Wonder Land
Obama's Favorite Gini
The left will never support the solution to income inequality.
By
Daniel Henninger, The Wall Street Journal
Feb. 12, 2014 6:53 p.m. ET
In one of his most major "major" speeches late last year, Barack Obama said income inequality "is the defining issue of our time." Or any other time.
Those of us who are yoked forever to the policy debates recall plowing this ground in the 1980s, before much of the Obama base was born. This year's panjandrum festival at Davos called income disparity the biggest risk facing the world in 2014 (which must have let Iranian President Hasan Rouhani smile himself to sleep in his Swiss hotel).
We will arbitrarily date the start of the modern income-equality debate to 1912, when an intense Italian statistician named Corrado Gini invented the "Gini coefficient," which ever since has been the universal mathematical measure of income equality anywhere. Gini also wrote "The Scientific Basis of Fascism," but his coefficient survived among economists.
It was Gini's coefficient that Mr. Obama invoked without citation in his speech when he said "statistics show" that income inequality in the U.S. ranks with Jamaica and Argentina. Mr. Obama then said France, statistically, has greater income mobility than the U.S. More on French equality in a moment. Politics first.
Corrado Gini, the godfather of income inequality.
I'm going to guess it was this assertion—the U.S. is no better off than Jamaica—that was on the minds of Democrats when they started hearing that Mr. Obama's State of the Union speech would be an income-inequality barnburner. Press reports said Democrats facing re-election beseeched the White House to soft-pedal the "income inequality" brimstone and put in more about "opportunity." Which he did.
Amid the fog of this subject—what is fair and does it matter?— two political points deserve notice. Income inequality is a total loser as a political issue. But we should talk about it to force the left to say exactly what policies it wants legislated or imposed.
By coincidence, a major experiment in the politics and policies of income inequality visited Mr. Obama this week—the French President François Hollande.
In 2012, French voters elected Mr. Hollande president to replace Nicolas Sarkozy. Mr. Hollande's campaign theme was, "The soul of France is equality." His solution to re-equalize France: Raise the top marginal rate on the wealthy to 75%, raise taxes on corporations, raise taxes on incomes above €150,000, and tax capital gains as ordinary income. This broad, rising tax trendline would be a key element of any set of progressive policies in the U.S. to address income inequality.
By last November, before Mr. Hollande's peccadillo problems, his approval rating had fallen to 15%. In a speech delivered New Year's Eve Mr. Hollande reversed course. The tax burden, he said, was "too heavy." He would cut it. He also would cut public spending because the state was "too heavy, too slow, too costly." The income-inequality left in France is screaming "betrayal." What did they want, political suicide? Probably.
In New York, Gov. Andrew Cuomo, up for re-election in November, is resisting higher taxes on the rich pushed by Mayor Bill de Blasio, the progressive poster boy whose "tale of two cities" campaign produced victory in somnambulant New York City with 17% of the electorate voting. Hillary Clinton, whose campaign operation is filling with progressive operatives, has to hope Bill de Blasio's magic moment doesn't sink into Hollande land by 2016.
What would a progressive income-inequality policy agenda look like in the U.S.? Joseph Stiglitz, the Nobel laureate economist, offered a summary in a 2011 article for that famous journal of income inequality, Vanity Fair magazine. " Franklin D. Roosevelt, a purebred patrician," Mr. Stiglitz wrote, "understood that the only way to save an essentially capitalist America was not only to spread the wealth, through taxation and social programs, but to put restraints on capitalism itself, through regulation." He added that Richard Nixon "invested" in Medicare, Head Start and Social Security.
We think we get it: Raise taxes and reflow the money into spending by the federal government on public programs. Merits aside, one may ask: What has the federal government done in recent memory to be entrusted with any such massive, permanent transfer of wealth? Perhaps we should consult first with the high Gini-coefficient French.
Let's cut to the chase: The real issue in the American version of this subject is the low incomes of the inner-city poor. And let's put on the table one thing nearly all agree on: A successful education improves lifetime earnings. This assumes one is living in an economy with better than moribund growth, an assumption no one in the U.S. or Western Europe can make anymore.
If there is one political goal all Democratic progressives agree on it's this: They will resist, squash and kill any attempt anywhere in the U.S. to educate those low-income or no-income inner-city kids in alternatives to the public schools run by the party's industrial-age unions.
Reforming that public-school monopoly is the litmus test of seriousness on income inequality. That monopoly is the primary cause of America's post-1970s social-policy failure. And that monopoly will emerge from the Obama presidency and de Blasio mayoralty intact. So will income inequality.
