Inequality related to racism, voting, happiness, income distribution and taxes – Feb 2021

“The Sum of Us: What Racism Costs Everyone and How We Can Prosper Together.” Once the civil rights movement expanded America’s conception of “the public,” white America’s support for public goods collapsed. People of color have suffered the most from the resulting austerity, but it’s made life a lot worse for most white people, too. McGhee’s central metaphor is that of towns and cities that closed their public pools rather than share them with Black people, leaving everyone who couldn’t afford a private pool materially worse off. One of the most fascinating things about “The Sum of Us” is how it challenges the assumptions of both white antiracism activists and progressives who just want to talk about class. McGhee argues that it’s futile to try to address decades of disinvestment in schools, infrastructure, health care and more without talking about racial resentment.

What privilege awareness does, at its best, is reveal the systematic unfairness, and lift the blame from the victims of a corrupt system,” McGhee said. “However, I think at this point in our discourse — also when so many white people feel deeply unprivileged — it’s more important to talk about the world we want for everyone.” So McGhee is trying to shift the focus from how racism benefits white people to how it costs them. Why is student debt so crushing in a country that once had excellent universities that were cheap or even free? Why is American health care such a disaster? Why is our democracy being strangled by minority rule? As the first line of McGhee’s book asks, “Why can’t we have nice things?” Racism is a huge part of the answer. McGhee describes a “solidarity dividend” gained when people are able to transcend racism. Look at what just happened in Georgia, where the billionaire Kelly Loeffler, in an attempt to keep her Senate seat, waged a nakedly racist campaign against Raphael Warnock, who ran on sending voters $2,000 stimulus checks. He still lost most white people, but won enough to prevail. He did it by appealing to idealism, but also to self-interest. In the fight for true multiracial democracy, counting on altruism will only get you so far.

Brian Wakamo, Five Painful Charts on Covid and Black America. This Black History Month, hard data reveal how the pandemic has widened racial divides.

Michelle Goldberg, The Book That Should Change How Progressives Talk About Race, New York Times. Heather McGhee shows how racism increases economic inequality for everyone. When she was a 25-year-old staffer at Demos, the progressive think tank she would eventually lead, she went to Congress to present findings on shocking increases in individual and family debt. “Few politicians in Washington knew what it was like to have bill collectors incessantly ringing their phones about balances that kept growing every month,” McGhee writes in her new book, “The Sum of Us: What Racism Costs Everyone and How We Can Prosper Together.”

Demos’s explanatory attempts failed. When Congress finally took action in 2005, it made the problem worse, passing a bankruptcy bill that made escaping unsustainable debt harder than ever. For McGhee, the disaster was an education in the limits of research, which is often no match for the brute power of big money. But as she was walking down the hallway of the Russell Senate Office Building, she learned something else. Stopping to adjust her new shoes near the door of a Senate office, she wrote, she heard “the bombastic voice of a man going on about the deadbeats who had babies with multiple women and then declared bankruptcy to dodge the child support.” She doesn’t know whether the man was a Democrat or a Republican, but when she heard him she realized she and her allies might have missed something. They’d thought of debt and bankruptcy primarily as a class issue. Suddenly she understood that for some of her opponents, it was more about race.

She wondered how, as a Black woman, she’d been caught off guard. “I hadn’t even thought to ask the question about this seemingly nonracial financial issue, but had racism helped defeat us?” she wrote. McGhee’s book is about the many ways racism has defeated efforts to create a more economically just America. Once the civil rights movement expanded America’s conception of “the public,” white America’s support for public goods collapsed. People of color have suffered the most from the resulting austerity, but it’s made life a lot worse for most white people, too. McGhee’s central metaphor is that of towns and cities that closed their public pools rather than share them with Black people, leaving everyone who couldn’t afford a private pool materially worse off.

One of the most fascinating things about “The Sum of Us” is how it challenges the assumptions of both white antiracism activists and progressives who just want to talk about class. McGhee argues that it’s futile to try to address decades of disinvestment in schools, infrastructure, health care and more without talking about racial resentment. She describes research done by the Race-Class Narrative Project, a Demos initiative that grew out of her work for the book. McGhee and her colleagues, she writes, discovered that if you “try to convince anyone but the most committed progressives (disproportionately people of color) about big public solutions without addressing race, most will agree … right up until they hear the counter-message that does talk, even implicitly, about race.”

But McGhee, who leads the board of the racial justice organization Color of Change, also implicitly critiques the way parts of the left talk about white privilege. “Without the hostile intent, of course, aren’t we all talking about race relations through a prism of competition, every advantage for one group mirrored by a disadvantage for another?” she asks.

McGhee is far from an opponent of the sort of social justice culture sometimes derided as “wokeness.” But her work illuminates what’s always seemed to me to be a central contradiction in certain kinds of anti-racist consciousness-raising, which is that many people want more privilege rather than less. You have to have an oddly high opinion of white people to assume that most will react to learning about the advantages of whiteness by wanting to give it up.

“Communicators have to be aware of the mental frameworks of their audience,” McGhee told me. “And for white Americans, the zero-sum is a profound, both deeply embedded and constantly reinforced one.”

This doesn’t mean that the concept of white privilege isn’t useful; obviously it describes something real. “What privilege awareness does, at its best, is reveal the systematic unfairness, and lift the blame from the victims of a corrupt system,” McGhee said. “However, I think at this point in our discourse — also when so many white people feel deeply unprivileged — it’s more important to talk about the world we want for everyone.” So McGhee is trying to shift the focus from how racism benefits white people to how it costs them. Why is student debt so crushing in a country that once had excellent universities that were cheap or even free? Why is American health care such a disaster? Why is our democracy being strangled by minority rule? As the first line of McGhee’s book asks, “Why can’t we have nice things?” Racism is a huge part of the answer.

McGhee describes a “solidarity dividend” gained when people are able to transcend racism. Look at what just happened in Georgia, where the billionaire Kelly Loeffler, in an attempt to keep her Senate seat, waged a nakedly racist campaign against Raphael Warnock, who ran on sending voters $2,000 stimulus checks. He still lost most white people, but won enough to prevail. He did it by appealing to idealism, but also to self-interest. In the fight for true multiracial democracy, counting on altruism will only get you so far.

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Harold Meyerson, What Having No Income Tax Gets a State During a Pandemic, American Prospect. The states that tax the wealthiest the least are having the hardest pandemic time maintaining public services.

Anand Giridharadas, Who gets a second chance? The Ink. The answer in America today: the already privileged.

On accountability and reinvention in American life: Who gets second chances and who doesn’t, what must you do to get one, and how is that connected to all the people who don’t even get first chances in America?

By Anand Giridharadas Feb 15 10665

I imagine a certain older arc of atonement that went something like: Sin>Accountability>Redemption. What we often see now is a very different arc, more like Sin>Sin-related expertise>Leadership of sin prevention... Another, more fundamental problem with these costless second chances for those at the top is they entrench a reality in which second, and often first, chances are withheld from most people...If bankers who wreck the housing market get costless second chances, bankers keep doing what they did, and people down below don’t get second chances to own a home after losing one to foreclosure. If people who lie the nation into war get costless second chances, there will be more lying into wars, and more young men and women who, meeting an IED on some dusty road, get no second chance. If people who enable fascism get costless second chances on cable and reality TV, it reduces the price of enabling fascism, and that makes it that much more likely that a refugee from violence won’t get a new start here. If the tax avoiders and union busters get costless second chances through reputation-laundering philanthropy, their workers will see their chances of ever experiencing a day of economic security withering and dying. Their second chances, high up there, are the reason you perhaps often feel you don’t have a first one. Not everything in life is simple. This is. Either they keep getting second chances they don’t deserve — or you start getting first chances you do.

In theory, second chances are a good thing. I mean, we all need them. Many of the ancient religions counsel mercy, and second chances are the natural consequence of that. Situations are not identities. Your worst deed is merely a situation. You should have the chance to become more than that deed, to transcend it.

But as the Trump era fades and a new wave of second-chance-seeking gets under way, I have been wondering: Who gets second chances and who doesn’t, what must you do to get one, and how is that connected to all the people who don’t even get first chances in America?

After President Trump’s acquittal in the Senate, what we’ve known all along was confirmed once again, and flagrantly: that certain people, especially if they are rich and powerful and white and male, enjoy total impunity in American public life. There will be no consequences for Donald Trump. Maybe some prosecutor somewhere will find a spine, but I wouldn’t bet my coffee on it.

So now, with a kind of constitutional sanction, Trump will get his thousandth second chance. Just as he got after every business failure, just as he got every time he crossed some supposed red line in office. And is this surprising? Is this second chance to resume a role in public life all that different from the impunity of every police officer who has shot an unarmed Black person? Is it different from the impunity of every Republican who laid the ground for Trumpism, then bailed at the last minute, only to reinvent themselves as a democracy-is-fragile guru? Is it different from the impunity of the speculators who caused the 2008 financial crisis? Is it different from the impunity of those who brought us Guantanamo and torture and Iraq and Katrina and climate change and voter suppression and suffocating plutocracy and more?

Not only are these powerful figures who maim or defraud or starve or oppress other people immune from accountability in America today. They come back better than ever. The 21st-century second chance is a flashy, well-publicized, flex of a reentry in which one expects more than a chance to be back in polite society. One expects to lead, to become an expert in the problem one caused, in the vanguard of the search for solutions to the problem that one is, the fire chief of the department investigating the arson one has set.

See, for example, how many highly culpable figures of the George W. Bush presidency have now become well-published writers on the topic of saving democracy — saving it from the totally predictable consequences of everything they once worked toward. Or how the Lincoln Project guys, before the organization imploded, became media darlings, despite having somehow had no problem with the pre-Trump Republican Party of “welfare queen” slander, the Southern strategy, trickle down, WMDs, Sarah Palin, and more. Or how the Wall Street speculators who brought you the 2008 crisis around the world now run “impact” and “social” funds, promising to solve through their investing genius the problem of poverty to which they helped contribute. Or how Jeff Bezos is now donating money to fund free preschool for children from low-income families, which is another way of saying the families Bezos and his friends underpay and thwart from unionizing.

If you play your cards right, you don’t even need to atone for one of these second chances. You can go straight from the arson to the firefighting, straight from causing the problem to leading the search for solutions to it. You can do this by starting a foundation, or writing some attention-getting magazine cover, or, as Kellyanne Conway did the other day, dancing on “American Idol” to begin the reputation-laundering process that will surely get her a cable explanatory job soon.

This oversimplifies it somewhat, but I imagine a certain older arc of atonement that went something like: Sin>Accountability>Redemption. What we often see now is a very different arc, more like Sin>Sin-related expertise>Leadership of sin prevention. It will not be long before some of the most craven collaborators of Donald Trump are teaching seminars and leading panels on how to guard against future autocracy.

So one of the problems with this kind of second chance that so dominates our public life is that it isn’t really a second chance, because people don’t atone, don’t seek mercy, don’t show they’ve changed. They just clean their stink, which is different. And they go right to the helm of supposed solution-seeking, cutting in line everyone who was right all along, in fact battling them all along.

But another, more fundamental problem with these costless second chances for those at the top is they entrench a reality in which second, and often first, chances are withheld from most people. There is a zero-sum relationship between these second chances at the top and the chances people enjoy below the stratosphere. Because if bankers who wreck the housing market get costless second chances, bankers keep doing what they did, and people down below don’t get second chances to own a home after losing one to foreclosure. If people who lie the nation into war get costless second chances, there will be more lying into wars, and more young men and women who, meeting an IED on some dusty road, get no second chance. If people who enable fascism get costless second chances on cable and reality TV, it reduces the price of enabling fascism, and that makes it that much more likely that a refugee from violence won’t get a new start here. If the tax avoiders and union busters get costless second chances through reputation-laundering philanthropy, their workers will see their chances of ever experiencing a day of economic security withering and dying. Their second chances, high up there, are the reason you perhaps often feel you don’t have a first one. Not everything in life is simple. This is. Either they keep getting second chances they don’t deserve — or you start getting first chances you do.

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Florian Scheuer and Joel Slemrod, Taxing Our Wealth, Journal of Economic Perspectives. A comprehensive look at how wealth taxes have fared internationally and could fare in the United States.

In 2016, for example, the top 1 percent of households ranked by net worth held 40 percent of US wealth, while the top 1 percent ranked by income earned 24 percent of income (Wolff 2017). In addition, wealth taxes typically have high wealth thresholds before any tax is due and may also include a graduated structure of tax rates that apply above the thresholds. Heightened consideration of a wealth tax is almost certainly tied to the increase in inequality over the past four decades: although the details of
this increase are disputable, in our view the conclusion that it has increased nontrivially is not (for discussion, see the “Symposium on Rising Inequality of Income and Wealth” in the Fall 2020 issue of this journal).

The wealth tax has had some prominent academic adherents: for example,
Kaldor (1956) called for a wealth tax for developing countries, Allais (1977)
proposed to replace most direct taxes with a 2 percent wealth tax in France, and Piketty (2014) called for a global progressive wealth tax. But even some of those who are concerned about rising economic inequality raise questions about whether a wealth tax is the appropriate policy response…

Politically Sustainable Tax Policy

One can argue that the primary role of a wealth tax is to make tax policy and the resulting inequality more stable, so that it can resist the threat of political upheaval (Farhi et al. 2012; Piketty 2014). Such threats were important drivers of tax and welfare state policies in 19th- and 20th-century Europe, when the socialist movement gained momentum (Esping-Andersen 1990), and they are palpable today in many South American countries. If political instability is an urgent problem, annual wealth taxes are able to compress the wealth distribution relatively quickly compared to, say, taxes on bequests or capital income.

One approach to modelling this question is to focus on tax policies that will maintain the support of a majority of citizens over time. Scheuer and Wolitzky (2016) show that the optimal sustainable tax policy involves a positive marginal tax on the wealth accumulation of the rich, while subsidizing that of the middle class. At any given time, there is always a temptation to impose wealth taxes, because at this point, wealth accumulation is sunk. However, if the future is likely to bring near-confiscatory wealth taxes, then individuals anticipating this outcome would
save very little in the first place, leading eventually to a poor outcome for everyone.

Hence, it is better to tax the savings of the rich at least to some degree and create a middle class that accumulates enough wealth to successfully oppose more extreme redistribution in the future. Of course, if the issue is reducing the impetus for political disruption based on tensions related to economic inequality, the wealth tax needs to be compared to a range of other political alternatives: for example, a combination of a progressive increase in income tax rates, more tax audits, expanding the estate tax, reforms to capital gains taxation, refocusing government spending on those with lower income levels, or an expansion of social insurance programs.

Wealth and Political Power
Even in a “one-person, one-vote” democracy, the superrich can affect politics more than others through campaign contributions, ownership of media outlets, or lobbying activities. Gilens (2014) and Bartels (2016) collect evidence that political decisions often are more sensitive to the preferences of the rich than those of the median voter. Accordingly, proponents of a progressive wealth tax have argued that reducing the wealth of the superrich is a desirable objective in itself, beyond the
revenue it could raise to effect redistribution. Indeed, Saez and Zucman (2019b) propose setting wealth tax rates above the revenue-maximizing rate, expressing a willingness to reduce the wealth of the superrich in the interest of preventing an “oligarchic drift” that would otherwise undermine democracy. Of course, there is some tension between enacting a wealth tax to fund redistribution initiatives (such as “Medicare for All” in some recent US proposals) and enacting a wealth tax with the goal to reduce top wealth rather than collect revenue.

Even if concerns about an extreme concentration of wealth and political power are warranted, the jury is still out on the extent to which a wealth tax is the appropriate tool to address the problem. Other instruments may be better targeted at ensuring a more equal political representation, such as regulating campaign contributions and public financing of political campaigns. Some European countries offer examples of democracies where money plays a smaller role in politics than in the United States, and Brechenmacher (2018) concludes that wealthy elites exerting
disproportionate political influence is a distinctly US phenomenon.

In recent years, many European countries decided that a wealth tax did not
belong in their armory of tax instruments. Although the United States has never had such a tax, perceptions of unacceptably high income and wealth inequality have recently galvanized support for one, and two prominent US senators have produced detailed proposals. These proposals differ quite substantially from the experience of their European counterparts. Thus, the evidence about the consequences of wealth taxation in Europe is in any event of limited usefulness. On one hand, the broader base along with promised expanded enforcement will limit the revenue leakage and distortion from avoidance and evasion, while exacerbating real behavioral responses. On the other hand, the higher top rates and targeting of the
superrich will concentrate the revenue pressure on those taxpayers with the best means and strongest incentives to avoid the tax.

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Stephen McNeice, How a maximum wage could ‘dramatically’ change how society’s wealth is shared, NewsTalk. An interview with Luke Hildyard, director of the UK High Pay Centre.

A salary cap for top earners is one of the ‘radical ideas’ being put forward to create a society where wealth is distributed more evenly.

It’s an idea that’s been backed by the likes of former UK Labour leader Jeremy Corbyn in the past.

It also comes amid concerns over how much billionaires such as Amazon founder Jeff Bezos earn, with some of the world’s richest people earning more money every minute than the vast majority of people earn in a year.

Luke Hildyard, Director of the High Pay Centre in the UK, spoke to Lunchtime Live about what it would entail.

He said: “It’s useful to dig into the thinking behind it by asking what is it that determines people’s level of prosperity? 

“Think about it in terms of a pie: how much everybody gets depends on how big the pie is and how evenly it is sliced up.”

Mr Hildyard said these debates are particularly necessary now as the economy is going to be smaller for quite some time in the aftermath of the COVID-19 crisis.

He said: “If we want those in the middle and at the bottom to maintain their current living standards – let alone improve them… we’re going to have to do a dramatically better job of sharing things more evenly.

We need radical ideas on how to redirect some of the money who have more than they need… to those who don’t have enough.

“Proportionally, the way we distribute things at the moment is not even efficient or sensible – let alone morally right. There’s great wealth in the world, and yet more people have more of it than they could possibly hope to spend.”

‘A utopian ideal’

Mr Hildyard said people do deserve to be rewarded for running successful businesses and creating jobs. However, he said it’s important to ask whether there should be a limit to such rewards when many, many others are working equally as hard to simply make a living.

He said: “Does having this good idea of selling books on the internet entitle [Jeff Bezos] to having a greater wealth than the entire country of Ukraine, for example? “Certainly in the UK – and I’d imagine this is very true in Ireland as well – most of the people who are struggling to feed their family, cover the costs of their heating bills or put a roof over their head… are going out and working hard themselves every day, taking risks, and doing the best they can for their families.”

Mr Hildyard said they absolutely accept this is “quite a utopian ideal”, and they don’t envisage it being enacted anywhere at the moment.

However, he said his own organisation has carried out research – a ‘thought experiment’ – looking at the kind of changes a maximum wage could bring for people.

He said: “For example, if you capped pay at around £200,000 in the UK… that’d [cover] a shade under 1% of the population… [around] 80,000 earners. But it would mean a pay rise of around £1,500 for around nine million people.

“Even those supposedly losing out… they’d still be earning eight times the UK national average salary, making the kind of money year in, year out that would enable you to afford multiple properties, foreign holidays, luxury cars… a lifestyle generally beyond the wildest dreams of any normal person.”

He said he believes people across society would be a lot happier if wealth was more evenly shared – stressing the idea is the “politics of proportionality rather than the politics of envy“.

Heather Hansman, Can Billionaires Really Save Us from Climate Disaster? Outside. The top 1 percent of income earners globally account for 15 percent of emissions, more than all the 3.5 billion people in the the world’s bottom earning half. 

Tim Schwab, Bill Gates, Climate Warrior. And Super Emitter, Nation. When will the media realize that with Gates you have to follow the money?

How to get managers’ incentives right, Economist. New data suggest that lavish executive stock incentives drive corporate behaviors that promote short-term profits over long-term enterprise health.

Shekhar Gupta, Economic ideology is the new binary in Indian politics as Modi swerves Right & Rahul Left, The Print. Politics in India may finally be about to challenge the 1 percent of Indians who hold 73 percent of the national wealth.