The Immorality of Income Inequality

The Immorality of Income Inequality
Rev. Douglas Taylor
April 6, 2014

 

A few weeks back I was part of a Moral Monday rally outside the state office building in Downtown Binghamton.  Moral Mondays began down in North Carolina over a year ago.  Religious and Civic leaders rallied around various legislative issues.  In Binghamton, the Labor Coalition and Citizen Action hosted three consecutive rallies in March focused on the state budget proposals that were passed at the end of March.

The issues we were talking about as clergy from different traditions at the Moral Monday rally included raising the minimum wage, increase funding for education, a more progressive and fair taxation on the wealthier people and corporations in our society, and a commitment to the safety net for the disadvantaged and poor in our neighborhoods.   

Well the state budget has passed and some of the features people are talking about include funding for potholes, prison reductions, and a property tax freeze.  There are some very good pieces to the budget involving money allocations for schools including the Universal Pre-K program.  This budget includes tax cuts for the wealthy and for corporations without much relief for the middle class.  For example, there is a major manufacturing income tax reduction from 5.9% to 0%.  http://auburnpub.com/blogs/eye_on_ny/things-to-know-about—new-york-state-budget/article_f1be5196-b9aa-11e3-8470-001a4bcf887a.html

The Classic Economic theory of John Stuart Mill and Adam Smith talks about the ‘invisible hand of the market.’  What is meant by this is that free markets will self-regulate, they will naturally find balance and equilibrium because it is the nature of economic interests, through the process of supply and demand for example, to adjust to the needs of the society.  The Classic Economic idea is that the free market, unregulated by the government, will always find balance.  That things are not balanced is a sign that the either this Classic Theory is not true or that the government is not neutral.  

I hear politically conservative people suggesting that government interference and over regulation mucks up the economic system and that’s why everything is out of balance.  The claim assumes that the interference is on behalf of the poor and the workers.  What if instead it is an undue government interference in favor of the wealthy and the corporations that is mucking up the system?

And while there is much to be said in favor of the poor, the concern I want to raise is for the middle class.  I’ve heard it said that America has an eroding middle class; that the middle class is disappearing.  I looked at some fairly simple and clear charts that show the growing income inequality, that demonstrate this growing gap to be a fact.  There is a measurement called the Gini Coefficient that shows the steady widening of the gap between the rich and the poor since the 1970’s in this country. http://en.wikipedia.org/wiki/Gini_coefficient

The Gini Coefficient proposes an optimal level of inequality: that there be an equal spread of all the various levels of income across the population.  It would look like a straight 45 degree line, a perfect diagonal on an x/y axis.  The U.S. chart has a deep bend into the corner that has been getting deeper and deeper over the past four decades. 

In Dick Gilbert’s book, How Much Do We Deserve, he explores the application of distributive justice to the American capitalist democracy. Gilbert says, for example, that the old board game ‘monopoly’ is fine for an evening of fun, but the ‘one winner and everyone else a loser’ game dynamic it is a poor model for a society’s economic policy.   He lifts up three ethical principles that refute pure capitalism.  He says the first principle is that the “needs of the poor should take priority over the wants of the rich.”  In many ways this is what the Occupy movement was all about with their juxtaposition of the 1% with the 99%.

Political conservatives will say that taxing the wealthy is unfair, even un-American.  They will say that people should be free to keep what they have earned, not being required to support the unsuccessful and unproductive people in the country.  They will say it is part of our national tradition to celebrate those who achieve wealthy, not to punish them.

Yet concern for an extreme concentration of wealth is a very American thing.  Jefferson warned against the danger of an aristocracy of the rich saying a broad distribution of wealth is important for broad participation in our government.  Theodore Roosevelt was a fierce proponent of high taxation of the rich, and Roosevelt’s programs were demonstratively beneficial for the country’s work force and economy.  And that part about keeping what you earn – I quibble with the idea that it was fairly earned.

It sometimes seems to me that people have mistaken capitalism for a form of government. They conflate a free market with a democratic society. 

My point is not about attacking the rich.  It is about calling out the acquisition of wealth by unfair advantage.  My point is not to say corporations and capitalism are bad.  It is about the abuse of capitalism and the undue influence corporations have gained over our government.  We’re not working with a zero-sum gain model.  My argument is that nurturing the middle class will benefit the rich and the poor alike.  A strong middle class is the driving force of a thriving democratic government and capitalist economy too.

The wealthy have taken to calling themselves ‘job creators.’  It seems to me that according to Classical Economics, the consumers are the job creators.  A job is created by the demand for a product. There is a limit to the number of fancy cars one wealthy person will buy.  Most of the money ends up in savings or essentially removed from the economy.  But if the middle class were thriving, there would be more people buying cars, or TVs or homes, or whatever widget is in the spotlight today.  

My point is that it is not just a Jeffersonian argument for the health of a democracy that leads me to say the middle class is necessary.  It is also economically critical. A capitalist society lacking consumers will not last long.  

Full time minimum wage should be a living wage.  I don’t know that everyone shares a definition of what a living wage means, but I figure it at least should be above the poverty line.  Yet people who work full time at minimum wage are still eligible for government assistance such as food stamps.  Full time Minimum Wage at the Federal level, $7.25 for 40 hours for 50 weeks, comes out to $14,500 a year. That is below the poverty line for a household of two ($15,730).  Why is that okay?

In the past 25 years the state based minimum wage has been raised 91 times.  http://www.americanprogressaction.org/issues/labor/news/2012/06/20/11749/the-facts-on-raising-the-minimum-wage-when-unemployment-is-high-2/  

When researchers looked in a year later they saw that the unemployment percent fell 47 of those times, remained unchanged 4 times, and went up 40  times.  Raising the minimum wage is not a guarantee that unemployment will increase, in fact, more often than not, raising the minimum wage is good for the unemployment rates. http://aneconomicsense.com/2013/03/06/the-impact-of-increasing-the-minimum-wage-on-unemployment-no-evidence-of-it/

It is a mixed bag, but raising the minimum wage leans toward creating more jobs more often than not.  Plus there would be few people on food stamps.  The government spends billions of dollars each year for the Supplemental Nutrition Assistance Program (SNAP).   

Slate ran a short 2 minute video crunching the numbers using Walmart as an example.  http://www.slate.com/articles/business/moneybox/2014/04/big_box_stores_make_billions_off_food_stamps_often_it_s_their_own_workers.html   

An estimated 15% of Walmart employees are currently on SNAP, or food stamps.  If Walmart raised the wages of those employees such that they were no longer eligible for food stamps and if they chose to pass the cost along to the consumer rather than just eat it themselves, the cost of everything in the store would need to go up by 1.4%.  So, the cost of a box of Mac & Cheese would rise from 68 cents to 69 cents.  And Walmart’s executives would not need to take a pay cut. 

But instead, Walmart is basically relying on the government safety net.  The government not only gives tax breaks to the corporation and other tax breaks for the wealthy individuals running the corporation, the government also pays to feed the low-wage employees of Walmart. According to reports, Walmart receives about 18% of all food stamps dollars spent.  That’s quite a cycle of benefit pouring into Walmart! 

Rather than insisting on a minimum wage that is a living wage (and thus allowing the bottom rung of workers the dignity of earning enough to live on) the government chooses to be complicit in forcing full time workers to be in the government assistance programs.  On one hand the political conservatives are saying we can’t tax the rich because they should be allowed to keep what they have earned.  I disagree with the word “earned” as used in that sentence.  On the other hand political conservatives claim that they poor don’t deserve $10 an hour and we shouldn’t have to support them.  Well, which is it: by not paying an honest wage for an honest day’s work, we are basically committing to supporting them through the safety net of government assistance. 

I have drifted away from preaching and into political problem solving. And really politics is not my strong suit. And besides, there are numerous layers of analysis concerning the problems of income inequality we face as a democracy and possible solutions.  I recall more than one member of this congregation saying that raising the minimum wage is not really the great solution I am now making it out to be. We have a diversity of opinion and understanding when it comes to politics just as we do when it comes to religious beliefs.   

The heart of what I want to offer today is the encouragement of people to pay attention and form opinions and listen to other people and engage in the conversation.  Get involved.  Be a citizen. 

For me, the reason this conversation is one about the ‘immorality’ of this political topic is that my faith is based in relationships.  How we gather in community has a holy component.  ‘We the people’ should be the end goal of any political debate.  How does this effect the people?  How does this effect the common good for all the people involved? 

Our form of government as a country is a mirror of the form governance we use in this congregation.  Theodore Parker said a Democracy is “of all the people, by all the people, for all the people.”  A phrasing picked up and put to good use by President Abraham Lincoln in the Gettysburg Address. 

Capitalism is not a political system, it is an economic system rooted in private ownership of means and production toward a profitable goal.  We would do well to remember that the purpose of our government is not to support our private industry over our citizenry.  Do we need to institute a separation of corporation and state? 

 As I have already said, politics is not my strong suit.  Perhaps it is so for you as well.  But too much is at stake for me to not be paying attention.  Perhaps it is so for you as well.  I do not wish to surrender my country to contrary values and self-destructive tendencies.  I do not wish to be lulled into complacency with a dream of middle class status while the reality of a middle class evaporates.  I do not wish to lose a prophetic voice for the poor for the benefit of a few extra coins in my pocket.

Let us gather in the spirit of mutual learning for the good of all involved.  Let us listen to each other and with compassion find a way forward at least one more step toward the goal of peace and liberty and justice for all people.

In a world without end
May it be so.