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December 18, 2012 12:07 PM What’s driving economic inequality? Reuters has some answers

By Kathleen Geier

I wanted to draw everyone’s attention to an important new series in Reuters on economic inequality in the states, called Redistributing Up. It has the usual jaw-dropping statistics: since 1989, inequality has increased in 49 of the 50 states, and the poverty rate has increased in 43 of those states. In Washington, D.C., which today’s story focuses on, the top five percent of households make 54 times more per year than the bottom 20 percent — and that shocking 54:1 ratio is up from 39:1 two decades ago. The article also includes some fascinating human interest stories, which makes it highly readable.

But the single most important story the article tells is the story of the powerful role our government plays in creating inequality and redistributing wealth upward. As the article’s authors explain, over the past 25 years or so, the government’s military spending and spending related to the global war on terror have led to an outsourcing boom. This outsourcing has helped the wealthy and hurt ordinary working people. Here are some of the deets:

The outsourcing boom has been particularly dramatic in the Washington [D.C.] region. Direct spending by the federal government accounts for 40 percent of the area’s $425 billion-a-year economy. The government spends more on private-sector procurement here than in any other metropolitan area or state - up 300 percent since 1990.

This boom, moreover, has

fostered a growing upper class of federal contractors, lobbyists and lawyers in the District of Columbia area. The federal government funneled $83.5 billion their way in defense and other work in 2010 - an increase of more than 300 percent since 1989, even after adjusting for inflation. Private industry poured more than $3 billion into lobbying to influence the government, nearly double what it spent a decade ago.

The growth of this elite class is accompanied by another, even more disturbing trend: the destruction of decent government jobs for working class and middle class Americans. Privatization, outsourcing, and government layoffs have caused those jobs to disappear, and the fortunes of ordinary working people in the D.C. area to plummet. Thus economic inequality continues apace. All too predictably, the revolving door between lobbyists and public officials has served to accelerate the outsourcing boom, and make the inequality even worse. Reuters does a fine job at explaining all this, but if you want to see a more academic treatment, I suggest that you have a look at this working paper by Professor James K. Galbraith and Travis Hale, which examines the subject in more technical terms.

The good news about the Reuters article, if you can call it that, is that the popular press is finally realizing that economic inequality is not some impersonal trend that we have no control over, but a deliberate political choice that our elected officials have made. The hard part — the excruciatingly difficult part, of course — will be figuring out a way to reverse course and to create a politics that works for the 99%, not the 1%. But at least our journalistic betters are no longer telling us that economic inequality is beyond our control. It’s taken long enough, but that’s a step in the right direction from what economists and economic journalists were telling us in the 1990s.

Kathleen Geier is a writer and public policy researcher who lives in Chicago. She blogs at Inequality Matters. Find her on Twitter: @Kathy_Gee

Comments

  • Mark-NC on December 18, 2012 1:13 PM:

    This has to start with the press. A good example of why was a conversation I had yesterday. A friend came by and he mentioned the new "law" in Michigan that trys to kill unions. A asked hem about the other laws - anti-Sharia, cutting off tax exempt status for charity food sources, guns in schools, etc. He had no clue about any of this happening.

    Without sunlight, nasty things flourish and the rich getting MUCH richer is just one of them. Until the decent people in the press begin to fight back against the liars on the "right?", you can bet the Repugnant Ones will continue their goal (IMHO)to destroy the middle class or accelerate it if possible.

  • c u n d gulag on December 18, 2012 1:34 PM:

    And so, we have a Rolls Royce military.

    Protecting what, exactly?

    A handful of Maserati Millionaires and Billionaires, who are in charge of skimming whatever profits our Yugo economy, which is rapidly on it's way to 3rd World Haiti's poverty levels, creates, from being invaded or attacked - by whom?
    From where?
    With what?
    Religious loons with boxcutters did almost as much damage as the entire Japanese military.

    And yet, we are told we need more super-fighter jets and nuclear-powere aircraft carriers and nuclear-powered submarines!

    FOR WHAT?!?!?!
    Osama bin Laden's goal, or at least one of them, was to bankrupt the USA.
    Now, there's someone who, if he were still alive, could claim, "Mission ACCOMPLISHED!!!" And the fact that he would have strutted and pranced and preened on a meadow between some mountains in Pakistan, would have been just as sweet for him.
    Our dunce danced too soon.

    OY!
    And so, now, the old, the sick, the disabled, and actual workers and their children, will pay for "Bush's Follies:" Two unnecessary wars and occupations, and increases in military spending; tax breaks for the rich; a gift to Big Pharma; and a financial system that almost took the rest of the world into a New Great Depresssion, caused by middle class people using their homes as collateral to, if not keep up, then at least come close to the standard of living their parents had enjoyed - relative to new technologies and advancements.

    Ah, but NOT the Rolls Royce military!

    OH NO!!!
    No cost to them.
    Why, THEY must protect US!
    How do they protect us, when the enemy, eating our countries economy from within, is the same Military Industrial Complex that's supposed to protect us?

    This enquiring mind wants to know...

  • WayneL on December 18, 2012 2:02 PM:

    Go back to Watergate. Follow the money! Where there is money, there is corruption. Elections are fueled by money. Lots and lots of money. Politicians spend more time raising money than representing their constituents. In fact, you can say that their main job is raising money for re-election. This leads to favors, and this leads to more money being funneled to the top. Combined with the Republicans understanding that by taking money out of the middle class, it defunds the Democrats. By moving jobs off shore, it takes down unions, which hurts the Democrats. By focusing on Fox News, the agenda is skewed toward the conservative ideology, to be "fair and balanced." It all goes hand in hand.

    The only way this will change is when it all falls apart, as it did with deregulation. It doesn't work. Tax cuts don't create jobs. It doesn't work. The conservative agenda is a failure. It doesn't work. Unlimited money in elections is a failure. It doesn't work. When the elites realize that they are unable to get even more money because the middle class doesn't have any with which to buy stuff, it will come crashing down. Until then, we watch the slow death of our country.

  • schtick on December 18, 2012 2:08 PM:

    Thank you Saint Ronnie for your "trickle down" economics that did nothing but trickle up.

  • Mark_NC on December 18, 2012 2:34 PM:

    To: WayneL on December 18, 2012 2:02 PM:

    You are wrong about the conservative agenda being a failure. It has worked PERFECTLY. It's just that their priorities are different from ours. They (IMHO) want to destroy the middle class, destroy labor unions, wipe out anything in government that helps anybody, and create a wealthy ruling class.

    They have been VERY successful getting there! And it's not just tax policy, it's getting rid of the Fairness Doctrine along with the creation of the Fox propaganda channel and taking over talk radio by buying most of the stations. And, they have eliminated most of the banking regulations that prevented greed from running wild.

    Don't assume they are too dumb to see that their policies don't help the things WE think are good. It's their goal!

  • Doug on December 18, 2012 4:01 PM:

    Mark_NC, I think you may be wrong about the conservative agenda wanting to destroy the middle class. It DOES want to destroy the ability of working class people to become middle class (otherwise, what's so special about themselves?), but 'way too many of them don't realize you that you can't "prune" the middle class and all attempts to close entry to it hurt those already IN the middle class just as much as those wanting to enter.
    To that extent, yes they ARE that dumb!
    Did anyone else note that the disparities in income starting showing up right at the end of St. Ronnie's last administration? Strange, that...

  • Robb on December 19, 2012 9:06 AM:

    Their goal isn't to destroy any class... We're just the casualties.

    Their primary goal is to consolidate and perpetuate control for people of their interests (the very rich), and they are just indifferent to what happens to the rest of us.