Collective Conscious

The New Repub­lic:

If one thing sur­vives from Occupy Wall Street and related protests, it is likely to be the con­cept of “the 99 percent”—that is, most of us, in oppo­si­tion to the top one per­cent, the group that took two-​​thirds of the total increase in income dur­ing the Bush years. It’s a polit­i­cally bril­liant fram­ing, and hardly “class war­fare,” since it implies the broad­est cross-​​class coali­tion imag­in­able, from the very poor to the fairly well off, all bound together by our shared expe­ri­ence of eco­nomic inse­cu­rity and rel­a­tive polit­i­cal powerlessness.

But there are rea­sons, albeit wonky ones, to be wary of the 99:1 con­cep­tion of the econ­omy and soci­ety. I’m hardly alone in hes­i­tat­ing to embrace this lan­guage of the many against the few, not because I’m afraid of oppo­si­tional lan­guage or have a soft spot for Wall Street or imag­ine that I might be part of the 1 per­cent some­day. (The price of entry to that top tier is an annual house­hold income over $516,000.) Rather, it’s that 99:1 doesn’t seem like the best way to describe what’s really been hap­pen­ing in the econ­omy, and can seem like a cheap kind of pol­i­tics, in which all the respon­si­bil­ity for repair­ing our cur­rent mess would fall on the 1 percent—that is, on some­one else.

 

One alter­na­tive approach would look at the top fifth of the pop­u­la­tion. That’s basi­cally house­holds earn­ing a lit­tle over $100,000 or more. This quin­tile did quite well in the eco­nomic boom, though not nearly as well as the very rich­est, and it is far more likely to have some sav­ings, the secu­rity that comes with edu­ca­tion (the unem­ploy­ment rate for col­lege grad­u­ates over 25 is only 4.2 per­cent), and some expe­ri­ence in the work­force. The top quintile’s expe­ri­ence of the econ­omy has lit­tle in com­mon with the tremen­dous hard­ship chron­i­cled on the “We are the 99 Per­cent” blog, although their ranks include many who slipped from more com­fort­able posi­tions. A focus on the 99 per­cent also risks obscur­ing the tremen­dous dif­fi­cul­ties that faced the work­ing poor even dur­ing the boom years, and are far worse in the reces­sion. Inequal­ity has sev­eral dimensions—the wide gap between the very rich and the upper-​​middle class is one, and the widen­ing gap between the poor­est 40 per­cent, who lost ground through the entire last decade, and the mid­dle and upper-​​middle class is another. That sec­ond dimen­sion of inequality—especially real, not just rel­a­tive, poverty—should always be the first pri­or­ity of pub­lic policy.

Nor can the 1 per­cent bear the whole bur­den of the tax increases that will be nec­es­sary to bring the fed­eral bud­get onto a sus­tain­able path and avoid pro­gram cuts that will inevitably hit the poor­est 40 per­cent the hard­est. Although the top 1 per­cent got 18 per­cent of the ben­e­fits of the Bush-​​era tax cuts, the upper fifth got their share—more than 50 per­cent of the total tax cut, accord­ing to the Tax Pol­icy Cen­ter. While it’s tempt­ing to recall that the econ­omy sur­vived and thrived with tax rates of 70 per­cent or more on the very top incomes as recently as 1981, in real­ity no one paid those rates. We were “dip­ping deep into large for­tunes, with a sieve,” in the mem­o­rable phrase of the econ­o­mist Henry Simons. While we can gain sig­nif­i­cant rev­enues by elim­i­nat­ing the pref­er­en­tial treat­ment of cap­i­tal gains and div­i­dend income (the sim­pler ver­sion of Pres­i­dent Obama’s “Buf­fett Rule”), it won’t be enough, while very high rates on just the very top earn­ers won’t be polit­i­cally sustainable.

But, as the bril­liant Aus­tralian econ­o­mist John Quig­gin recently put it, start­ing from sim­i­lar skep­ti­cism, “I’m now much more sym­pa­thetic to the ‘99 per cent’ analy­sis.” What per­suaded Quig­gin? In addi­tion to the polit­i­cal sol­i­dar­ity of the 99 per­cent, he notes that even for most of the top 20 per­cent, incomes have stag­nated: “The redis­tri­b­u­tion of the past three decades has gone from the bot­tom 80 per cent to the top 1 per cent.” And even if the top 20 per­cent is still doing okay, “they are less secure than at any time since the 1930s, and their chil­dren face even more uncer­tain prospects.” This shared expe­ri­ence of eco­nomic inse­cu­rity explains some of the back­lash to the prospect of mod­est tax increases on those earn­ing over $250,000. Even though these fam­i­lies (roughly the top 5 per­cent) are earn­ing almost five times the median income, there’s inevitably a feel­ing that with such an income, an amount that would have been aston­ish­ing to our par­ents and grand­par­ents, one ought to be more com­fort­able, more secure. And yet, many fam­i­lies with this level of income, along with stu­dent loans and huge mort­gages, feel they’re still on the edge.

To Quiggin’s points, I’d add two oth­ers. One is that an 80:20 analy­sis might have made more sense at the begin­ning of the eco­nomic cri­sis, in 2008, than it does now. A severe reces­sion should be expected to reduce inequality—in the Great Depres­sion, for exam­ple, the share of wealth going to the top 1 per­cent went from 23.9 per­cent in 1928 to 15.5 per­cent in 1931, even before any of the effects of New Deal pro­grams. It took 80 years for the top incomes to approach Roar­ing Twen­ties lev­els again, peak­ing at 23.5 per­cent in 2007. In the reces­sion, that share dropped to 21 per­cent by the end of 2008. While we don’t have more recent data, all indi­ca­tions are that the top 1 per­cent has recov­ered: The stock mar­ket is boom­ing, and exec­u­tive pay—almost half of the top 1 per­cent are cor­po­rate executives—rose 24 per­cent in 2010 alone, to an aver­age CEO pay pack­age of $9 mil­lion. As CNBC put it, “In the board­room, it’s as if the Great Reces­sion never happened.”

This last bit of data rep­re­sents another rea­son to focus on the 1 per­cent. This is not just a winner-​​take-​​all soci­ety in which super tal­ents and geniuses like LeBron James and Steve Jobs com­mand huge rewards. Rather, these are sim­ply cor­po­ra­tions decid­ing to hand over more of their rev­enues to their CEOs and other top exec­u­tives, and less to work­ers. In this sense, then, the gains at the top and the stag­na­tion and decline in the mid­dle of the income spec­trum are very directly linked. Their gains are our losses, through a series of very spe­cific choices.

The pol­icy solu­tions that flow from a 99 per­cent analy­sis have to be more cre­ative than just redis­trib­u­tive tax­a­tion, how­ever. They have to address the struc­ture of incen­tives in cor­po­rate com­pen­sa­tion and the struc­tures of power that pre­vent work­ers from bar­gain­ing for their share of prof­its. And they have to involve build­ing or rebuild­ing the gov­ern­ment struc­tures that pro­vide eco­nomic secu­rity to all of the 99 per­cent, such as unem­ploy­ment insurance.

But we also shouldn’t let the cross-​​class sol­i­dar­ity of the 99 per­cent blind us to the very real, pro­found hard­ship expe­ri­enced every day by the poor­est 40 per­cent of work­ers and fam­i­lies who barely tasted the ben­e­fits of eco­nomic growth in the 2000s. We have oblig­a­tions to them as well, and it’s not just the respon­si­bil­ity of the 1 percent.