November 19, 2007
Last week, the Pew Charitable Trust released a series of three reports on economic mobility across generations, in hopes of providing “information and tools that will provide the nation’s leaders with an objective and accurate picture of the status and health of the American Dream.
While the release of the reports was covered widely in the news, I’m finding little in the blogosphere about the reports’ overall findings that depending on one’s starting points, income mobility may be more limited than many Americans believe.
An exception is the Wall Street Journal’s Wealth Report, where Robert Frank contrasts the finding of the reports that family background still strongly influences where one winds up on the economic ladder with recent reports supporting the belief that in the U.S.,
“wealth is [now] ruled by the entrepreneur and the middle-class guy made good”.
And over at Writing in the Wild, Ray Watkins provides a good summary of the reports and insight into the possible “glass half-full/half empty” interpretations of their findings.
In contrast, No Oil for Pacifists seems to have given the Pew Reports a very quick read, indeed. Ignoring the high rates of downward mobility of African American children from middle-income families, he proclaims that
“the economic prospects for African-Americans has improved dramatically since the mid 1970s; I suspect the gains over the past decade are closer to those of whites”.
Similarly, he proclaims that unlike Europe, “nearly everyone in America has the chance to be rich”, when the Pew Reports repeat the findings that are widely cited elsewhere: that America is a less mobile society than other developed nations. He’s missed, also, one of the report’s central findings: that much of the growth in family income in the past generation is attributable to more women going to work, not to the ease by which ambitious people simply work their way into wealth.
The Washington Post’s Michael Fletcher’s on-line Q and A focused on diverse explanations for the fall of so many African Americans from middle income status, while Get Religion, going far beyond the data used in these reports, insists that these long-term economic trends can be explained by individual choices (decline in involvement in religion, single parenthood) made by African Americans.
Insisting, instead, that the data in the reports are evidence of ongoing racism, Jack and Jill Politics blog takes exception to NPR’s Juan Williams’ essay on the divergence of black culture and values along class lines.
It will be interesting to follow Pew’s ongoing work on this project of careful scrutiny of the American Dream — and to follow, also, the public discourse that their work generates.
November 3, 2007
My reading these days is done in snatches on the bus, but while stuck in traffic last week, I finished Robert Frank’s brilliant small book Falling Behind: How Rising Inequality Harms the Middle Class.
Frank opens with an intriguing thought experiment:
You’re given the choice between two worlds: World A in which you own a 4,000 square foot house but everyone else owns a 6,000 square foot house and World B, in which you own a 3,000 square foot house but everyone else lives in a 2,000 square foot house.
According to “the standard, neoclassical model of choice”, Frank argues, World A, in which everyone can consume more, is the obvious logical choice.
Yet most people, when asked, choose World B.
In chapters whimsically illustrated by graphs, photos, and cartoons, Frank demonstrates that there is much more at stake here than simple envy or greed. He acknowledges the psychic reality: that with ever-more lavish consumption at the higher ranks, the costs of simply “adequate” has risen, and the bar at which people feel relative deprivation is set ever higher (even while he also argues that owning many things does not make the wealthy happier).
Yet in times of limited access to important goods, decisions about buying a house are also decisions about whether one’s children will attend the best schools or merely mediocre schools, whether streets will be in good repair, whether drinking water will be clean, whether fire fighters will be well-equipped.
And as long as a relatively small number of people at the top of the income ladder can easily afford to outbid most everyone else for access to homes where all of these services can be taken for granted, those clamoring for their place on the rungs below will find themselves paying ever more for housing (and for cars that will be safe in collisions with the luxury vehicles of the wealthy, and for interview clothes that will position them as “one of us” on first impression).
The consequences, Frank argues, are that the middle class is working longer hours, commuting longer from more “affordable” neighborhoods, going further into debt, and withdrawing their support for public services so that more of their income can go to personal consumption rather than to taxes.
With sales of $2000 watches growing at double digit rates, Frank suggests, taxing consumption rather than income could help to level the playing field. Persons who might otherwise build an 80,000 square foot house, he argues, would suffer little if they instead lived in 60,000 square feet, but dampening the competitive frenzy for owning The Most could free up resources for rebuilding a crumbling national infrastructure, for reinvesting in public education, for personal leisure among the frenzied workforce.
I find his argument compelling, and a welcome perspective to deliberations about inequality that are more conventionally framed only in moral terms.
But I am certainly not an economist. So I wonder: is a consumption tax workable? Are there arguments against a consumption tax that Frank is missing? Are there other viable options for ending the frenzy of competitive consumption?