Nobrainer’s Think Tank

From the NYT:

Income inequality grew significantly in 2005, with the top 1 percent of Americans — those with incomes that year of more than $348,000 — receiving their largest share of national income since 1928, analysis of newly released tax data shows.

To me that means nothing by itself, other than that the top 1% had a good year. It’s not necessarily a bad thing or a good thing. But fixing it at all costs can potentially be a very bad thing:

… you’ll see that the share going to the top 1% peaked in 1929 at 23.94%. In 1933, the number was 16.46.

Hurray! The rest of us, the bottom 99% were getting a bigger share in 1933. The economy was more fair! But there was nothing to cheer about. Real GDP per capita (cool tool—don’t miss it), fell 29%.

There’s nothing like a good depression to level out that playing field.

But it is striking to me that income inequality is usually measured at the national level. And it seems to me that the issue only draws political traction from the left at the national level.

Why is that? If, for example, you are an average American and your neighbor had a great year, you don’t accuse him of creating income inequality or of stealing from you or anyone else (maybe if your only literal means of advancing are theft, you assume that everyone else also steals to get ahead). And I, at least, have never seen the issue even raised on a state level. Do people in Washington feel worse every year when they learn that Bill Gates net worth increased by a few billion dollars? Maybe it’s because it is still too local, or maybe it’s too easy for the-about-to-have-his-tax-go-way-up to pack up and relocate in another state.

It doesn’t gain traction in America on a global level either. You would have an extremely difficult time convincing an American who wants a lower level of income inequality in America that he should be taxed additionally and heavily to help ease the income inequality between him and the global poor. No politician in America will ever get elected on a platform of higher taxes for the sake of giveaways to other nations.

Prof. Thomas Piketty of the Paris School of Economics, said such growing disparities were significant in terms of social and political stability.

“If the economy is growing but only a few are enjoying the benefits [my note: not that this is at all shown to be true in the article], it goes to our sense of fairness,” Professor Saez said. “It can have important political consequences.”

The issue of income inequality has nothing to do with good economics and certainly nothing to do with maximizing wealth for everyone. It doesn’t even have anything to do with being fair. It has everything to do with a wide swath of Americans believing they can get a free lunch and wide swath of politicians eager to give them guaranteed shit for enough votes to get themselves into a precious little piece of DC real estate and power. To the extent that the issue of income inequality is a winner for politicians, I see it only as a failure of people like me to artfully articulate the consequences.