Increasing Inequality: It’s happening, it matters, and we can do something about it. Jared Bernstein Ben Spielberg.

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Presentation transcript:

Increasing Inequality: It’s happening, it matters, and we can do something about it. Jared Bernstein Ben Spielberg The Center on Budget and Policy Priorities Updated: 1/6/2015

Inequality… …has risen sharply since the late 1970s. …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. …is a problem we can combat with the right policy solutions.

Inequality… …has risen sharply since the late 1970s. …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. …is a problem we can combat with the right policy solutions.

Earnings Inequality Social Security Administration data Source: Wage data, tab 3Wage data, tab 3 Top 1%: Bottom 90%: Ratio: 1947 $131,072 $14, $255,760 $27, $648,541 $31,

Earnings Inequality Bureau of Economic Analysis: National Income and Product Accounts data Source: Table 1.12Table 1.12

Income Inequality Census data Source: Tables F-1 and F-5Tables F-1 and F-5

Income Inequality Congressional Budget Office data Source: Calculations from Supplemental DataSupplemental Data

Income Inequality Congressional Budget Office data Source: Calculations from Supplemental DataSupplemental Data

Income Inequality Internal Revenue Service tax data Source: “Piketty and Saez”Piketty and Saez

Wealth Inequality Survey of Consumer Finances data Source: Federal Reserve Bulletin Federal Reserve Bulletin

Wealth Inequality Internal Revenue Service tax data and Federal Reserve Flow of Funds data Source: “Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data”Wealth Inequality in the United States since 1913: Evidence from Capitalized Income Tax Data

Inequality… …has risen sharply since the late 1970s. …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. …is a problem we can combat with the right policy solutions.

Inequality… …has risen sharply since the late 1970s. …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. …is a problem we can combat with the right policy solutions.

1. Inequality may have negative macroeconomic effects. Mechanisms: A.Different spending propensities B.The bubble/bust syndrome Evidence:

1. Inequality may have negative macroeconomic effects.

Mechanisms: A.Different spending propensities B.The bubble/bust syndrome Evidence: Cynamon and Fazzari Kumhof and Ranciére Mian and Sufi Mianand Sufi

2. Inequality matters because it creates a “wedge,” channeling growth away from the typical worker. Mechanisms: A.Globalization B.Technological change C.Decreased worker bargaining power D.The tax code, financial deregulation, and corporate compensation Evidence: Source: Economic Policy InstituteEconomic Policy Institute

2. Inequality matters because it creates a “wedge,” channeling growth away from the typical worker. Mechanisms: A.Globalization B.Technological change C.Decreased worker bargaining power D.The tax code, financial deregulation, and corporate compensation Evidence: Bernstein Danziger Mishel Mishel, Bivens, Gould, and Shierholtz Mishel, Bivens, Gould, and Shierholtz Saez

3. Inequality matters because it undermines the democratic process. Mechanism: The influence of money in politics makes the political system more responsive to the wealthy and less responsive to everyone else Evidence: Source: Gilens and PageGilens and Page

3. Inequality matters because it undermines the democratic process. Mechanism: The influence of money in politics makes the political system more responsive to the wealthy and less responsive to everyone else Evidence: Source: Gilens and PageGilens and Page

3. Inequality matters because it undermines the democratic process. Mechanism: The influence of money in politics makes the political system more responsive to the wealthy and less responsive to everyone else Evidence: Bartels Bernstein Gilens

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: A.Residential segregation by income B.Educational investment barriers C.Direct effects Evidence: Source: Reardon presentation at the Boston Federal Reserve, October 17-18, 2014

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: A.Residential segregation by income B.Educational investment barriers C.Direct effects Evidence: Source: YellenYellen

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: A.Residential segregation by income B.Educational investment barriers C.Direct effects Evidence: Source: Duncan and MurnaneDuncan and Murnane

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: A.Residential segregation by income B.Educational investment barriers C.Direct effects Evidence: Source: Bradbury and TriestBradbury and Triest

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: A.Residential segregation by income B.Educational investment barriers C.Direct effects Evidence: Source: Pew Economic Mobility ProjectPew Economic Mobility Project

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: A.Residential segregation by income B.Educational investment barriers C.Direct effects Evidence: Source: Sherman, Parrott, and TrisiSherman, Parrott, and Trisi

4. Inequality matters because it reduces opportunities for millions of Americans. Mechanisms: A.Residential segregation by income B.Educational investment barriers C.Direct effects Evidence: Bradbury and Triest Chetty, Hendren, Kline, and Saez Pew Economic Mobility Project Reeves and Sawhill Sard and Rice

Inequality… …has risen sharply since the late 1970s. …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. …is a problem we can combat with the right policy solutions.

Inequality… …has risen sharply since the late 1970s. …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. …is a problem we can combat with the right policy solutions.

Inequality is a problem we can combat with the right policy solutions. Full employment Source: Baker and BernsteinBaker and Bernstein

Inequality is a problem we can combat with the right policy solutions. Full employment Collective bargaining Source: FurmanFurman

Inequality is a problem we can combat with the right policy solutions. Full employment Collective bargaining Other labor standards Source: GouldGould

Inequality is a problem we can combat with the right policy solutions. Full employment Collective bargaining Other labor standards Access to quality education Source: SmeedingSmeeding

Inequality is a problem we can combat with the right policy solutions. Full employment Collective bargaining Other labor standards Access to quality education Regulation and Improved Fiscal Policy Source: CBPPCBPP

Inequality is a problem we can combat with the right policy solutions. Full employment Collective bargaining Other labor standards Access to quality education Regulation and Improved Fiscal Policy Safety Net Programs Source: CBOCBO

Inequality… …has risen sharply since the late 1970s. …reduces opportunities, undermines the democratic process, distributes growth unevenly, and may even have negative macroeconomic effects. …is a problem we can combat with the right policy solutions.

Thank You! Jared Bernstein Ben Spielberg The Center on Budget and Policy Priorities