There’s no evidence that giving tax breaks to those in the top income levels generates economic growth that will “trickle down” to those in the lower income brackets. A quartet of international economists has shown that countries like the United States and Britain that cut their tax rates haven’t grown significantly faster than countries, such as Germany and Switzerland, that didn’t cut their tax rates. Rich countries around the world have generally grown at the same rate despite differing tax policies, they concluded.
The U.S. economy has seen a sharp increase in the share of income going to the top 1 percent, with this group claiming 17.4 percent of income in 2010, up from 7.7 percent in 1973. The top 1 percent had an average income of $1.5 million in 2011. The pope captured this growing inequality when he said, “While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few.”
Harvard economics professor N. Gregory Mankiw defends the top 1 percent to some extent by creating the following thought experiment. Suppose that society had somehow managed to create an economic situation where everyone’s income was the same. Now, suppose a brilliant author named J.K. Rowling writes a phenomenal best seller about a wizard named Harry Potter and, as a result, her earnings skyrocket. What should a society that denounces economic inequality do in such a case? Should it tax away her windfall earnings and spread the wealth around because her extraordinary income no longer reflects society’s wishes? The policy response is not at all obvious.
Mankiw says that the increasing income inequality isn’t due to government policy so much as it’s due to simple economics: there’s a growing gap between the demand for skilled workers and for unskilled workers. Highly-educated workers have a much lower unemployment rate than less-educated workers because companies seek the skills they possess. A trip to the grocery store where customers, not cashiers, scan their purchases, and a drive along the expressway where the EZ pass pays the toll are evidence that robots are increasingly doing things that unskilled labor used to do.
Or, as the pope put it, “Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape.”
It’s hard to identify why income inequality is a problem, but the 76-year-old pontiff raises some uncomfortable truths.
For example, there’s something wrong in a society when, as the pope said, “It is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?” In recent days, the stock market has reached new highs as the Dow Jones Industrial Average closed above 16,000 points for the first time in history. Meanwhile, out in Los Angeles, two Democratic members of the Los Angeles City Council would like to see the city, which has the highest rate of homelessness in the country after New York, stop feeding the homeless in public spaces.
It may be politicians like these to whom the pope directed the words: “I beg the Lord to grant us more politicians who are genuinely disturbed by the state of society, the people, the lives of the poor! It is vital that government leaders and financial leaders take heed and broaden their horizons, working to ensure that all citizens have dignified work, education and healthcare.”
“It is a struggle to live and, often, to live with precious little dignity,” the pope noted.The Washington Post recently highlighted this struggle when it reported that families with the least amount of income have the highest share of overweight or obese children. This seemingly paradoxical outcome arises because these families often can’t afford to eat healthy food on the $1.50 or so per person per meal that the federal food stamps program allocates to them.
It’s not just America’s 85 million Catholics who should heed the pope’s words when he says that we have a problem when “the culture of prosperity deadens us; we are thrilled if the market offers us something new to purchase; and in the meantime all those lives stunted for lack of opportunity seem a mere spectacle; they fail to move us.”
This Thanksgiving weekend marks the start of the biggest shopping season of the year, with Black Friday, followed by Small Business Saturday and Cyber Monday. Each day is designed, in the pope’s words, to offer us something new to purchase. Americans spent a record $59.1 billion, or an average $423, on Black Friday last year.
Meanwhile, we may only dimly recall that one in six Americans lives in poverty, that almost 18 million American households didn’t know how they were going to put enough food on the table for their family at some time in 2012, and that 40 million Americans still don’t have health insurance.
The pope asked for greater charity, not just among friends and family members, but also within social, economic and political circles. In this aspect, it’s somewhat a relief to know that the four shopping days of Thanksgiving are followed by Giving Tuesday, a day when people are asked to support the charitable activities of nonprofit organizations.
Americans are a generous people, having made $229 billion in charitable donations in 2012. But, while donations are up 3.9 percent over a year, Black Friday spending is up 13 percent at the same time.
Charitable donations and events like Giving Tuesday help. But, they’re not enough according to the pope. “As long as the problems of the poor are not radically resolved by rejecting the absolute autonomy of markets and financial speculation and by attacking the structural causes of inequality, no solution will be found for the world’s problems or, for that matter, to any problems,” he declared.