most Americans. Under our current system tens of millions lack adequate health care, millions more have had their lives destroyed by the financial burden of medical costs, and many more who haven’t yet gone without insurance or been bankrupted by health costs live in fear that they may be next. And it’s all unnecessary: Every other wealthy country has universal coverage. Reducing the risks Americans face would be worth it even if it had a substantial cost—but in this case there would be no cost at all. Universal health care would be cheaper and better than our current fragmented system.
There is, however, another important reason for health care reform. It’s the same reason movement conservatives were so anxious to kill Clinton’s plan. That plan’s success, said Kristol, “would signal the rebirth of centralized welfare-state policy”—by which he really meant that universal health care would give new life to the New Deal idea that society should help its less fortunate members. Indeed it would—and that’s a big argument in its favor.
Universal health care could, in short, be to a new New Deal what Social Security was to the original—both a crucially important program in its own right, and a reaffirmation of the principle that we are our brothers’ keepers. Getting universal care should be the key domestic priority for modern liberals. Once they succeed there, they can turn to the broader, more difficult task of reining in American inequality.
12 CONFRONTING INEQUALITY
The America I grew up in was a relatively equal middle-class society. Over the past generation, however, the country has returned to Gilded Age levels of inequality. In this chapter I’ll outline policies that can help reverse these changes. As I did in discussing health care, however, I’ll begin with the question of values. Why should we care about high and rising inequality?
One reason to care about inequality is the straightforward matter of living standards. As I documented at length in chapter 7, the lion’s share of economic growth in America over the past thirty years has gone to a small, wealthy minority, to such an extent that it’s unclear whether the typical family has benefited at all from technological progress and the rising productivity it brings. The lack of clear economic progress for lower-and middle-income families is in itself an important reason to seek a more equal distribution of income.
Beyond that, however, is the damage extreme inequality does to our society and our democracy. Ever since America’s founding, our idea of ourselves has been that of a nation without sharp class distinctions—not a leveled society of perfect equality, but one in which the gap between the economic elite and the typical citizen isn’t an unbridgeable chasm. That’s why Thomas Jefferson wrote, “The small landholders are the most precious part of a state.”[1] Translated into modern terms as an assertion that a broad middle class is the most precious part of a state, Jefferson’s statement remains as true as ever. High inequality, which has turned us into a nation with a much-weakened middle class, has a corrosive effect on social relations and politics, one that has become ever more apparent as America has moved deeper into a new Gilded Age.
One of the best arguments I’ve ever seen for the social costs of inequality came from a movement conservative trying to argue the opposite. In 1997 Irving Kristol, one of the original neoconservative intellectuals, published an article in the
income inequality tends to be swamped by even greater social equality…. In all of our major cities, there is not a single restaurant where a CEO can lunch or dine with the absolute assurance that he will not run into his secretary. If you fly first class, who will be your traveling companions? You never know. If you go to Paris, you will be lost in a crowd of young people flashing their credit cards.[2]
By claiming that income inequality doesn’t matter because we have social equality, Kristol was in effect admitting that income inequality
Lifestyles of the rich and famous are arguably the least important part of the story, yet it’s worth pointing out that Kristol’s vision of CEOs rubbing shoulders with the middle class is totally contradicted by the reporting of Robert Frank of the
Today’s rich had formed their own virtual country…. [T]hey had built a self-contained world unto themselves, complete with their own health-care system (concierge doctors), travel network (Net Jets, destination clubs), separate economy…. The rich weren’t just getting richer; they were becoming financial foreigners, creating their own country within a country, their own society within a society, and their economy within an economy.[3]
The fact is that vast income inequality inevitably brings vast social inequality in its train. And this social inequality isn’t just a matter of envy and insults. It has real, negative consequences for the way people live in this country. It may not matter much that the great majority of Americans can’t afford to stay in the eleven-thousand- dollar-a-night hotel suites popping up in luxury hotels around the world.[4] It matters a great deal that millions of middle-class families buy houses they can’t really afford, taking on more mortgage debt than they can safely handle, because they’re desperate to send their children to a good school—and intensifying inequality means that the desirable school districts are growing fewer in number, and more expensive to live in.
Elizabeth Warren, a Harvard Law School expert in bankruptcy, and Amelia Warren Tyagi, a business consultant, have studied the rise of bankruptcy in the United States. By 2005, just before a new law making it much harder for individuals to declare bankruptcy took effect, the number of families filing for bankruptcy each year was five times its level in the early 1980s. The proximate reason for this surge in bankruptcies was that families were taking on more debt—and this led to moralistic pronouncements about people spending too much on luxuries they can’t afford. What Warren and Tyagi found, however, was that middle-class families were actually spending
Americans still tend to say, when asked, that individuals can make their own place in society. According to one survey 61 percent of Americans agree with the statement that “people get rewarded for their effort,” compared with 49 percent in Canada and only 23 percent in France.[6] In reality, however, America has vast inequality of opportunity as well as results. We may believe that anyone can succeed through hard work and determination, but the facts say otherwise.
There are many pieces of evidence showing that Horatio Alger stories are very rare in real life. One of the most striking comes from a study published by the National Center for Education Statistics, which tracked the educational experience of Americans who were eighth graders in 1988. Those eighth graders were sorted both by apparent talent, as measured by a mathematics test, and by the socioeconomic status of their parents, as measured by occupations, incomes, and education.
The key result is shown in Table 10. Not surprisingly, both getting a high test score and having high-status parents increased a student’s chance of finishing college. But family status mattered more. Students who scored in the bottom fourth on the exam, but came from families whose status put them in the top fourth—what we used to call RDKs, for “rich dumb kids,” when I was a teenager—were more likely to finish college than students who scored in the top fourth but whose parents were in the bottom fourth. What this tells us is that the idea that we have anything close to equality of opportunity is clearly a fantasy. It would be closer to the truth, though not the
