We're going to be hearing a lot about income inequality over the next few years. It may be an abstract concept, but it gets hits like Sarah Palin and attracts grant money like Cory Booker. Tim Noah's series on the subject was (rightly) so popular he got a book contract out of it. Jacob Weisberg's piece, in which he declares (plausibly) that Obama is losing the "war on inequality" has been up for a few hours and is already a magnet for impassioned comments.
There are two big questions to ask liberal opponents of income inequality. 1) What, exactly, is it about greater economic inequality that's so bad? and 2) What you gonna do about it? Let's take the first question.* Noah wrestles with it and concludes
I do not wish to live in a banana republic. There is a reason why, in years past, Americans scorned societies starkly divided into the privileged and the destitute. They were repellent.
Weisberg's answer also has a Latin flavor:
Moving toward an income distribution like Brazil's threatens individual happiness, social peace, and American values.
My own answer is that we care about income inequality because it corrodes social equality—i.e., whether we respect each other as equals. But if that's the reason, I'd argue, there are other methods (e.g., national service, a national health care system, safe and popular public spaces) that can directly give us more social equality than longshot liberal efforts to indirectly affect social equality by trying to "reverse" a "decades long trend toward income inequality" that is powered by fundamental shifts in technology and trade. **
But, hey, whatever. Let's assume the problem is income inequality. And none of us wants Brazil.
The question is then what makes Brazil Brazil. Is it wild riches at the top, or extreme poverty at the bottom? It seems pretty obvious, from what little I know of Brazil, that the problem is the bottom, not the top. We worry about Brazil because of the favelas, the huge impoverished shantytowns, and the crime coming out of them. We worry because it's hard to believe that if you're a poor Brazilian squatting in a shanty you can think of yourself as the social equal of a tycoon across town. And across town, thanks to all that crime, it seems impossible to lead a normal, American-style socially-egalitarian middle class life, at least without a full-time bodyguard. You're not about to go sit in the cheap seats at a soccer match or wander near your local favela while shopping. I had an affluent Brazilian friend who moved to New York City and would only consider living in Trump buildings, on the grounds that only they would have adequate security for someone of her class. I finally convinced her that no, this was America. You could really live almost anywhere you wanted. You didn't need a guard with a gun on every floor. And you could walk around.
If you're worried about incomes at the bottom, though, one solution leaps out at you. It's a solution that worked, at least in the late 1990s under Bill Clinton, when wages at the low end of the income ladder rose fairly dramatically. The solution is tight labor markets. Get employers bidding for scarce workers and you'll see incomes rise across the board without the need for government aid programs or tax redistribution. A major enemy of tight labor markets at the bottom is also fairly clear: unchecked immigration by undocumented low-skilled workers. It's hard for a day laborer to command $18 an hour in the market if there are illegals hanging out on the corner willing to work for $7. Even experts who claim illlegal immigration is good for Americans overall admit that it's not good for Americans at the bottom. In other words, it's not good for income equality.
Odd, then that Obama, in his "war on inequality," hasn't made a big effort to prevent illegal immigration--or at least to prevent illegal immigrration from returning with renewed force should the economy recover. He hasn't, for example, pushed to make it mandatory for employers to use the "E-Verify" system, or some other system, to check the legality of new hires, preferring to hold that reform hostage (sorry!) in order to try and achieve a larger "comprehensive" bill that included a conditional amnesty for the 11 or so million illegals already here. (In Washington, if something's obviously desirable that means it's a bargaining chip.) True, Obama has tried to make a big deal of his administration's deportation numbers, but only as a nose-holding effort to placate the right sufficiently to get a mass legalization bill through. And the deportation numbers themselves are suspect.
I'd argue Obama's main effort on immigration would, in fact, have made the inequality problem at the bottom worse. A "comprehensive" bill would almost certainly have attracted new illegals, but the efforts to stop them at the border might well have failed, as they failed after a similar 1986 bill. The result of that failure has been a looser labor market at the bottom. Lower unskilled wages. Even the emergence of favela-like shantytowns in California. You want Brazil? Obama's 2009-2010 immigration plan would bring us Brazil. Obama was putting coalition politics--pleasing Latino voters, and especially Latino politicians--over economics, at least egalitarian economics.
The good news is that now, because his immigration reform failed, Obama has a potential money-equalizing solution in sight. Republicans in the House are going to propose various anti-undocumented "enforcement" efforts, including widespread use of E-Verify, designed to prevent the flooding of the unskilled labor market. All Obama has to do is go along. He can go along reluctantly and tell his Latino coalition partners that he really hates having to sign an E-Verify bill, the way he hated having to sign an extension of the Bush tax cuts for the top brackets. Or he can actually transcend his coalition and tell them, maybe even convince them, that they're wrong, that controlling the border ("Enforcement First") is a) the best way to boost wages at the bottom and b) the only way to eventually set the stage for legalization.
You never know, but there are approximately zero signs that Obama is ready to engage in the second type of leadership. If he has to have egalitarian policies pushed on him by Republican committee chairman, to what extent are he and the Democrats fighting a "war on inequality"?
* On the second question, suffice it to say I think Obamans were in fantasyland if they actually thought that (in David Leonhardt's words) raising $100 billion in annual taxes on the rich, "increasing federal college aid," and reducing health insurance premiums--the main pro-equality provisions in Obama's initial budget—could "reverse the rapid increase in economic inequality over the last 30 years".
** Weisberg's solution ("the key to combating inequality") is "upgrading the education and skills of American workers." This is everybody's favorite answer, but you have to almost consciously avoid thinking about it not to see the problems. 1) It takes a really long time--many decades at plausible levels of "human capital" investment. 2) Not everyone can have their education and skills upgraded at will. Some people are less upgradeable than others and some are not upgradeable at all. 3) The rise in income inequality hasn't been just a rise in the extra pay earned by those with college degrees. There is also the "star" pheonomenon in which the most talented of a group of similarly-educated people take home increasingly bigger and bigger checks. It's certainly not clear that sending everyone to college will make everyone a star; it might help proleterianize some professions, something that is arguably happening to lawyers and doctors; 4) Computers and the Internet are getting better at taking away or outsourcing the jobs of the skilled; 5) A truly meritocratic society in which everyone acquired as many valuable skills as they could would probably be a social egalitarian hell, with smart people on top and stupid people on the bottom and everybody all too aware of this. Weisberg's education solution is actually toxic to the ultimate goal of income equality, which is (to quote one of Noah's sources) society in which we are "used to working together and respecting each other as equals" (i.e. social equality).