There are two contrasting posts on income inequality that you might want to read for perspective. The first is from Ben Domenech at The Federalist. My eyes glazed over during his criticisms of Obama except for this part:
Income inequality is not primarily an economic problem. It is a problem of societal decline and the breakdown of family structures, accelerated by government but not solely by government. Barack Obama the family man could’ve made a difference in this regard, but decided not to. Instead, he embarked on an agenda which has been great for corporate America, Big Banks, and Wall Street, and generally terrible for wage growth and working families. Evan Soltas has a little piece here, frustrated that people are looking to get rich off Obamacare, wringing his hands about how “the expected increase in health-care profits has a whiff of rent about it.†What do you expect to happen when you make it illegal not to buy a corporation’s product which drives these profits?
That rings true to me. The parts about marriage as protection against poverty are interest, too. “Ironic” isn’t a strong enough word to cover the reality that those who can least afford to eschew marriage are doing so. Finishing high school, avoiding drugs and alcohol, not having children before marriage, and getting married remain a solid groundwork for avoiding poverty. Why aren’t more people doing it?
One of the reasons may be that stress early in life can produce lifelong patterns of lack of impulse control and the inability to delay gratification. It’s also the case that television, that great educator, conveys images of married life to which many people cannot aspire. There aren’t many Kramdens or Evanses on television these days. Nowadays on television single people live in apartments and married people own houses. It might be the case that people who are have low or no incomes do not perceive that they can afford to get married when the opposite is more nearly the case. They can’t afford not to get married.
The observed tendency for women to “marry up” (hypergamy) paired with the decline in the number of jobs available to men might be a factor as well.
The other post is by Robert Reich. In it he urges an increase in the Earned Income Tax Credit:
One way we already redistribute is through the Earned Income Tax Credit, a wage subsidy for the working poor, which, at about $60 billion a year, is the nation’s largest anti-poverty program. It’s like a reverse income tax — larger at the bottom of the wage scale (now around $3,000 for incomes around $20,000) and gradually tapering off as incomes rise (vanishing at around $35,000).
The EITC subsidy should be enlarged and extended further up the wage scale before tapering off.
characterizing it as “redistribution”. I wish he’d taken the next step and quantified the increases he was talking about. My guess is that increasing the EITC by the amount he’d propose would do very little to change the patterns of income and inequality and that he’d be horrified at the measures that would be required to raise the EITC to a level that would address the problem.
I agree with him though that it’s unrealistic to subsidize the wealthy and not expect more income inequality. Too bad he doesn’t extend that to individuals as well as to corporations. He does make a tiny sideswipe at the home mortgage deduction, the preponderance of whose benefits go to the highest income earners. I guess that’s something.
Peter Orszag recently pointed out that a low single income parent can face as much as 95% marginal rate by marrying a second earner, which would phase them out of means-tested programs. He proposes giving the secondary earner an additional tax break. Reihan Salam thinks it would be easier simply to increase the existing child tax credit. Somewhere in there is an argument about the benefits of children being reared by two earner families versus a one-earner family with one stay-at-home parent.
Somewhere in there is an argument about the benefits of children being reared by two earner families versus a one-earner family with one stay-at-home parent.
Single-earner two-parent families might also reduce the labor pool, thus creating upward pressure on wages. _IF_ you don’t import tens of millions of people to pick up the slack and keep wages down.
“Finishing high school, avoiding drugs and alcohol, not having children before marriage, and getting married remain a solid groundwork for avoiding poverty. Why aren’t more people doing it?”
Those benefits are largely based on gummint artifacts. If licensing were abolished, as Milton Friedman recommended, there’d by less value placed on finishing high school or college graduation. Edison, Ford and Firestone, not to mention Gates, Zuckerberg, Jobs, Dell and others show. Drugs and alcohol impoverish users, but they’d also be impoverished if the gummint were to tax them highly and imprison them for drinking milk. Getting married of course makes you better off, since there are about 1000 benefits dumped on married folks that singles pay through the nose to support.
What we need to start taxing are marriage, breeding, and religion–three totally destructive behaviors.
It kinda bothers me, a typical $100/hr software engineer, that when I limit my annual work to 200 hours, earning $20,000, the gummint sees fit to give me a free EITC of $3000.
Salam pushed for a bigger child tax credit in the book he wrote with Douthat. I am not sure why we should favor those with kids over those w/o. It would also mean that even fewer pay income tax, if that is an issue for you.
Steve
I think Salam has more reasons than I can think of for increasing the child tax credit, including a political one that Republicans need to promote policies that help the people that vote for them.
But basically:
Conservatives want to encourage children being raised in a two family home. They are sensitive to tax effects that discourage this, such as marriage penalties and high marginal tax consequences.
Conservatives prefer cash payouts, including refundable tax credits, to government programs, particularly if they reward work. They would prefer a cash handout to alleviate child poverty to hiring more social workers.
Going from one full-time earner to two with a family does have significant effects. I did the calculations before I started working full-time again, and figured I need to make at least 20k a year just to break even. Most of that cost (a bit over half) is child care for 3 kids.
@Andy, there was a commentor at OTB, I think from New England, that was upset that though he and his wife had reasonably good jobs, they couldn’t afford the second child they wanted. The cost of childcare was quite high (maybe twice as much as it is around here), and I suspect the cost-of-living was high in many respects. I think I pointed out the child care tax credits and expressed some concern that you don’t want government subsidies to simply drive up child care costs. But I’m not happy with the idea that a couple that’s played by the “rules” doesn’t think they can afford children:
“Finishing high school [or college], avoiding drugs and alcohol, not having children before marriage, and getting married remain a solid groundwork for avoiding poverty.”
A tax break is not a reason to have kids, and I doubt that it would motivate the right people anyway, but the couple with two kids thinking about a third, and a third thinking about a fourth, might be worth giving more help.
Domenech’s criticism is what we’ve been getting for centuries, not economics, but moral sentiment. That approach (the problem is the poor) has dominated policy since the Great Society and we have nothing to show for it. Rather than treat poverty as a technical malfunction we “retrain”, we work on improving “attitudes”, we distribute welfare and we blame single mom. This approach has never delivered and is pretty much used as an excuse to maintain the status quo.
Mr. Domenech: massive inequality is an economic issue, just as Keynes labeled the Great Depression “magneto trouble.” It is not a problem of the wretches having insufficient virtue but a problem of flows failing to reach vast numbers of workers. That you cite breakdown of family structure is an admission by you that only certain types of households (those which conform to your personal vision) are entitled to a rising standard of living. Nowhere do you present a convincing argument as to why this should be so, you simply presume it should be.
When I do school visits I list my three rules for having a decent life: Don’t get pregnant or get anyone else pregnant, don’t develop an addiction, and don’t kill anyone or yourself.
I don’t tell them they have to finish high school because it’s not the right answer for everyone, and I’d be a hypocrite to preach that. Middle school and high school both are often very destructive of creativity. The current test-obsessed, careerist high school culture, with its politically-driven cookie cutter curricula and hamstrung teachers is poisonous, in my opinion, and borders on being child abuse.
At my son’s high school probably 60% of kids are on Adderall. They’re taking speed to cope with homework and 12 hour work days. It’s not your high school or mine anymore, Dave, it’s fucked up and I’m so determined to spare my daughter from what my son is now enduring that we’re looking at moving clear across the country to have her attend a decent vocational high school.
You’re mistaken about TV not showing successful marriages in working class families. The Middle is a must-watch for us, first because we used to be that broke, and second because it’s still very much our family, despite the different economic circumstances. Dad is a foreman in a quarry, mom is a dental hygienist. There’s also Raising Hope – Dad mows lawns, mom is a maid, the grown son is raising a kid alone but only because the kid’s daughter is a serial killer. (Very common problem, that.) Mike and Molly is a working class couple who I assume will have kids as soon as ratings require it. There are others.
Fairly recent and still in re-runs, you have Everybody Loves Raymond and Roseanne. Raymond was middle class, Roseanne decidedly working class and struggling.
More generally, marriage is quite popular in TV land at the moment. Sitcoms like Modern Family, old-fart dramas like Blue Bloods. The Seinfeld-Friends era was all about singles, now it’s largely married couples. Marriage is chic now, possibly because of the attention thrown on the institution by gay marriage.
The point I was making, Michael, was not the absence of marriage from television but the close association of marriage with home ownership on television.
Adderall was prevalent when my son was in high school too, along with lots of other drugs. It’s crazy what kids are subjected to both at school and in pressurized chambers called ‘home.’ Everything is geared, though, towards higher education, except k-12 doesn’t really prepare students adequately for college, because the academics are just not there anymore.
There used to be shops in high school, introducing students into the idea of vocational pursuits following high school. However, all that is gone. It’s college or nothing. Like everything else, we are become a society, seemingly bent on a singular nomanclature of human design — highly educated, oftentimes with no meaning or purpose, and no where to use it once you have all the degrees.
It is not a problem of the wretches having insufficient virtue but a problem of flows failing to reach vast numbers of workers
Sounds like a false dichotomy to me. An economy with insufficient growth presents little opportunity for individuals at the bottom of the ladder, but larger numbers of people get stuck there also by the decisions they make (referring to that in moral terms isn’t very helpful, either.)
I suspect there is a feedback loop between the two problems, as well- because of the lack of vision and aspiration when there are inadequate opportunities for reward, and tepid growth in the economy exacerbated by the drag of poor decisions and poor work ethic among a large segment of the population.
@michael, I don’t think you would be a hypocrite to preach getting a high school diploma. Times have changed. In the 60s, only about 50% of adults had graduated from high school; and its closing in on 90% today. That ten percent better be highly talented and lucky, or they are going to have a life we wouldn’t wish for them.
@michael reynolds: Yes, the homework culture is insane. My girls aren’t quite there yet but my friends with 3rd and 4th graders spend two or three hours a night helping them with their projects. It amounts to child abuse and also happens to further exacerbate the inequality of our society, since most parents can’t or won’t devote that much time and energy to their kids’ education.
I also concur with @PD Shaw on the hypocrisy issue. Is it possible to be an incredibly successful person without finishing high school? Sure–if you’re either well connected or extraordinarily talented, lucky, and self-motivated. But it’s a hell of a lot easier if you’ve got that diploma.