One of the lines I tripped over during Hillary Clinton’s riff on income inequality last week was her contention that “we have to have a … consensus on how to deal with this [issue].” The formulation struck me as a little strange—who thinks consensus is remotely possible on an issue as thorny as inequality? But I had other quibbles with what Clinton said and didn’t want to get bogged down on what might, after all, have been an innocent verbal misfire.
Then, earlier this week, the Times ran a detailed piece about the challenge Clinton faces in channeling the current populist mood without alienating her longtime Wall Street benefactors. Tucked away near the end of the piece was a nugget that brought that “consensus” line immediately back to mind. It came from a source who summarized Clinton’s message in her paid speeches as, “We’re all in this mess together,” the mess being taxes, financial regulation, and economic growth. Which is to say, there had been no verbal misfire. This is apparently how Clinton frames the discussion these days.
It is, to say the least, discouraging. The only other time I’ve heard people use words like “consensus” and “in this together” during conversations about financial regulation was while talking to Wall Street executives, whom I spent countless hours on the phone with in 2009 and 2010. Many would complain about Obama’s hostile rhetoric (like “fat-cat bankers”) and even more hostile policies (like the Volcker Rule) before positing an alternative approach. What was the approach? You guessed it: He should reassure the country we’re all in this together (I actual heard that phrase), get Wall Street on board with his proposals, and move forward from there.
Has Hillary picked up this line because she’s spent too much time in the company of well-heeled corporate types? It doesn’t take a conspiratorial mind to conclude as much. But let’s set aside the question of where she got it and sort out the fallacies that underlie it, the biggest being that it’s almost literally untrue. When it comes to inequality, the numbers show a tiny group of ultra-rich amassing a shockingly large and rapidly accelerating share of income and wealth. (To her credit, even Clinton has pointed this out elsewhere.) According to data collected by economists Emmanuel Saez and Thomas Piketty, the top 1 percent of earners in this country took home over 22 percent of the income in 2012, versus only 10 percent in 1980—that is, their share of income roughly doubled. The share for the top .1 percent of earners nearly quadrupled during the same period (from 3 to 11 percent); the share for the top .01 percent more than quintupled (from 1 to about 5.5 percent). By comparison, the share of income for the bottom 90 percent fell from 65 percent to just under 50.
The good news is that this means the bottom 99 percent of us are in some sense very much “in this together.” But, in economic terms, we are emphatically not in it with the richest .1 percent or .01 percent.
A second problem with Hillary’s formulation: The incomes of the ultra-rich are rising so rapidly that there’s simply no way we can deal with this growing concentration of money (and the even more alarming concentration of political power that flows from it) without slowing and even reversing the growth in their incomes. Holding constant for inflation, the poorest member of the .1 percent made $730,000 in 1980; they made $1.9 million in 2012 (again, according to Saez and Piketty). For the .01 percent, the numbers were $2.8 million in 1980, and $10.3 million in 2012. By contrast, the income of the median household rose from $47,000 in 1980 to … $51,000 in 2012.
Some have suggested we can solve the problem of inequality by growing the whole economy more and giving the poor and middle class a bigger share of the extra pie. Clinton herself occasionally hints at this, though in terms that are vague enough it’s hard to know exactly what she means. But given the rate at which the ultra-rich are increasing their earnings, there’s no plausible rate of economic growth that would allow the share of income going to the poor, middle class, and merely affluent to collectively gain on them.
To be sure, there are different ways to go about reining in the ultra-rich: We could do it after they earn their income, in the form of taxation. We could do it beforehand, by making certain sectors, like finance, less profitable. (Escalating incomes in the financial sector explain a big part of the chasm between the very rich and the rest of us.) Most likely, we’d want to do some combination of these things. The point is that, if you’re concerned about massive inequality between the top and everyone else, there’s no real alternative to doing something about incomes at the top, as opposed to boosting the middle and bottom. The math just doesn’t work any other way.
Which brings us to the third and final problem with Hillary’s consensus line: Given that solving the problem of plutocracy, which is essentially what we’re dealing with here, would require some significant financial hit to the ultra-rich, it doesn’t make sense that it could be achieved by consensus. Granted, there are some exceedingly public-minded rich people out there. Many of them supported Barack Obama in 2012 even though he was pretty clear about the need to raise their taxes. Many others have poured money into essentially limiting their own political influence. Still, it’s safe to say that, as a class, the ultra-rich aren’t going to be wild about a major hit to their incomes. (There is every indication that billionaires overwhelmingly supported Mitt Romney in 2012, for example.) When considered against this reality, any suggestion that tackling inequality should happen by consensus is effectively a suggestion that it not be tackled at all.
Now, in fairness, maybe Hillary is merely pursuing a shrewd rhetorical strategy. Maybe she plans to tackle our drift toward plutocracy in the ways I’ve suggested, but has decided to market it as a completely non-controversial idea drenched in consensus so as to isolate the small (if incredibly influential) fraction of the country that’s likely to oppose her. If so, then terrific. She’s a step ahead of me.
But my gut says she doesn’t really doesn’t want to deal with the problem. She seemed to implicitly concede as much during an interview this week, telling Der Spiegel that while the expanding gap between rich and poor was a threat to democracy, “in our country … we've always had people who did better than other people. That's just accepted. The problem is that people on the bottom and people in the middle class no longer feel like they have the opportunity to do better.” Translation: yes, runaway incomes for the rich are a bummer, but let’s talk about the middle class instead.
Fair enough. Middle-class prosperity is a critical issue in its own right. And if Hillary Clinton wants to take a pass on the plutocracy question, that’s entirely her right. But she should have the courtesy to level with us rather than insult our intelligence.