Tuesday, February 15, 2022

Income Inequality In America


How does it happen that the rich are getting richer and the poor are getting poorer?
Part One: What Is the Problem of Income Inequality

The professor and economist Dr. Robert Reich wrote the 2020 book, The System: Who Rigged It, How We Fix It. It’s a very readable 206 pages. There is no calculus. Ninth grade math knowledge of percent is all the math you need. In this book Reich reveals and explains income inequality in a professional, kind manner. I don’t think he is politically polarized. He illustrates his points with interesting economic-related facts from American history. He reveals how corporate greed supported by politicians has interfered with the financial survival of eighty to ninety percent of American families. 
According to Robert Reich, Americans live in a rigged economic system where the rich are getting richer and the poor are getting poor. Here are specific figures from Reich’s book:
  • Between 1980 and 2019, the share of the nation’s total household income going to the richest 1 percent more than doubled, while the earnings of the bottom 90 percent barely rose (figures were adjusted for inflation). Most of us are in that bottom 90%!
  • Chief Executive Officer's (CEOs) pay increased 940 percent, (yes, that’s 940%) but the typical worker’s pay increased 12 percent. "In the 1960s, the typical CEO of a large American company earned about twenty times as much as the typical worker; by 2019, the CEO earned three hundred times as much.” (Reich, 2020)

Let’s get more information from another credible source, the well respected and often quoted Pew Research Center. One year ago they said, “Economic inequality, whether measured through the gaps in income or wealth between richer and poorer households, continues to widen.” (Note: “wealth” means the value of assets such as savings accounts and how much money you could get from selling your home.) Their data comes from the U.S. Census Bureau and the Organization for Economic Cooperation and Development.
Data published by Pew Research shows income inequality is rising in America. In each decade the numbers show the ratio of income at the 90th percentile to the income at the 10th percentile (90/10 ratio).
  • 1980 - 9.1
  • 1990 - 10.1
  • 2000- 10.6
  • 2010 - 11.7
  • 2018 - 12.6
More data from Pew Research shows that there is more income inequality in America than in the G7 countries listed below. G7 countries all have well developed economies.
  • U.S. - Most income inequality
  • UK
  • Italy
  • Japan
  • Canada
  • Germany
  • France - Least income inequality

I don’t doubt Robert Reich and the Pew Research Center’s statistical data and conclusions. Here are two bottom lines and most important takeaways.
  • Except for those at the upper 20% income level, everyone else’s income has been stagnant for many years. 
  • Eighty percent of US citizens since the 2007 Great Recession forward to 2016, have not recovered their lost wealth.

Although America has dozens of significant problems worthy of focus, income inequality gives pain to the large majority of citizens; therefore, the pain should strongly motivate us to become more engaged politically, voting on issues, and voting for particular politicians rather than political parties.

Part Two: Where to Focus and How to Approach Getting Solutions to Income Inequality 
On the one hand, the stark reality of America’s income inequality is not hard to grasp. This is because being richer or poorer is a simple concept to grasp. It can be displayed in numbers graphs. This is what researchers label “objective data.“ It’s difficult to honestly argue against objective facts from well- established research groups. 
But on the other hand, income inequality has many causes arising from many places in government and society. This leaves much room for argument, blaming, and bitter political disagreements. Proving those major causes sufficiently for legislative purposes will face many difficulties. The many special interest groups will push back and attack one another. In today’s political world, conspiracy theories will be added to bias and prejudice to impede progress by creating confusion.  
To prepare us for the difficult task of understanding the causes of and remedies for income inequality, let’s learn from the success story of reducing lung cancer from smoking. Though the problems are different, the processes toward solutions are similar: Success comes from significant changes in the intensity of research. Changes in state and federal laws will be necessary. Citizens must become more determined to use their voting power to elect politicians who will put citizens first instead of CEOs. Governmental stalemate won’t be tolerated. A lot of consistent effort everywhere must be applied over a long time. 
Smoking causing lung cancer, is a simple concept which was difficult to prove. Our example comes from the book, The Lady Tasting Tea: How Statistics Revolutionized Science in the Twentieth Century. The author, David Salsburg, had a long career as Senior Research Fellow at Pfizer, the pharmaceutical company. He is an expert with deep knowledge of math and statistics used for preventing disease.
In the late 1950’s cigarette companies were vigorously denying the validity of smoking as a cause of cancer. And there were some statisticians who pointed out limitations in the statistical methods. Salsburg explains that the cancer studies were retrospective studies, meaning that they looked from the onset of lung cancer backwards in time to measure years of smoking by the persons in the research study. The correlation coefficient statistic used in the research showed a connection between smoking and cancer; but correlation suggests causation but cannot prove it. 
Between 1952 and 1959 there were 5 – 10 more retrospective studies. Mr. Cornfield and five prominent cancer specialists laid out their results which showed a much greater percentage of cancer among smokers than among the comparison group of nonsmokers. The evidence in total showed, that “smoking is a causative factor in the rapidly increasing incidence of epidermoid carcinoma of the lung.” Salsburg shows how the scientists overcame the problems proving causes and concludes with, “Although each study is flawed, the evidence keeps mounting, as one study after another reinforces these same conclusions.” (Salsburg, 2001)
For a while, The Tobacco Institute continued to run full page ads in popular magazines questioning the smoking-cancer relationship. But in reputable scientific magazines no articles questioning the smoking-cancer relationship appeared after 1960.

Was the incidence of death from lung cancer due to smoking reduced? Yes!
From 1991 to 2003 in the U.S. there was a 40% reduction in overall cancer death rate. At a minimum, 146,000 lung cancer deaths were prevented. (Peto R, Darby S, Deo H.et al Smoking, smoking cessation and lung cancer in the UK since 1950: combination of national statistics with two case‐control studies. BMJ 2000321323–329.)
What actually caused the success? Research has shown that the most potent demand-reducing influences on tobacco use have been interventions that impact virtually all smokers repeatedly, such as higher taxes on tobacco products, comprehensive advertising bans, graphic pack warnings, mass media campaigns, and smoke-free policies. (Cummings KM. Programs and policies to discourage the use of tobacco products. Oncogene. 2002 Oct 21;21(48):7349-64. doi: 10.1038/sj.onc.1205810. PMID: 12379878.)

In Robert Reich’s book of 206 pages, The System, every page is filled with substantial information. He has written a gripping story of how rich and powerful persons (whom he calls oligarchs) cleverly influence individual politicians so they, the oligarchs can further increase their wealth and power. This process also helps the politicians get reelected and maintain their power and influence. The cozy big business and politician relationships have been an enduring and much debated problem for at least 150 years!
  • In the past, laws have been passed to insure the government serves the people and that the people have a stronger voice than the railroads (in 1800s), or banks, or Wall Street, or big business. And the oligarchs have pushed back and caused new laws to weaken or leave loopholes in the previous (reform) laws. 
  • Government passes laws telling how corporations how to treat their employees, as well as what is legal or illegal. Important laws are often very complicated, have exceptions, and loopholes. Of course, some exceptions are reasonable. But politicians insert some exceptions and loopholes as part of how politicians bargain with one another and major influencers to get the law passed. Many citizens suspect they’re being betrayed by their government but the vast majority of citizens know so little inside information they couldn’t put into words a meaningful complaint.
Within any government, even in well-established democracies, there are tempting ways to “game the system,” to unethically exploit it, or systematically corrupt it.

Keep in mind, now, the exemplary successes in the prevention and treatment of the complex disease of cancer. Everybody got involved to make things better. Government, science and citizens cooperated in the success.
In contrast, however, since 1980 the Republican and Democratic parties have failed to discover, implement and maintain a program to first halt and then reduce the gross amount of income inequality. 
The goal cannot be equality of income. The appropriate goal is a reduction in the grossness of America's current level of inequality.


        For references, see the relevant page on the powertomyvotes.com website.

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