Editorial
It's not fair T he American economy has been uniquely successful in providing a decent and rising standard of living for its citizens. In the "boom years" following World War II, Americans...
...poverty rate was 20 percent higher than in 1973...
...National economies and free markets are not perfectly rational operations that lend themselves to easy manipulation...
...income while the bottom fifth is left to divide up 4.4 percent...
...European nations have avoided a similar increase in income disparity thanks to the presence of strong unions, a higher minimum wage, and successful government and corporate cooperation in job-training programs...
...Certainly, these programs are not beyond criticism...
...That need not, and should not, be the case...
...No empirical evidence, he says, conclusively links the decline in productivity to any of the usual suspects, such as the globalization of trade and the 4 pressure of international competition, the loss of manufacturing jobs and the shift to a service-based economy, or to the adjustment to technological advances...
...Families in the top quarter of the income scale earn an average of $91,000 compared to $ 11,500 for those in the bottom 25 percent...
...In the "boom years" following World War II, Americans enjoyed an unprecedented prosperity...
...But the "rising tide" that was to lift all boats never arrived...
...How much this costs European nations in terms of productivity is a matter of fierce debate, but clearly they have chosen to pay the price of greater government intervention in the economy in return for the social comity a more equitable distribution of wealth brings...
...True, Europe's unemployment problem is greater, but a more generous welfare system keeps most of the unemployed above the poverty line...
...Cautious initiatives and patience comprise the best approach...
...Seventy percent of income growth from 1979 to 1989 was "siphoned off by the top 1 percent of wage earners...
...According to Business Week (August 15), that is the widest gap between rich and poor since 1947, when the Census Bureau began gathering such data...
...Government alone cannot solve the problems of poverty and social breakdown...
...These economic trends continue, and continue to raise basic questions about social justice and fairness...
...But the cry to cut "waste and fraud" from the federal budget is a diversion, if not a fraud itself...
...Economists such as Krugman are agnostic about the fundamental reason for our economic problems...
...Cuts in social spending programs simultaneously took money out of the hands of the poor, reducing some to destitution, and eclipsing the hope of economic advancement for many more...
...The top 10 percent of American workers earn 5.6 times as much as those in the bottom 10 percent...
...Americans at the very top of the wage scale are doing better than ever, with the top fifth of American families now in control of 44.6 percent of U.S...
...By the end of the 1980s, the U.S...
...Even in these uncertain times, the $6-trillion American economy can easily afford to make a decent provision for the poor...
...So did living standards...
...Even the effort to cut so-called "discretionary" spending—farm subsidies, aid to education, disaster relief—routinely fails...
...Or lacking that, of finding truly effective alternative ways of better distributing the nation's material abundance...
...Though the Reagan administration controlled inflation and lowered unemployment temporarily, that disturbing trend continued during the 1980s...
...Even more troubling, the increasing cost of education—the most important determinant of earning capacity—is making it more difficult for the poor to acquire the skills that would increase their opportunities in tomorrow's economy...
...More than 70 percent of government spending goes for defense and middle-class entitlement programs such as Social Security and Medicare...
...Most advanced economies are in the same boat...
...Krugman asks, "Why did the economic magic go away...
...Deprived of a quality education today, too many Americans will be unjustly denied a decent standard of living tomorrow...
...It will take political will to take such steps, and the political leadership to summon it...
...But if the economic reasons for inequality remain hard to quantify, the fundamental injustice of continuing down this road is not in question...
...Adjusted for inflation, wages for most Americans have stagnated for two decades...
...But since 1973, productivity has advanced at a sluggish 1 percent...
...During the postwar period the American economy improved its productivity by roughly 3 percent each year...
...On the larger question of productivity, Krugman and others simply note that we have been living beyond our means for the better part of a decade—that is what the deficit is all about—and the best hope for a return to genuine prosperity is to curb wasteful private and government consumption...
...The severe stratification of income is a recipe for social resentment and despair, if not higher levels of crime and violence...
...That will can be found in a sense of what justice demands...
...Instead, according to economist Paul Krugman (Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations, Norton), incomes for the wealthiest 1 percent of American families doubled while income for those at the bottom of the economic scale declined...
...Even if every inefficiency were magically removed, the economic problems of most Americans would remain...
...But the much-maligned aid programs account for only a small portion of government spending...
...Those are the facts...
...This will cost money—" Krugman writes, "but not much, because our poor are so poor that it only takes a moderate amount of spending to make them much better off...
...The declining American standard of living, which is at the root of so much of the volatility in our political culture, will not be reversed by confiscating the pittance grudgingly allotted to the poor...
...and answers with refreshing candor: "The real answer is that we don't know...
...In Germany and 3 France, those at the top earn only three times as much as those at the bottom (Business Week...
...economic productivity doubled in twenty-five years...
...Sadly, the promise of an ever-increasing and more widely shared prosperity has been fading since the mid-1970s...
...Meanwhile, the Republican-led assault on government and the welfare state seems only to intensify...
...This makes social spending for the poor an easy target...
...Americans seem unwilling, or politically incapable, of sanctioning such government activism...
...Neither are the likely consequences of an ever-widening gap between rich and poor...
...Nevertheless, it would be a serious mistake to attribute the growing disparity between the rich and the rest of Americans solely to Republican efforts to reduce taxes...
...Under the Reagan presidency, taxes for the wealthy were reduced in the belief that money in the hands of the "productive" would spur real prosperity for all...
Vol. 121 • September 1994 • No. 16
