It feels so good to return to blogging after nearly 4 months away, and this article is the perfect reason to do so. Holidays, winter weather events, school closures, as well as continually adjusting to being a single mom of 5 children receiving little to no support (financial or physical) from their father drove me into a bit of blogging hibernation. Reading Paul Krugman’s article on income inequality and whether or not anything could or should be done about it prompted me to jump back into the blogging pool and disseminate information.
Krugman cites in his article several studies/books to make his point that “taking action to reduce the extreme inequality of 21st-century America would probably increase, not reduce, economic growth.” The first book, titled “Equality and Efficiency: The Big Tradeoff,” was published almost 40 years ago and was written by Arthur Okun, chief economic adviser to President Lyndon Johnson. Krugman tells us Okun argued “that redistributing income from the rich to the poor takes a toll on economic growth.” However, Krugman then reveals that two landmark studies by economists at the International Monetary Fund (which Krugman tells us “is hardly a leftist organization”) concluded that reducing inequality through redistribution does not hurt economic growth.
Here’s what Krugman states about the studies:
The first study looked at the historical relationship between inequality and growth, and found that nations with relatively low income inequality do better at achieving sustained economic growth as opposed to occasional “spurts.” The second, released last month, looked directly at the effect of income redistribution, and found that “redistribution appears generally benign in terms of its impact on growth.”
Krugman goes on to say:
In short, Okun’s big trade-off doesn’t seem to be a trade-off at all. Nobody is proposing that we try to be Cuba, but moving American policies part of the way toward European norms would probably increase, not reduce, economic efficiency.
At this point someone is sure to say, “But doesn’t the crisis in Europe show the destructive effects of the welfare state?” No, it doesn’t. Europe is paying a heavy price for creating monetary union without political union. But within the euro area, countries doing a lot of redistribution have, if anything, weathered the crisis better than those that do less.
But how can the effects of redistribution on growth be benign? Doesn’t generous aid to the poor reduce their incentive to work? Don’t taxes on the rich reduce their incentive to get even richer? Yes and yes — but incentives aren’t the only things that matter. Resources matter too — and in a highly unequal society, many people don’t have them.
Later in his article, Krugman addresses the point that we have to look at the way America’s children are faring to really decide what is best for economic growth. Children born into low-income (and even many middle-income) families start life off already behind and most will never catch up or have the same opportunities than children from affluent families will have. He asks us to consider the slogan that “we should seek equality of opportunity, not equality of outcomes,” but then tells us “that may sound good to people with no idea what life is like for tens of millions of Americans; but for those with any reality sense, it’s a cruel joke. Almost 40 percent of American children live in poverty or near-poverty. Do you really think they have the same access to education and jobs as the children of the affluent?”
The truth is babies and toddlers born into poor families will never be able to take advantage of the “opportunities” given to them by universal Pre-K or an improved educational system. By the time these children are 36 months old, they are exposed to a million words fewer than children from high-income families. Not only do they hear far fewer words, but they hear far greater disparaging and “punishing” remarks versus the affirming words heard by high-income children (e.g., Good job!, Nice coloring!, You’re so smart!). By 36 months of age, these children are already so far behind in language, social, emotional and sensory processing skills that there is simply no way they can catch up, no matter what we do for them beginning at age 4 in Pre-K. Their brains are so far along in development, especially in terms of language and social-emotional skills, that that the damage simply can’t be undone as easily as most politicians, educators and others want to believe.
Krugman ends his piece saying that “low-income children are much less likely to complete college than their affluent counterparts, with the gap widening rapidly. And this isn’t just bad for those unlucky enough to be born to the wrong parents; it represents a huge and growing waste of human potential — a waste that surely acts as a powerful if invisible drag on economic growth.” He freely admits that “the very affluent would lose more from higher taxes than they gained from any economic growth.” That said, he ends with the powerful statement “In short, what’s good for the 1 percent isn’t good for America. And we don’t have to keep living in a new Gilded Age if we don’t want to.”
My flame for helping all babies and toddlers be ready for school by the age of 3 has just been reignited big-time.