David R. Henderson  

Is Outrage at the Top 1% Distracting Us?

The Modest Problem of Children... Blame the Republicans...
I worry about growing income inequality. But I worry even more that the discussion is too narrowly focused. I worry that our outrage at the top 1 percent is distracting us from the problem that we should really care about: how to create opportunities and ensure a reasonable standard of living for the bottom 20 percent.
This is the opening paragraph of Sendhil Mullainathan, "A Top-Heavy Focus on Income Inequality," New York Times, March 8, 2014.

Mullainathan makes a careful argument, not that the government shouldn't tax the top 1% more, but that it shouldn't try to tear down the top 1% for the sake of tearing them down. He also points out that tearing them down in itself does no good for people at the bottom.

Mullainathan also gives some sobering data on people at the bottom and their odds of going to prison:

In focusing on the 1 percent, we aren't talking about our failure to create equal, or even reasonable, opportunities for all. The Crime Lab at the University of Chicago says, "A back-of-the-envelope calculation suggests that there are 15 ZIP codes where if you are born into one of them you have at least a one-in-two chance of ending up behind bars at some point; and 775 ZIP codes where birth ensures at least a one-in-three chance of incarceration."

Unfortunately, Mullainathan doesn't run with that argument. His very next paragraph is this:
We should try to ensure that everyone has a fair opportunity to find a great life. It's a quest that will require political will and ingenious policies. President Obama's proposed expansion of the earned-income tax credit goes in this direction, but we need more.

Somehow I doubt that expanding the earned-income credit would do much for the people in those 775 zip codes. But I can tell you what would do a lot for them: ending the drug war, ending the grinding regulation that prevents many of them from selling food on the street, driving cabs, and doing scores of other jobs without government permission.

Still, Mullainathan's piece is a welcome response to those who sound as if they do want simply to tear down the top 1%. After all, he has made it clear that he doesn't object per se to taxing them more if doing so would help the bottom 20%. By the way, I don't want to tax the top 1% more. But we could tax them less and help many in the bottom 1% by letting out of prison the hundreds of thousands of people who have committed victimless crimes, as I've outlined here.

So how could someone who both wants to tax the top 1% more and wants to help the bottom 20% object to Mullainathan's article? Yet Mark Thoma does. He doesn't tell us why, but here's the only comment he makes in his post on this article: "This was *not* my favorite article of the day." OK, but why? By saying it this way, of course, Thoma doesn't come out and disagree. It could, after all, be his second-favorite article of the day. But I doubt it. When you say that someone is not your favorite person, that is your understated way of saying that you don't like, or at least have serious reservations about, that person. I think this was Mark Thoma's way of being negative about the article without putting himself in the position of having to explain why.

By the way, Sendhil is co-author of the article in The Concise Encyclopedia of Economics on "Behavioral Economics."

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COMMENTS (20 to date)
Daniel Kuehn writes:

I think Mullainathan is making a very good point, but he's making it by invoking a strawman. There are quite a few of us who spend a considerable amount of time thinking about the bottom 20% and what to do to help them, and often we get accused of statism or class warfare for it.

When I think about the people that seem to have the deepest concern for the bottom twenty percent, the overlap with those raising concerns about the top 1% are substantial.

I honestly don't know who Mullainathan is thinking of here. But I can't disagree with his underlying point, or yours.

Daniel Kuehn writes:

I don't see any great mystery in Thoma's frustration. Doesn't that last sentence he quoted sound a little... I dunno... condescending to you??

MikeP writes:

Doesn't that last sentence he quoted sound a little... I dunno... condescending to you??

Absolutely not. Having a problem with the 1% because they are the 1% is pure unadulterated envy. And the appeasement of envy is one of the most negative forces in a society, being destruction for destruction's sake.

Daniel Kuehn writes:

MikeP -
Perhaps, but of course that ("having a problem with the 1% because they are the 1%") is not what Mullainathan wrote and not what I was responding to when I wrote that.

I am not sure I am as down on envy as you are (nor do I think it needs to lead to having a problem with someone). Envy/jealousy is an ugly sort of motivator, I don't particularly like it, but it can motivate people to strive for better things. I wouldn't go as far as calling it "destruction for destruction's sake".

David R. Henderson writes:

@Daniel Kuehn,
Doesn't that last sentence he quoted sound a little... I dunno... condescending to you??

Daniel Kuehn writes:

MikeP -
This is a big part of the problem and how these strawmen get generated, I think. Mullainathan writes, Thoma quotes, and I make reference to one thing - you read something completely different. That is precisely how misunderstandings over hot issues like this start.

Michael Strong writes:

You forgot to add minimally regulated school choice to this list:

"But I can tell you what would do a lot for them: ending the drug war, ending the grinding regulation that prevents many of them from selling food on the street, driving cabs, and doing scores of other jobs without government permission."

When one compares the moral stature of a libertarian world-view with that of a progressive world-view, libertarian-ish policies:

1. Ending the drug war
2. Eliminating regulatory obstacles to income-producing opportunities for the poor
3. Minimally-regulated school choice

look pretty good for the bottom 20%.

On any empirically plausible view of the world, the libertarian-ish policies provide some path for productive, positive lives for these people (with or without increased redistribution).

But I don't see how the progressives have anything whatsoever that could provide much of a difference in the lives of these people. Universal pre-K and health care? As long as we enforce the drug war, maintain high regulatory barriers to entry, and force these people's children into hopeless "schools," their lives look pretty dismal into the indefinite future.

The most progressives seem able to offer at this point is "slightly less miserable" lives. No real path to dignity, opportunity, or healthy communities. No amount of frothing at the mouth over "inequality" changes the fact that they have no way forward.

It is time to make a mainstream case that "libertarian" policies achieve Rawlsian ends more effectively than do "progressive" policies.

MikeP writes:

...that ("having a problem with the 1% because they are the 1%") is not what Mullainathan wrote...

He didn't write exactly those words, but he certainly expressed exactly that notion.


...a tax on the rich as a means, not as an end in itself...

When taxation of the rich is the end...

This is taxing the 1% for being the 1%: i.e., having a problem with the 1% because they are the 1%.

Also, I am also not really down on envy either: it can be a motivator. I am down on the appeasement of envy -- particularly on the state taking actions in order to placate the envious. That is bad. That is pretty much Mullainathan's point.

lowcountryjoe writes:
There are quite a few of us who spend a considerable amount of time thinking about the bottom 20% and what to do to help them, and often we get accused of statism or class warfare for it.

I've noticed! I also notice that the suggested or implemented help is some form of redistributed tax money that first went through an enormous bureaucracy so that a substantial amount has been siphoned. Perhaps if the same people that spent considerable time thinking about the 20% were to just open up their own wallets and purses -- with a discerning eye -- they could find out which of those 20% truly need the help. That might be something to think about and implement.

Maniel writes:

Zip-code inequality - could this finally be the key that unlocks a few opportunities? What have we got to lose if we're already in one of the bottom 15? Just as charter schools in Harlem struck terror into the cold, cold hearts of the NY Mayor and his union brethren, so might free-enterprise zones in a few of those out-of-favor zip codes. Obviously, if (or should I say when) they worked, the politicians would kill them, but that would just show, once again, that the poor have zero representation among politicians (minimum wage, anyone?). Time to call the bluff of those who say that inequality is important and who "really mean it."

Sebastian H writes:

This is an interesting counterpoint to the recent posts on 'deserving'. One of the devastating differences between the poor and the rich is the likelihood of having the life damaging effect of going to jail for minor crimes. Do the poor deserve to go to jail with much greater frequency for the same acts?

Andrew_FL writes:

@Sebastian H-Your question seems to be phrased in such a way as to presume the incidence of committing certain crimes isn't higher among the poor than the rich, they only get prosecuted more.

However I suspect that the bloggers here generally would not be in favor of prosecuting anyone for drug related non-violent "crimes," so it's also misplaced, even if we take a rather cynical view of the American justice system.

Unless...you don't actually mean to suggest there should be class quotas for certain criminal prosecutions?

Pajser writes:

Focus on 1% is not needed to solve the problems of the poor. However, redistribution is needed. USA is at least 3-5 times wealthier than needed to ensure job, apartments, food, clothes, complete existential security, free health and education, some free recreation, tourism, culture consumption to everyone - with redistribution. Without redistribution? If 250 years of more less consistent GDP growth didn't solved some of the basic problems of the poor then it is unlikely that another 50 years of growth will.

Floccina writes:

Great post....

Mullainathan also gives some sobering data on people at the bottom 20% and their odds of going to prison:

Could it be that people prone to crime are also prone to poverty. Could it be that crime surely does not pay for most criminals. That a person's reputation for honesty and trustworthiness is very valuable indeed especially for those that lack other skills.

Sebastian H writes:

I'm not just suggesting that they only get prosecuted more, I'm stating it. ;)

And not just prosecuted more, also convicted more if selected for prosecution (and perhaps selected for prosecutorial abuse in the sense of frame ups more too--though that is just a suggestion).

It is also well known that being prettier will greatly increase your chances of being found not guilty, and will have already increased your income.

David R. Henderson writes:

Thanks. By the way, you quoted me correctly but I had a mistake in the line you quoted and I’ve now corrected it. I had meant to delete “20%” when I wrote the piece but forgot to.
You write:
Could it be that people prone to crime are also prone to poverty.
I think the answer is yes. That’s one reason that I don’t to give them even more opportunities for crime--and a way to do that is to legalize the peaceful things they’re doing that are now called crimes.

Thomas Sewell writes:

Outrage at the top 1% is designed to justify the actions and desires among the "elite" who want more control of society by government bureaucracies, politicians and their press and academic hanger-ons.

I'm sure there are people who are sincere in their misguided belief that action against the 1% is going to help the less fortunate among us, but if you ask the general population what a fair percentage of their income should be taxed, you reveal that while they generally have a decent sense of fairness, they don't understand that tax rates on the top 1% exceeded that a long time ago.

If people want to help the less fortunate among us, then there are established ways to accomplish that which have worked for hundreds of years in various places around the globe. It's not a huge mystery why some countries are wealthier than others and how that changes over time. If anything, stoking fires of jealousy at the 1% is counter-productive to the goal of increasing wealth in society.

When I see someone on the left advocating for removing restrictions on economic activity in order to get the government out of the way of creating more wealth for everyone, then I'll believe they're serious about actually helping people instead of simply using that as an excuse for additional control.

ThomasH writes:

Why the false choice? Expand the EITC and exempt the first $x thousand dollars of wages from the payroll tax by taxing high income earners AND end the drug wars and occupational licensing and vested interest zoning. Many liberals will think the latter will do little good, but would go along to get Libertarian support for redistribution.

Jim Glass writes:

In light of the question, it may be relevant to note how the "inequality" issue has evolved in political campaign terms over the last generation.

"Rich v poor" has been a Democratic drum-banging campaign issue forever (Andrew Jackson) -- but 20 years ago it was solidly "top quintile v bottom quintile". I have a clip file on it going that far back, e.g. 1992 young Krugman in a NY Times guest op-ed pounding "top quintile v bottom quintile" -- the top quintile was moving up, the bottom one wasn't. Bang, bang, bang, election year big issue.

Yet today that just doesn't work politically for Democrats because of the DeBlasio Dilemma, seen very clearly here in NYC.

DeBlasio got elected by pounding the "fight inequality!" "tax the rich!" drum and has been beating it ever since. But if he puts it in "quintile" terms, it blows up in his face:

[] The top quintile is his voting, fundraising, organizational base -- the proverbial NYC "Moscow on the Hudson" liberals. Is he going to tell them "You are the problem, with your college and professional educations, good jobs, marrying each other to multiply your household income! You are driving inequality, I'm going to tax you for your good behavior!"?

In NYC, a senior public school teacher makes $100,000+. Two married rank-and-file city employees with seniority like that can make $200k. Is he going to attack and tax *them*? I think not.

And as to addressing...

[] The bottom quintile by saying "we have to move them up", that doesn't work for him either. Because it resolves into either (1) "blaming the victim" -- the poor should finish school, not do drugs, take entry-level jobs even at low pay, get married before having children, become more responsible, etc -- which doesn't sell at all on the left, or (2) city agencies that are supposed to help the bottom quintile, like public schools and their teachers unions, must become better at their jobs and more accountable for results -- and that absolutely doesn't sell to his supporters.

So who is left for DeBlasio to politically target with the "inequality" agenda? Only the top 1%. Thus, he swears to fight his war on inequality by sticking it only to those who make ... more than $500,000 a year.

This is sign of how weak the inequality agenda really is. Note how Obama and the national Dems have followed the exact same course -- heroically fighting inequality by making permanent 98% of the formerly demonized Bush Tax Cuts and push-push-pushing a minimum wage increase 'for the poor' that sends the bulk of its benefit to the middle class.

So to the question "Is Outrage at the Top 1% Distracting Us?" the answer is "Yes, and intentionally so", it is designed and framed this way exactly to keep the 'inequality' issue alive on the left while distracting left-side voters from the DiBlasio Dilemma, for which the Dems have no other answer.

Political issues like this are carefully and extensively field tested before pushed by the parties and their journo-allies. All the "outrage over inequality" has evolved from being about quintiles to being about the top 1% for a reason. It's not an accident.

Also, note well: There is no real "outrage" among the public over the top 1%. If there were, Occupy would have marched on Madison Square Garden and Citi Field to protest all the top 1% multimillionaires there producing dreadful W-L records, and have marched on Hollywood ... etc. It is just faux outrage over anonymous bankers and CEOs -- but not even real ones. Where's the "outrage" over Warren Buffett? If he isn't the walking personification of mega-wealth and the power it brings, who is? But everyone likes Warren.

That's how well the false image of "outrage" has been engineered and marketed.

One can't be cynical, er, realistic enough about election year issues like this. "Inequality" has never, ever won an election for the Dems because it has next to no sway on the decisive middle voters, who idolize the Hollywood rich, think Warren is cuddly, and wish their sports teams would pay bigger salaries to get better players. But it has always been a vital issue to the Dems for its power to motivate their base and distract from other issues (how's Obamacare doing?). That's what all faux outrage over the top 1% is carefully designed, framed, to do. Yes, it does distract indeed -- even more than suggested.

Hoby M. writes:

David H., I'm sorry but I am pretty disappointed in your "article." Perhaps it was simply meant to provoke thought, but along with your comments it seemed to be simply more negative ideology disguised as journalism. No better than that which you criticize. I have been reading many enlightening and thought provoking articles tonight. This was *not* one of them.

Perhaps you have a more sophisticated view than absolute libertarianism. If you do than this article did that no justice. I don't understand how letting an immigrant sell your daughter a salmonella dog on the street fixes poverty?

While there are certainly better efficiencies to be found in regulation, as in business, I don't see the greater good in selling you fake Lipitor, or 10 gallons of gas for the price of 11. Appreciate your consideration of needless incarceration, but could use more insight to believe you aren't simply advocating for selective anarchy.

There are many things we could do to help the bottom 20%. Most of them cost a lot of money. Something the 1% have a bit more to spare than the rest of us. I'm not advocating for handouts, but if they won't pay the maids a living wage to run their hotels, than we have to help them somehow, as none of us like to sleep in someone else's filth.

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