On Income Disparities
I’ve previously said that I wouldn’t write about economics anymore. And I didn’t intend to, but this is about debate; specifically the neg case for the December Public Forum topic.
My partner and I agree with G.K. Chesterton’s assessment that “The poor have sometimes objected to being governed badly; the rich have always objected to being governed at all,” and thus don’t believe that “In the United States, current income disparities threaten democratic ideals.” Overall, we’re going to claim that the resolution (and the affirmative) misidentify the causes of macrosocioeconomic woes in the United States today, and that the resolution is necessarily false because of this.
First of all, let’s check the mathematics. All other economic factors being equal, could we mitigate the current income disparities without resolving any alleged threats to democratic ideals or social justice issues the United States faces today? If we could magically double the income of the working poor to increase their disposable income so that they can better solve their own socioeconomic problems, that would mathematically be the same as if we cut the income of the working rich in half — multiply by two versus divide by two — and yet cutting the income of the rich in half doesn’t help the poor who have jack-all one bit. So seen in this light, the problem isn’t that there’s a huge gap between the rich and the poor, it’s that the poor are suffering from being too poor: if the poor weren’t suffering, then there wouldn’t be dire complaints about the rich. So yes, we totally grant that there are problems — but income disparity is not their root. We could solve for income disparity without fixing democracy.
Second, these problems are not a threat to democratic ideals because a successful democracy, a functional democracy, is based on practical compromises, not strongly held ideals. Alexis de Tocqueville said that the peculiar genius of American democracy was “self-interest, properly understood,” which Joseph Stiglitz breaks down like this:
Tocqueville was not suggesting that there was anything noble or idealistic about this outlook — in fact, he was suggesting the opposite. It was a mark of American pragmatism. Those canny Americans understood a basic fact: looking out for the other guy isn’t just good for the soul — it’s good for business.
So our second claim is that the income disparity is actually proof of capitalist ideals of meritocracy and some people being “worth” a whole lot more than others, while being bad for democratic compromise — not some ideal — that smooths over those inequalities by requiring people be willing to cede some of their personal ideals to the collective jurisprudence of civil society. Point is that even if American meritocracy is threatening the functionality of our government, we know — and our perpetually dismal views of congressional and presidential performance show — that there are no democratic ideals for us to have, much less threaten. We compromise, rather than cling rabidly to our ideals, to make a society despite our differences: that’s democracy.
Third, and this will chain on a bit, the problem isn’t income, the problem is wealth. The difference between the two (on face) is like the difference between deficit and debt: a lot of money moving fast is one thing whether it’s income or deficit, but having money that sticks around, either as debt or as wealth, is what gives you lasting problems or power. Just compare bankrupt Nick Cage to billionaire investor Warren Buffett who can’t seem to give his money away fast enough (though he is trying). When it comes right down to it, the income disparities are shocking… but the accumulated wealth disparities are even more so. Economists are estimating that the top 1% of the nation holds 37.1% of society’s total wealth, the next 19% of the nation has 50.6% of the wealth, leaving for the remaining 80% of the people a scant 12.3% of societal wealth. So our claim here is that underlying wealth is the actual lingering problem, even if it’s easier on-face to get fired up about paychecks.
Fourth, and cross-referencing Buffett’s lament that his secretary ends up paying a higher percentage in taxes than he does, the resolution gives a shallow glossing of the complexities of wealth with the word “income.” This word means something to the IRS: it means what you pay Income Taxes on. But guess what? The wealthy people with big investments — and Stiglitz backs us on this — don’t make their money from conventional income as the IRS recognizes, but rather from Capital Gains on stocks and such. And the taxes on Capital Gains are generally rather lower than they are on normal income, resulting in Warren Buffett paying proportionally less in taxes to keep America great than his secretary which even he thinks is dumb. Point is that even if the problems were being caused by income in the loosest sense of the word, they’re not being caused by income in what your or I would conventionally think of as income, or by what the IRS identifies as conventional income, so the resolution continues to be off-target.
Fifth, and this goes big, while we love what Buffett and Gates and some other enlightened wealthy people are doing for our world and trying to do for our nation, the fundamental problem is that our meritocracy isn’t producing an general aristocracy with a sense of noblesse oblige (that is, roughly translated, “Noble is as noble does”). For example, the Wall Street Journal brazenly asked “Do the Rich Need the Rest of America,” and roughly concluded “Ha ha, no you silly peasant.” But Jiang Xuequin counters in “What’s Wrong with Meritocracy” that
There’s a major difference between the US aristocracy and the meritocracy… Aristocrats like Henry Chauncey, bred at Saint Grottlesex boarding schools and the Ivy League, were conscious of their privilege and social responsibility, and focused on developing the character and leadership skills necessary for public service. Many of today’s meritocrats, in contrast, don’t believe it’s a rigged game in their favour, and commit themselves to winning it at all costs, which means stepping on everyone else.
So the problems we’re really seeing are the exceptionally wealthy focusing on their capitalistic and meritocratic ideals of being The Greatest and refusing to compromise with the rest of society which is, necessarily, not as great as they are. But the key phrase I want to point out there is that “it’s a rigged game in their favor,” which is super relevant because that shows how we can’t even do meritocracy right. Buffett refers to the rigging of the game as their winning of the “ovarian lottery” when he defines wealth in The Snowball:
Wealth is just a bunch of claim checks on the activities of others in the future. You can use that wealth in any way that you want to. You can cash it in or give away. But the idea of passing wealth from generation to generation so that hundreds of your descendants can command the resources of other people simply because they came from the right womb flies in the face of a meritocratic society.
When you put those two things together, when you think about how much property that stuck-up Paris F—ing Hilton and her ilk will tragically but eventually inherit, you see that the disparity of wealth is a threat to our pragmatic and functional democracy — which isn’t the same thing as income disparity being a threat to alleged democratic ideals at all.