Debate: J. Bradford DeLong and R. Glenn Hubbard
Video of public debate held February 3 2015 at Rice University's Baker Institute for Public Policy featuring R. Glenn Hubbard, Ph.D., Dean and Russell L. Carson Professor of Finance and Economics, Columbia Business School versus J. Bradford DeLong, Ph.D., Professor of Economics, University of California, Berkeley.
We get much more insight, though, once we have a look at what UNICEF means by "poverty rate." In this case, UNICEF (and many other organizations) measure the poverty rate as a percentage of the national median household income. UNICEF uses 60% of median as the cut off. So, if you're in Portugal, and your household earns under 60% of the median income in Portugal, you are poor. If you are in the US and you earn under 60% of the US median income, then you are also poor.
The problem here, of course, is that median household incomes --
and what they can buy -- differs greatly between the US and Portugal.
In relation to the cost of living, the median income in the US
is much higher than the median income in much of Europe.
So, even someone who earns under 60% of the median income in the US will,
in many cases, have higher income than someone who earns the median
income in, say, Portugal.
...
So, yes, the US has a higher poverty rate than many other countries,
but the standard of living available to a person at poverty levels
in the US is higher than it is to a person at poverty levels in places
like the UK, Spain, Italy, France, Japan, New Zealand, and others.
If inequality is such a growing concern, why are no Americans taking to the streets?
In a provocative new book, the critic and historian Steve Fraser
tries to explain why mass protest on the left has become so scarce
in what he aptly calls The Age of Acquiescence. For Fraser, the main
culprits are not such usual suspects as right-wing politicians and
the market power of global corporations but public admiration for
workaholic entrepreneurs whose self-serving definition of freedom
legitimizes their reign.
... Fraser describes how freedom, which bygone progressive movements
and liberal icons like Franklin Roosevelt defined as a collective goal
("freedom from want," "freedom from fear," etc.), has now become
synonymous with the "free market" in which every man and woman
supposedly has the same chance to rise or go under.
With rising income inequality in the United States, you might expect more and more people to conclude that it's time to soak the rich. Here's a puzzle, though: Over the last several decades, close to the opposite has happened.
In other words, respondents favored less redistribution if they
believed that the person had already grown accustomed to a higher
income. The psychology seems to be something like this: Rich people
who have been rich for a while have gotten used to their money,
so it would be unfair to tax them heavily. But people who have just
gotten rich have not become accustomed to higher levels of after-tax
income, so it wouldn't be as harmful to raise their taxes in the
interest of greater equality.
...
The shift away from a belief in redistribution has been stronger among
older Americans than any other age group.
Richer and Poorer: Accounting for inequality
Income inequality is greater in the United States
than in any other democracy in the developed world.
...
The causes of income inequality are much disputed; so are its costs.
And knowing the numbers doesn't appear to be changing anyone's mind
about what, if anything, should be done about it.
Scott Sumner
We did have a tax on luxury goods, which seems like a really good idea
if you are worried about inequality.
...
So the tax was a huge success, which reduced the only kind of inequality
that matters, consumption inequality. But apparently some progressives
who supported the tax had hoped that it could raise lots of revenue for
the government without actually depressing the living standards of
America's rich. That would occur, of course, only if the rich maintained
their living standards by donating less money to charity and investing
less money in new capital formation. Instead, the rich actually did
reduce their living standards, and America was on the road to greater
economic equality. Senator Kennedy, et al, reacted in shock and horror
and had the bill repealed. Meanwhile Massachusetts is among the leaders
in taxing the poor via the lottery and cigarettes.
Up to a point, redistributing income to fight inequality can lift growth
Some inequality is needed to propel growth, economists
reckon. Without the carrot of large financial rewards, risky
entrepreneurship and innovation would grind to a halt. In 1975
Arthur Okun, an American economist, argued that societies cannot
have both perfect equality and perfect efficiency and must choose
how much of one to sacrifice for the other.
While most economists continue to hold that view, the recent rise in
inequality has prompted a new look at its economic costs. Inequality
could impair growth if those with low incomes suffer poor health and
low productivity as a result. It could threaten public confidence
in growth-boosting policies like free trade, reckons Dani Rodrik,
of the Institute for Advanced Study, in Princeton. Or it could sow
the seeds of crisis. In a 2010 book Raghuram Rajan, now governor of
the Reserve Bank of India, argued that governments often respond to
inequality by easing the flow of credit to poorer households. When
the borrowing binge ends everyone suffers.
Tyler Cowen used his
Upshot piece
this week to tell us that the real
issue is not inequality, but rather mobility. We want to make sure
that our children have the opportunity to enjoy better lives than
we do. And for this we should focus on productivity growth which
is the main determinant of wealth in the long-run.
This piece ranks high in terms of being misleading. First, even
though productivity growth has been relatively slow since 1973, the
key point is that most of the population has seen few of the gains
of the productivity growth that we have seen over the last forty
years. Had they shared equally in the productivity gains over this
period, the median wage would be close to 50 percent higher than
it is today. The minimum wage would be more than twice as high. If
we have more rapid productivity growth over the next four decades,
but we see the top 1.0 percent again getting the same share as it has
since 1980, then most people will benefit little from this growth.
The next point that comes directly from this first point is that it
is far from clear that inequality does not itself impede productivity
growth. While it can of course be coincidence, it is striking that
the period of rapid productivity growth was a period of relative
equality. At the very least it is hard to make the case that we
have experienced some productivity dividend from the inequality of
the post-1980 period.
Sean McElwee and Marshall I. Steinbaum: The New York Times' David Leonhardt gets it wrong.
It is facile to divide rising inequality into "between" and "within" effects with respect to household types, and to argue that since inequality between types has grown and more households are now in worse-off types, changing family structure has caused inequality to increase. The evidence shows that family structure has changed because economic opportunities for most people have worsened. Why has that happened? There are some suggestive answers, but much more research is necessary. Leonhardt's claim that changing family structure causes rising inequality simply doesn't hold up.