Posted here are slides from talks I’ve given in the past few months on …
America’s opportunity gap
America’s struggling lower half
Social democratic America
For those interested, the 2013 conference of the Foundation for International Studies on Social Security (FISS) is June 13-15 in Stockholm. Details are here.
Lecture slides for my “Social Issues in America” course this past fall are posted here. The topics:
- Should we legalize marijuana?
- Do we need a carbon tax to reduce climate change?
- Should same-sex marriage be legal?
- Is political polarization hurting America?
- Why are some of us red and others blue?
- Should we reduce taxes?
- Should we reduce income inequality?
- How can we get our economy back to health?
- Is big business ruining America?
- Should we promote gender equality?
- What should we eat?
- Would less regulation make cities better?
- Should we limit imports and outsourcing?
- Should we reduce illegal immigration?
- When should we intervene abroad?
For those interested, the 2013 conference of the Society for the Advancement of Socio-Economics (SASE) is June 27-29 in Milan. Details are here.
This article appears in the November-December 2012 issue of Foreign Affairs magazine. Reprinted here by permission.
It’s Hard to Make It in America: How the United States Stopped Being the Land of Opportunity
by Lane Kenworthy
For all the differences between Democrats and Republicans that were laid bare during the 2012 U.S. presidential campaign, the parties’ standard-bearers, Barack Obama and Mitt Romney, do seem to have agreed on one thing: the importance of equal opportunity. In remarks in Chicago in August, Obama called for an “America where no matter who you are, no matter what you look like, no matter where you come from, no matter what your last name is, no matter who you love, you can make it here if you try.” The same month, he urged the Supreme Court to uphold affirmative action in public universities, putting his weight behind what has been a mainstay of U.S. equal opportunity legislation since the 1960s. Days later, the Republican vice presidential nominee, Paul Ryan, echoed Obama’s sentiment, saying, “We promise equal opportunity, not equal outcomes.” Romney, too, argued that whereas Obama “wants to turn America into a European-style entitlement society,” his administration would “ensure that we remain a free and prosperous land of opportunity.”
It is no accident that both campaigns chose to emphasize equality of opportunity. It has long been at the center of the American ethos. And one of the United States’ major successes in the last half century has been its progress toward ensuring that its citizens get roughly the same basic chances in life, regardless of gender or race. Today, women are more likely to graduate from college than men and are catching up in employment and earnings, too. The gap between whites and nonwhites has narrowed as well, albeit less dramatically.
Yet this achievement has been double edged. As gender and race have become less significant barriers to advancement, family background, an obstacle considered more relevant in earlier eras, has reemerged. Today, people who were born worse off tend to have fewer opportunities in life.
Of course, there is no perfect way to measure opportunities. The best method devised thus far is to look at outcomes: college completion, gainful employment, and sufficient income. If the average outcome for one group far outpaces that for another, social scientists conclude that the first group had greater opportunities. Comparing outcomes is not foolproof, as differences in outcomes can result from differences in effort. But a person’s effort is itself shaped by the circumstances he or she encounters.
To assess equality of opportunity among people from different family backgrounds, the measure of outcome that social scientists look at is relative intergenerational mobility — a person’s position on the income ladder relative to his or her parents’ position. Social scientists don’t have as much information as they would like about the extent of relative intergenerational mobility, its movement over time, and its causes. The data requirements are stiff; analysts need a survey that collects information about citizens’ incomes and other aspects of their life circumstances, then does the same for their children, and for their children’s children, and so on. The best assessment of this type in the United States, the Panel Study of Income Dynamics, has been around only since the late 1960s.
Even so, there is general consensus among social scientists on a few basic points. Continue reading
A key challenge for America and other affluent countries going forward is to figure out how to ensure that more of the benefits of economic growth reach households in the middle and below. In the U.K., the Resolution Foundation, a London think tank, set up a Commission on Living Standards a year and a half ago to look into this. The Commission has produced a number of helpful studies and reports. Today it released its final summary report: Gaining from Growth. Well worth a read.
From the Economic Policy Institute. Accessible online and fully downloadable.
Mitt Romney in a recent Fortune magazine interview: “I indicated as I announced my tax plan that the key principles included the following. First, that high-income people would continue to pay the same share of the tax burden that they do today.”
That’s odd. Sensible debates about tax fairness and tax policy focus on what rate each group should pay, not on what each group’s share of total tax payments (the “tax burden”) should be.
High-income people’s share of tax payments is determined by their average tax rate, their share of total pretax income, and the average tax rate among all taxpayers.
Policy makers have a lot of control over tax rates. They have some, but far less, influence on the share of pretax income that goes to each group. Hence they have limited ability to control the share of total tax payments paid by a particular group.
In the past several decades federal tax rates on the top 1% of Americans have been lowered (Reagan), raised (Bush I and Clinton), then lowered again (Bush II). If all else stayed the same, that would have reduced the top 1%’s share of total tax payments. But this effect has been dwarfed by the large rise in the top 1%’s share of pretax income, which causes their share of total tax payments to increase. Here’s what the numbers looked like in 1979 and 2007, two years at comparable points in the business cycle (data are from the CBO).
The top 1%’s share of pretax income doubled, from 8.9% to 18.7%. Although the average tax rate they paid fell, their share of total tax payments increased, from 14.2% to 26.2%, because their income share jumped so much.
Consider what the Romney approach would have implied for tax rates paid by the top 1% during the 1979-2007 period. In 1979 their average federal tax rate was 35%; in 2007 it was 28%. Suppose policy makers had promised to keep the top 1%’s share of total tax payments at its 1979 level of 14%. Given the sharp rise in the top 1%’s income share, the average federal tax rate paid by the top 1% would have needed to fall to just 15%.
What does this mean going forward? In pledging to maintain the tax share of the richest Americans at its current level, Mitt Romney is in effect promising that if that group’s pretax income share continues to rise as it has in the past three decades, he will slash their tax rates.
Mark Thoma adds: “He is also promising that if the income share falls, he’ll raise tax rates for upper income households. Anyone think he’d really do that?”
Eduardo Porter, writing in the New York Times, says we need policies to help adjust to, not fight against, economic globalization.
In the Financial Times, Jared Bernstein argues that our chief tax problem is lack of revenues, not lack of progressivity.