Obama's leaky bucket
Statistics show rising income inequality in the United States. But, contrary to the impression created by the Occupy protests, and media coverage thereof, statistics also show that Americans worry less about inequality than they used to.
In a Dec. 16 Gallup poll, 52 percent of Americans called the rich-poor gap “an acceptable part of our economic system.” Only 45 percent said it “needs to be fixed.” This is the precise opposite of what Gallup found in 1998, the last time it asked the question, when 52 percent wanted to “fix” inequality.
Maybe Americans are Okunites — as in Arthur Okun, the late Yale economist and author of the 1975 book, “Equality and Efficiency: The Big Tradeoff.”
Okun saw free markets as a source of unparalleled human progress — and of big gaps between rich and poor. Indeed, he argued, markets are efficient partly because they distribute economic rewards unevenly. Government should try to smooth out income stratification, but such efforts risk undermining incentives to work and invest.
Hence the “big trade-off”: Channeling income from rich to poor, Okun wrote, was like trying to carry water in a leaky bucket. He wanted to move money from rich to poor without “leaking” so much economic growth that the whole process became self-defeating.
In short, the public wants fairness but retains a healthy skepticism about the federal government’s ability to achieve it.
As such, Gallup’s numbers do not bode well for President Obama’s effort, launched in a Dec. 6 speech at Osawatomie, Kan., to win reelection as a soak-the-rich populist.
The president, like Okun, acknowledged that the free market created “prosperity and a standard of living unmatched by the rest of the world.” But he explained the recent rise in inequality too simplistically, as the result of financial deregulation and the “breathtaking greed” it enabled.
And rather than tackle the big trade-off directly, Obama tried to sidestep it. Rising inequality “hurts us all,” he argued, implying that more widely distributed income would essentially pay for itself through higher growth.
Okun’s message is that equality is a public good, whose benefits — social cohesion, political stability and the like — are worth paying for. The trick is not to overpay.
Charles Lane is a member of The Post editorial page staff.