homeowners facing foreclosure or students with loan debt. I am in no way arguing that government should bail out any of these folks, but if we believe in capitalism I’m not sure government should be bailing out failing companies.
- Oh…and when we bailed out the banks in 2008/2009, $1.6 billion went to the executives of those banks. The top five Goldman Sachs executives pocketed a total of $242 million at a time when taxpayers were saving their company. Your. Tax. Dollars.
- The Constitution’s “Takings Clause” allows governments to take private property via eminent domain for “public use” by providing “just compensation”. Much of this makes sense because society needs highways, for example, so government must have a mechanism for taking property required for building them. However, in Kelo v City of New London (2005) the Supreme Court expanded the Takings Clause to allow government to take property for “economic development”. Ms. Kelo’s property was seized to make room for a pharmaceutical company’s new building, a plan that was later abandoned. So Ms. Kelo was without her property and the property was ultimately not used. Similar abuses of eminent domain have occurred across the country, and the local property owners are always the loser. In Boonville, MO, about twenty minutes from my house, the city granted eminent domain power to a company to force the sale of property so a casino could be built over the objections and legal challenges of property owners.
- Each year there are numerous examples of corporations that earn billions in profit but pay no taxes. In fact many of these actually receive a rebate from the IRS (see the ctj.org link below). I’m not sure about you, but I’m fairly certain my good Uncle (Sam) takes a good portion of my income every two weeks.
- As of 2017 the first $127,200 of income is subject to the Social Security tax. Yes, I realize that this is quite a bit more than the average American earns, but it also means that a person earning $50,000 per year will pay exactly the same amount as someone earning millions (or billions). In that respect the Social Security tax has a greater adverse affect on those with lower incomes.
Similar examples abound.
Before you start calling me a flaming liberal or socialist, you should know that concerns over this disparity and consequent income inequality cross ideological and income boundaries. Last spring Charles Koch, the conservative billionaire who has historically supported conservative candidates and causes, told ABC News that the economic system is rigged in favor of the wealthy and that the U.S. tax code does in fact offer “corporate welfare” to companies such as his. He and Warren Buffett, the world’s third richest person, have argued for years that the tax codes are unfair and that the wealthy should be paying more in taxes.
Income inequality matters, and it matters more now than possibly any time in history. The steady economic growth since the 1970’s has not affected all income groups equally. The truth is that during the last forty years the rich have truly become richer while incomes for the poor have not significantly improved. Many Americans still live in poverty, and that number would be much higher were it not for government “safety net” programs (SNAP, TANF, SSI, etc.) that have actually reduced the number of people living in poverty since the 1960’s in spite of the growing income gap.
So why does this income inequality matter? A 2015 piece in The Atlantic concluded that in addition to the obvious inability to buy things, including necessities, the folks at the bottom of the income scale suffer in at least three ways. First, the growing disparity in incomes has led to “residential segregation” as a result of the growing number of people living in poverty-stricken neighborhoods, and it self-perpetuates because these folks and their children have difficulty finding a way out of those neighborhoods. Second, children growing up in poor families generally have limited access to higher quality education throughout their lives. Finally, the authors conclude that children in these neighborhoods also have less access to “enrichment goods” and fewer social networks, and studies demonstrate they are more likely to suffer from “toxic stress” resulting in hampered brain development and lower earning potential. The authors conclude that policies reducing taxes on the rich (eliminating the estate tax, for example) increase the burden on the poor and, interestingly, often harm the children of the wealthy because they lose incentive to be productive, an idea argued by wealthy philanthropist Andrew Carnegie and others in the 1800s.
In addition, there is evidence that other social ills such as crime and unplanned teenage pregnancy are more closely associated with income disparity than with poverty itself.
These are powerful arguments for seeking ways to close the income gap. I’m not optimistic that such alternatives will be actually sought in the current political environment where money dominates politics (the topic of an earlier post).