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General News    H1'ed 12/8/14

The Flacks for Plutocrats Need a New Analogy

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Milanovic and van der Weide have some thoughts of why higher income inequality so stunts income growth for a state's poorest. They point to the phenomenon they call "social separatism."

In a society where the rich are grabbing incomes "significantly greater than the incomes of the middle classes," the rich have little interest in public services. Their lives revolve around private services, everything from private schools to private country clubs.

These wealthy, note Milanovic and van der Weide, "prefer not to invest in public goods like education, health, and infrastructure." But these public investments -- for the poor -- make all the difference in the world. Paltry investments in public services translate into paltry, or worse, income growth for the poor.

The political implication? If income inequality speeds the growth of wealthy people's incomes, Milanovic and van der Weide wonder, how can we expect the wealthy to accept public policy changes that reduce inequality?

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We can't, of course. Most rich will continue to claim that trickle down works, no matter how empty that claim may be. And the evidence for that emptiness is pouring in from more than academic sources.

We now have, for instance, the live-action contrast of Kansas and California. In Kansas, an exceedingly rich people-friendly governor and legislature two years ago slashed taxes on the state's wealthy, most notably by making business profitstax-free.

In California, meanwhile, voters at about the same time raised tax rates on taxpayers making over $500,000 by 30 percent.

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The story since then: California, notes analyst David Cay Johnston, has grown jobs "at 3.4 times the rate of Kansas." California's weekly wages have also grown more than weekly wages in Kansas.

So maybe we do need a rising tide after all, a rising tide of voter anger at pols who keep winking at inequality.

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Veteran labor journalist and Institute for Policy Studies associate fellow Sam Pizzigati co-edits, the Institute's weekly newsletter on our great divides. He also contributes a regular column to OtherWords, the IPS national nonprofit editorial service.

Sam, now retired from the labor movement, spent two decades directing the publishing program at America's largest union, the (more...)

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