Elites focus on inequality; real people just want growth

By Bill Schneider
May 5, 2014

kochs & warrenThe economic debate is now sharply focused on the issue of income inequality. That may not be the debate Democrats want to have, however. It’s negative and divisive. Democrats would be better off talking about growth — a hopeful and unifying agenda.

Democrats believe income inequality is a populist cause. But it may be less of a populist issue than an issue promoted by the cultural elite: well-educated professionals who are economically comfortable but not rich. There’s new evidence that ordinary voters care more about growth.

Growth and inequality are not separate issues. Nobel Prize-winning economist Joseph E. Stiglitz wrote, “Politicians typically talk about rising inequality and the sluggish recovery as separate phenomena when they are in fact intertwined.  Inequality restrains and holds back our economic growth

The question is whether Democrats want to talk about punitive and confiscatory policies aimed at curbing the power of the wealthy and special interests or an agenda aimed at growing the economy for everyone.

Policies aimed at reducing inequality gain more traction with voters when they are pitched as pro-growth policies. Issues like raising the minimum wage, extending unemployment benefits, pay equity for women, student-loan debt relief, increasing the earned income tax credit and closing tax loopholes for the rich.

clinton -- spotlightThe argument is straightforward: More fairness means more growth. When the incomes of the poor and the middle class are growing, consumption — the principal driver of economic growth — goes up. So do tax revenues and investment in business and education.

Former President Bill Clinton, in a speech at Georgetown University last week, called inequality “a severe constraint on growth.” He defended his administration’s pro-growth agenda. “My commitment was to restore broad-based prosperity to the economy,” Clinton declared, “and to give Americans a chance.”  He noted that 7.7 million Americans were lifted out of poverty during his eight years in office.

During the last four years of Clinton’s presidency, the nation’s economic growth rate averaged 4.5 percent a year — three times as high as last year. Plus we had a budget surplus. Yes, incomes grew for the richest 20 percent of Americans during the 1990s. But, as Clinton noted, they grew faster for the poorest 20 percent. “It worked out pretty well,” he said. Even though the left criticized his policies of financial deregulation, welfare reform, free trade and balancing the budget.   We now have evidence from the GlobalStrategyGroup, a Democratic consulting firm, that the growth agenda is more popular than the inequality agenda.  Asked how much of a priority it should be for Congress to “promote an agenda of economic growth that will benefit all Americans,” 78 percent called it extremely or very important. Growth topped the list. At the bottom: addressing income inequality (50 percent) and spreading wealth more evenly (43 percent).

Would voters prefer a candidate focused on “more economic growth” or “less income inequality”? No contest. Growth beat inequality, 80 percent to 16 percent. Growth also came out ahead of “increasing wages,” “expanding the middle class,” “economic justice to level the playing field for middle- and low-income Americans” and even “more economic fairness.”

That doesn’t mean Democrats have to choose between growth and inequality.  The GSG poll showed that Democratic policies aimed at reducing inequality are seen as promoting growth. Solid majorities (ranging from 54 percent to 74 percent) said that providing more income opportunity for all, increasing spending on education and infrastructure, making seniors’ retirement more secure, increasing the minimum wage and asking the wealthy to pay more taxes would lead to more economic growth rather than less.

Democrats already have credibility on the inequality issue. Asked which party can be trusted “to enact policies that will lead to more income opportunity for all,” Democrats lead Republicans 46 percent to 34 percent.

romneyWhat Democrats lack, however, is credibility on the growth issue. Asked which party can be trusted “to enact policies that will lead to more economic growth,” it’s a dead heat: Democrats 39 percent, Republicans 39 percent.  After George W. Bush and Barack Obama, voters aren’t sure which party can deliver prosperity.

What’s driving the inequality frenzy? New York Times columnist David Brooks wrote, “If you are a young professional in a major city, you experience inequality firsthand. But the inequality you experience most acutely is not inequality down, toward the poor; it’s inequality up, toward the rich.”  They’re the people who are buying Thomas Piketty’s book advocating redistribution of wealth.

These days, a lot of American politics is a war between two elites. For years, polls have revealed that the wealthier you are, the more likely you are to vote Republican. But the better educated you are, the more likely you are to vote Democratic. So in 2012, we got a race between Republican nominee Mitt Romney, who represented the elite of wealth, and Obama, who represented the elite of education.

The debate over inequality is a debate between these two bitterly antagonistic elites. An army of country-club conservatives doing battle with an army of NPR liberals. The fabulously wealthy Koch brothers, for example, versus the fabulously well-educated Senator Elizabeth Warren (D-Mass.), a former Harvard professor.

What do ordinary voters want? They want an economic boom.

Ronald Reagan got elected in a recession and delivered a boom in his second term. Clinton got elected in a recession and delivered a boom in his second term. Voters’ deep dissatisfaction with Obama right now is due mostly to his failure to deliver on the economy. That’s why the most popular political figures in the country today are the Clintons.

Bring them back, people hope, and maybe we can bring back the “good times.’’


PHOTO )TOP): Charles Koch; Senator Elizabeth Warren (D-Mass.) on Capitol Hill in Washington, November 14, 2013. REUTERS/Joshua Roberts; David Koch

PHOTO (INSERT 1): President Bill Clinton chooses a reporter to ask a question in the glare of television lights as he holds a press conference in the gardens of the U.S. ambassador’s residence in Tokyo, July 9. 1993. REUTERS/Files

PHOTO (INSERT 2): Former Republican presidential nominee Mitt Romney speaks at the Conservative Political Action Conference in National Harbor, Maryland, March 15, 2013. REUTERS/Jonathan Ernst




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WOW! I don’t know where to start, so I’ll start with the headline.
FIRST – Growth and inequality are not, and were never, an either/or proposition and I don’t know where the author got such an absurd idea.

SECOND – “REAL PEOPLE?” Please define this obviously bigoted expression. Who are the “real people?” And by extension who are the “not-real people” I am guessing that the “REAL” people are mostly those who look and think like you. I am stunned that Reuters would allow such prejudiced statements in it’s headlines.

THIRD – The headline is objectively and mathematically false. ALL people are obviously focused on inequality for a variety of practical, moral, and class reasons. If this were not so, CAP21 would not be a runaway best-seller on Amazon for weeks on end: among ALL PEOPLE on the internet. And that’s not even considering the vastly expanded public news coverage data on inequality! http://fivethirtyeight.com/datalab/inequ ality-booms-on-msnbc-and-fox-news-cnns-l ooking-for-flight-370/

This articles author, Bill Schneider, is unworthy of Reuters. Think and do research before presenting to an informed international audience.

Posted by CCBCCO | Report as abusive

What a poorly sourced article. It throwes forth tired tropes about “inegequality” and growth. There are a number of theories on this and none of them are in anyway provable.

IF Equality is defined as “Access to opportunity” I might agree, but taking from one and giving to another does not equal “Access to Opportunity” and does not create conditions for long-term growth.

More relevant issues are Pluralistic Political Institutions, and Extractive Economic Institutions. We have problems that are growing with both, and this article completely misses it rather than try to tackle it and ruffle liberal feathers.
Will Liberal Extractive approach provide a way toward long-term growth? Not Likely, but neither will the Capitalist approach of wanton exploitation of resources.

Limiting the deterioration of our Pluralistic Political process needs attention, which means Campaign Finance and Corruption reforms in the form of Amendments.

Extractive Political expansion needs to be restrained as well. This means limiting growth in taxes and opportunities for Corporations and the wealthy to avoid them. It also means that no tax dollars go to illegal entrants to our country. Foreign Aid?…Sure, but not Citizen aid for Non-citizens. Illegal workers get exploited and this unnaturally keeps wage growth low. This hurts citizens and everyone in the room knows it.

Face it, neither of these parties is acting in the average American’s best interest, and the sooner American’s realize it the better.

Posted by akcitaska | Report as abusive

RE: The question is whether Democrats want to talk about punitive and confiscatory policies aimed at curbing the power of the wealthy and special interests or an agenda aimed at growing the economy for everyone.”

And that’s the key, isn’t it?

Democrats like Sen. Warren talk a good game about income inequality, and they are good at getting the socialists in their party fired up, but what do they actually propose as a solution to the issue? Seriously. They do a lot of hand-waving. Where are their proposals for debate? Everything they’ve put forward so far are minor changes in tax code.

I have a modest proposal. Let’s bring back the federal excise tax on luxury goods? Just tax the toys. And let’s make it generate real revenue this time: start at 20% on expensive cars, boats, and private planes, and then go to 25% the next year and 30% the year after.

If socialists cannot defend that simple tax, which won’t affect business people investing in a new software company or a restaurant opening a new store, then they need to sit down and shut up. They have nothing to offer.

I suspect they can’t. The socialist wing of the democratic party doesn’t know anything about the economy, about growth, nor do they want growth. And deep down in their souls, they know that their tough talk about confiscatory tax rates is just that: talk.

Posted by kevindo | Report as abusive

All of the increases in productivity over the last 20 years have benefited the 1% while the wages of the middle class have stagnated or declined. If we merely focus on growing the economy while disregarding who benefits from that growth, those at the top can be expected to grab it all for themselves.

Posted by BuffOrpington | Report as abusive

And it’s not even the educated elite that are the problem. There are a lot of baristas with diplomas that say “studies” on them who think they’re elite as well.

You also have the problem of the educated elite who are, in fact, well-”educated” but who aren’t all that bright.

I hate to break it to, say, Elizabeth Warren, but if you take a native English speaker from the UMass math department and swap that person with Warren, Warren wouldn’t last a month in a grad program in math but the third-tier mathematician would be bored to tears in law school.

We have the worst philosopher-kings in history.

Posted by TheAmishDude | Report as abusive

First, consider this at Wikipedia:

“Much of the earnings of those in the top income bracket come from capital gains, interest, and dividends, which are taxed at a maximum of 20 percent.”

Then this at MarketWatch.com:

“The market is really just a yardstick of our confidence, right? Actually, no. That’s because most of us who own stocks don’t hold much and most people don’t own any stocks at all. How is the market a reflection of this silent majority? The reality is that stocks are not only owned by a minority of Americans, but by a minority of that minority – and a very wealthy minority at that. The wealthiest 5% of
Americans own 82% of directly owned, publicly traded stocks, according to the Federal Reserve. Mr. Favilukis concluded ‘changes in inequality are correlated with stock returns’ and that ‘stock market participants are on average richer and benefit disproportionately from a stock market boom.’”

Now this at The Atlantic.com:

“It turns out that wealth inequality isn’t about the 1 percent v. the 99 percent at all. It’s about the 0.1 percent v. the 99.9 percent (or, really, the 0.01 percent vs. the 99.99 percent, if you like). Long-story-short is that this group, comprised mostly of bankers and CEOs, is riding the stock market to pick up extraordinary investment income. And it’s this investment income, rather than ordinary earned income, that’s creating this extraordinary wealth gap.”

The last four years witnessed a meteoric rise in the stock market, bought into mostly by the well-off. The wages of lower- and middle-income Americans remained stagnant.

If Mitt Romney or any other Republican were president, the dramatic difference between Wall Street and Main Street would have been seized upon by liberals and the Democratic Party as undeniable proof of Bush’s lack of concern for wealth/income equality, for the poor, for minorities, for women….

The sharp difference between the “Streets” would have been portrayed, if Romney were president, as an on-going Republican strategy to help the rich at the expense of the poor. That portrayal would have gotten top billing and showcased daily by the liberal press, most significantly by ABC/CBS/NBC/MSNBC/CNN and The New York Times. Ideologues such as Ed Schultz, Al Sharpton, and Lawrence O’Donnell would be calling for people to get out and protest, perhaps even to march on Wall Street.

But because Obama is president, these pundits and the liberal press seem utterly oblivious of the Streets’ difference.

Regrettably, the same can apparently be said of the Republicans.

A question for liberals and Democrats:

How many of you see the need for out-reach programs to help low-wage Americans learn how to save and invest for their future — to do as the wealthy do? Among low-wage earners are millions who buy lottery tickets, gamble at casinos, smoke and drink excessively…. Could not these people be encouraged to forsake one of these vices and save $5-$10 per month until they had enough money, first, to create an emergency fund, then to buy into, say, a mutual fund (an easy way to invest in the stock market), then continue saving until they had enough for a fund’s minimum investment on a regular basis — so that 10 years from now they had enough to ride the next meteoric rise in the stock market?

But I can already hear: “Low-wage earners can’t save! Low-wage earners can’t save!” That belief alone, I fear, is the hammer-blow to most efforts to help low-wage earners save and invest.

Because of liberal/Democratic hammer-blows, one significant effort that would have helped low-wage earners invest — and have something to pass on to their children — failed rather quickly. In his second term, George W. Bush wanted to give young workers the option of investing part of their Social Security contributions in private accounts. The rate of return, he said, “would be higher than in the traditional system; the accumulation could be passed on to children and grandchildren.”

In my view, those who opposed Bush’s idea of giving the young the option of investing part of their income ought to hang their heads in shame.

Now comes another liberal/Democratic hammer-blow — Obamacare. Its insurance subsidies may help extend the poor’s inability to save and invest: the low earners who are incentivized by the subsidies to cut their hours or to leave and stay out of the workforce, for whatever reason, will have less money to put aside for their and their children’s futures.

Obamacare is also causing involuntary cuts to low earners’ pay: “Cities, counties, public schools and community colleges around the country,” says The New York Times on February 21, 2014, “have limited or reduced the work hours of part-time employees to avoid having to provide them with health insurance under the Affordable Care Act, state and local officials say.”

How many of these part-timers are seniors who must work to supplement a fixed-income pension, or who want to save and invest for their children to give them a leg up? Will Obama address this problem? Apparently not soon, given that “For months, Obama administration officials have played down reports that employers were limiting workers’ hours.”

Many Democrats, I’m convinced, inwardly want the poor to believe they can’t save. That’s because if the poor learn to “do as the wealthy do,” the Democratic Party might lose a huge part of its dependent base, which Obamacare will greatly enlarge.

As for President Obama, according to the Atlantic Monthly: “Indeed, Obama never uttered the words ‘inequality’ or ‘unequal’ in his 2008 convention speech. And while Obama used Mitt Romney’s wealth
against him in 2012, he rarely discussed poverty on the stump.”

Posted by MaleMatters | Report as abusive

In ref to your R spin, please post a budget that provides for savings, college funds, HC and that pesky auto/ins as well as food, dwelling and other essential. Do the budget on 10-14 hour. Lets not forget the taxes, etc. Then “Save” $10 and get rich in 10 years, like the wealthy.

Amusing twist of fact, kind of like those that howl that the new measure, the “5%” pay all those taxes, yet own so little. Lets get real and use the upper 1-2% who own and control 90% of wealth. The only real economic issue is wealthy is now a product of legislation, as our tax codes provide. For the “others” who must work, are at the mercy of some “WS/Bank analysts” who determine what their profits should be, penalty exists for R&D, update of facilities, workers pay/benefits, etc. All this is being subject to the holy grail of CEO’s, “I must protect the stockholders (and CEO stock options) as it is my holy duty”, blah blah. Now most citizens via credit, stagnant wages, and the greed of upper 2% or 1%, your choice, are in fact in economic servitude. So let’s see the budget of the worker, and how they can save etc. Suggest you call Disney or such as it will be mostly fiction on how good they have it, but do not know it!
Note O nor R’s or D’s or any of those elected who were purchased long ago, about 1980′s will end the war on Middle class, as Twain called them “Those in the shadow” would not allow such.

Posted by chuck2 | Report as abusive

A Growth economy is the new way of saying a Trickle-down economy.

Posted by tmc | Report as abusive

This is a very muddled article. I’m unclear whether that is for partisan reasons but it doesn’t add anything to the debate. People do not want growth for its own sake. Growth which only benefits a few…which US growth has…is not what Clinton was aiming for (though I’m not sure he actually got it…I’m open to correction here).

Underlying the fallacies of the article is a false dichotomy between inequality and growth. People want growth which provides broad based prosperity i.e growth the benefits of which are equally distributed. Recent growth patterns do not.

Posted by nickir | Report as abusive

What the majority of Americans want is crystal clear. We want a Congress full of people like Senator Elizabeth Warren who talks straight and wants a just, fair democracy for all Americans. The top 1% financial elite who are pulling republican/libertarian/tea party strings want to destroy government – now they’re trying to privatize the VA instead of fix it. The majority of us want a government that works well and will elect/hire the people who will restore democracy.

Posted by njglea | Report as abusive

@njglea, there’s nothing wrong with privatization as long as we get a grip on corporations. Government civil service structures are very inefficient and breed bureaucracy. We should limit the use of them to what is absolutely necessary. A small but strong government controlling outsourced agencies is far more efficient. Again, we just need to get a grip on capitalism first. I’m sure Senator Warren would agree.

Posted by tmc | Report as abusive

“During the last four years of Clinton’s presidency, the nation’s economic growth rate averaged 4.5 percent a year — three times as high as last year. Plus we had a budget surplus.”

Clinton’s second term was the period of the DotCom Bubble. Of course there is growth and increased tax revenue during a bubble.

Posted by walstir | Report as abusive