The 2016 presidential election campaigning has begun, although it would be more accurate to say that presidential campaigning cannot ever begin since it never really stops. Presidential campaigning in the United States has become an electoral equivalent of Newton’s second law of motion: since there is nothing that can oppose it – not even elections, it seems – then the campaigns continue unabated, kind of like a planetary body in orbit.
In the coming election we’re going to hear a lot about the important issue of wealth inequality. Actually, we’ll be hearing about income inequality and wealth inequality as if they’re the same thing, which they’re not. And that is just the beginning of where I believe the national discussion will be missing the mark.
First, the issue: One of the great sources of strength in the United States has been its enormous middle class and the sense that, with diligence and effort, one can move into the middle class from below, and perhaps even into the upper class. Recent analyses however indicate that the wealthiest are increasing their wealth faster than any other segment, and the gulf between that group and a growing lower class leaves the middle class thinner than it’s ever been.
Naturally, all of this is grist for campaign mills. The candidates will be seeking electoral advantage by playing one group of voters against another, which is a problem; however the bigger problem will be the fact that both parties will be emphasizing their opponents’ tax policy as the cause of the problem, and their own proposed tax policy as the solution.
While it’s fine to argue that tax policies can influence wealth distribution, there are two much more significant issues driving wealth inequality that we need to confront if we’re going to seriously discuss it.
The first is what I’ll call “Global Efficiency”. Often people think of their “producer selves” (their jobs) as very separate from their “consumer selves” (their buying habits). They also think of a third entity – their “investor selves”, or their desire for a good return on their savings and retirement accounts.
Although many of us think of ourselves in these roles distinctly, in fact all of us are all of them, simultaneously. As consumer selves we enjoy amazing supply chain and distribution innovation as we purchase high quality, low price items from a retailer located next-door or a half a world away. As investors we, or the portfolio managers who work for the funds we invest in, demand greater profitability from companies we invest in or else we’ll sell the stock in favor of another.
Yet as producers, we complain when employers squeeze payroll or seek to lower their cost basis through global sourcing or technology. And here’s the thing for those worried about wealth inequality to consider: we’re not going back to how it used to be. In fact, the growing issue of technology displacing low-skill jobs will increase rapidly, thus exacerbating the problem. Example: given the rapid advances of driverless car and drone technology, it’s not hard to see the day when freight delivery won’t need many pilots, truck drivers, or delivery van drivers. We the consumers and we the investors will love it. But jobs will disappear and wealth inequality will grow. And that’s just one example.
The second issue is even more unpleasant: changing family structures, which is a nice way of referring to the breakdown of the traditional nuclear family. Particularly among lower socio-economic populations, the traditional guardrails that helped keep kids out of trouble are being lost, with detrimental impact on their job prospects and opportunity for upward mobility. When Dad is absent and Mom has to do all the work, the likelihood that the kids will enter school with a large vocabulary is pretty slim, and the trouble continues from there.
Sure, some kids go on to establish solid families of their own and find great careers despite the lack of good role models, but the data from countless studies are conclusive. In an economy where jobs require both higher-order thinking as well as the ability to succeed in a changing world, the growing population of young people who grow up without married parents and in communities where drug use is up and church attendance is down will have a tougher challenge establishing a middle-class career. And the wealth gap will widen.
Over time, we will need to consider all sorts of ideas that might seem crazy on the surface to prepare for the coming fifty years of economic change. But in order to make progress, we’ll need to be honest with ourselves. Heaven knows that our tax code could use a major overhaul in a number of respects, but when it comes to the growing wealth gap, it’s a small part of a big problem.
Originally published in the Appleton Post-Crescent on June 7, 2015
