Catching up with Conservatism: Obama, OWS Blow Income Inequality Out of Proportion

Back in December, President Barack Obama rode his inner Bull Moose to Osawatomie, Kansas in a progressive tribute to Theodore Roosevelt. In the spirit of Occupy Wall Street and rising concerns of income disparity, the President lamented, “over the past few decades, the rungs on the ladder of opportunity have grown further and further apart.” According to the President, a child born in poverty following World War II had a 50-50 shot at eventually breaking into the middle class, while, by 1980, that child’s chances shrank to 40 percent. Now, apparently, the likelihood of hitting this nation’s coveted middle-class status is a depressing 33 percent. I know the economy is pretty broken at the moment, but these numbers struck me as unbelievable.

Based on everything I’ve observed from the lifestyle of my parents, my grandparents, Jonathan Franzen novels and 1980’s sitcoms, I simply couldn’t process the administration’s figures. Certainly the Great Recession has not acted as a friend to upward mobility—and I want to emphasize that a rugged belief in the accessible American Dream is a cornerstone of my conservative identity.  But how could the 1980’s and 90’s—the most tremendous quarter-century of economic growth in history—be described with such disgust? Could the decades of personal computers, cabbage-patch dolls, Disney classics, and global markets really have left so many hardworking Americans in the financial Dust Bowl?

According to the Brookings Institute’s Scott Winship, who was equally perplexed by President Obama’s address, intergenerational income mobility for generations X and Y is tough to summarize because data sets are limited. Very few economic studies have tracked children born in the early Reagan years as they grew up—and those kids are hardly 30 today. Based on what Winship does know about the data, he reports that the escape from poverty actually rose modestly, from 51 to 57 percent, when we compare 1980’s children to their predecessors in the beginning 60’s. Because some conservatives praise the Leave it to Beaver-esque social fabric of the 1950’s, the Left often challenges the GOP at their own game and points out the relative lack of income inequality during the Eisenhower years. However, as Emmanuel Saez notes, income compensation among the elites predictably fell during the Great Depression and World War II, and dramatic progressive tax rates between 1914-1945 made it virtually impossible for top capital holders to recover by mid-century.  I doubt that’s a model we want to replicate.

The tents in Zuccotti Park last fall insisted, if anything, on a national conversation regarding the distribution of wealth. Yes, the richest Americans are richer than the Rockefellers and Carnegies of yesteryear. But be careful. Many graphs documenting the seemingly exponential cavern between the haves and have-nots are cut off in 2007. The wealthiest 1 percent took a heavy beating after the financial crisis. If the goal is to cure inequality, recessions are a proven medicine: they render everyone, regardless of class, sicker. Indeed, the rich in 2009 had a smaller slice of income than they did at anytime during Bill Clinton’s second term. But whether its 2009 or 1999, income is not a zero-sum game. Decrying that the elite 1 percent hoard one-fifth of all American earnings doesn’t tell us how the other 99 percent lives. The difficult experiences of the contemporary poor shouldn’t be diminished, yet it’s telling that, according to a well-circulated Heritage Foundation study, the vast majority of Americans beneath the poverty line still have their own refrigerator, multiple televisions, an oven, a microwave, and air-conditioning. The Vanderbilts themselves couldn’t have fathomed these modern amenities.

While its true that quickly eyeballing income charts makes it appear as if people are trapped in the poverty bracket for all perpetuity, statistics themselves don’t have arms, legs, or 2-car garages: people do. One of my favorite lecturers at the Institute of Humane Studies, Steve Horwitz, remarks, “Immigrants and young people entering the labor force come into income distribution at low levels of income. They become the new poor when the old poor slowly move their way up.” Horwitz summarizes, “even though a first glance at the data may make it seem as if the rich are getting richer and the poor are getting poorer, the reality of the United States in the early 21st century is that everyone is getting richer, poor and rich alike.” As for those pesky millionaires at the top, they’re a fleeting income cohort as well. The Tax Foundation states that, of the 675,000 citizens who reported $1 million or more in pre-taxes at some point between 1999 and 2007, only half of them were likely to report feeling like a million bucks even one year later. Before we start moaning about a new Gilded Age, we should note that only a small 6 percent of these tax-payers were classified as millionaires for all 9 years. In short, the millionaires we love to hate aren’t even the same millionaires.  More generally, the Pew Economic Mobility Project reveals that two-thirds of middle-aged Americans belong to households with larger real incomes than their parents did at the same age. What’s more, today’s homes house fewer family members, so income is generated among fewer working adults rather than the crowded boarding rooms of decades past.

Conservatives shouldn’t remain completely mum on the chasm between the rich and poor.  A lack of interaction between the Ivy Leaguer, the farmer, and the short-order cook isn’t healthy for anyone. This trend dries up the kind of neighborliness Robert Putnam highlights in Bowling Alone.  American social capital could use a serious boost. Without it, marriage and religious faith decline, while crime escalates. But the conservative answer to reclaiming our economic spirit can’t be found in the speeches of FDR, LBJ, or even old bootstrapping Teddy Roosevelt. Let’s clean up the tax code, enact school choice, and salute an American Dream that is, quite intrepidly, still holding on.