Lawrence Summers in a 2007 photo (AP)
Some serious talk about 'spreading the wealth'
COMMENTARY | October 24, 2008
Henry Banta, citing a talk at Harvard by Lawrence Summers, notes that there has been staggering income redistribution – upward – in recent decades.
By Henry M. Banta
A mere whisper about “spreading the wealth” has sent the Republicans off like a pack of hungry hounds howling about “class warfare,” income redistribution,”and worst of all, “socialism.” The media once again have demonstrated their inability to get beyond the mere reporting of slogans and counter slogans.
The question of income inequality is serious and at the moment has little to do with liberal ideology, socialism, or even fairness. It is at the heart of the practical question of how we get out of our current economic mess.
Recently the stock market took another nasty plunge on a report that consumer spending was down. No one should have been surprised; we are incessantly reminded that consumer spending is the “engine that drives the economy.” What should we expect when the engine is out of gas? Three decades of stagnant wages and growing debt, topped by a collapse in the value of homes and other assets, have sent consumer spending into a deep slump. The real question is how to get out of it.
At the centennial conference of the Harvard Business School, former Treasury Secretary Larry Summers called the growth of inequality a crisis of legitimacy for market capitalism. He suggests that we have already had income redistribution for the last 30 years. He points out that since 1979 the income share of those in the top one percent gained about $600 billion. The bottom 80 percent lost about $600 billion. He then calculates that this means that on average those in the top one percent got an additional $500,000 each year while those in the bottom 80 percent lost $8,000 each year. He further concludes that,
"If the bottom 80 percent had kept pace and earned that $8,000 .... their income would have been twice as high over the last generation as what we in fact observed. Think about this number: $600 billion a year. It is immense compared to any discussion of changing the tax system here or there."
[Click here for a video of Summers’s talk at Harvard, and here for a report on his talk in Harbus, a student weekly at the Harvard Business School.]
In short, there is no simple way to use the tax code to reverse the staggering amount of income redistribution we have already had. But without some income re-redistribution how are we to revive the economy? How are we to get the consumer back spending – and with his own, not borrowed, money? Isn’t this the real question that needs to be asked of the next politician who feels compelled rant about socialism? And shouldn’t someone tell “Joe the plumber” about the last round of income redistribution?
Highly Unfashionable but refer back to The Constitution.
11/01/2008, 06:44 PM
The government does not exist to determine the acceptable level of wealth of its individual citizens.
For government to assume that role, it would have to end private property rights and assume all property belonged to the State.
That is classic Marxism. Barack Obama complains that the Constitution is a `charter of negative liberties.’ That’s because the Constitution was intended as a limiting document, to curtail the power of the federal government vis-à-vis the states and the individual. Barack Obama wants to reverse that entirely. And that’s radical change you’d better believe in, or else.