It’s the Stupid Economy: Why Income Inequality Ought To Be This Election’s Hot Topic

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Last updated on July 17th, 2023 at 06:10 pm

The health of an economy should correlate directly to the health of the people living within it, not to their economic impoverishment.

Bernie Sanders’ socialist presence in the presidential primary mix as well as populist sentiment brewing on both sides of the political aisle promise, hopefully, to keep the much-needed conversation on income inequality front and center in our national debates.

Unfortunately, the discussions of income inequality too often get subsumed into questions about the health of the U.S. economy overall—as politicians preach to Bill Clinton’s same old song, “It’s the economy, stupid.” We need, though, to recognize that these are not the same discussions at all. In fact, many proposals to prop up—or restore the health of–our current economic system are actually at odds with improving the standard of living for workers in America. For example, while “Right-to Work” laws might to some extent be effective in creating business-friendly environments attractive to corporations, in states with such legislation workers tend to receive less in both wages and benefits. Nonetheless, despite this data, Governor Bruce Rauner of Illinois is pushing for right-to-work legislation by creating “economic empowerment zones” in which local communities could decide if workers can opt out of paying dues to the unions which protect them in the workplace and bargain for their wages and benefits. In this case, empowering the economy means disempowering workers and decreasing their wages and benefits.

We have to ask, is this the type of economy we want to improve, stupid? Can’t we organize our economic life more smartly?

Sam Brownback’s efforts to improve the local economy in Kansas by dramatically slashing taxes on businesses and the wealthy overall have resulted in severe social decay, leaving a wasteland without adequate revenue to sustain public schools or vital social services.

So much for trickle-down economics. But even the ludicrous pretense that the wealth redistributed to the top will trickle down has been dropped.

Donald Trump, for example, in a recent interview with The Detroit News actually outlined a plan to drive down wages, pointing the finger at auto-workers who, he believes, earn too high of a wage. Expressing dismay that Ford plans to open a factory in Mexico, Trump proposed an alternative strategy for lowering labor costs that would keep jobs in the U.S. by closing plants in Michigan and moving production to more corporate-friendly regions: “You can go to different parts of the United States and then ultimately you’d full-circle—you’ll come back to Michigan because those guys are going to want their jobs back even if it is less. We can do rotation in the United States—it doesn’t have to be in Mexico.”

We see here no plan to address income inequality as a social ill but only to exacerbate it as a corporate benefit for the wealthy. Moreover, Trump reveals that the sought-after boosts in corporate profits are not intended at all to trickle down. The wealth only trickles up from wage reductions workers suffer, perpetrating another mass re-distribution of wealth from the bottom to the top.

For all their railing against calls for re-distribution of wealth, our nation’s economic elite seem to engage quite a bit in the practice.

Of course, even many of the most persistent arguments marshalled to defend policies aimed at addressing the wealth gap rely, typically, on their own brand of trickle up economics. Nick Hanauer, for example, a venture capitalist with the Seattle-based firm Second Avenue partners, dismisses “the dire warnings of economic calamity [that] rain down” whenever the prospect of raising wages arises. He terms this alarmist response “Chicken Little economics,” documenting that these alarms have sounded with every substantial increase in the minimum wage since 1938 without the economic sky ever having fallen. In urging New York to raise its minimum wage to fifteen dollars, he points to Seattle and San Francisco as cities that significantly increased their minimum wage to the benefit rather than detriment of their economies. Raising the minimum wage, so goes the argument, creates more able consumers, buoying the economy as a whole and causing wealth to trickle up.

Still, these arguments center around the question of whether raising the minimum wage—a small step in addressing income inequality—helps or hurts the economy. They never question the current economic arrangement in any fundamental way. Consider, for example, some of the following headlines on stories covering this ongoing issue on CNBC.Com: “State Minimum Wage Hikes: Help or Hindrance?” and “Easy Street or the Breadline?: New Year Wage Hike Debated.”

The debate usually goes like this: Opponents of a minimum wage increase offer the threatening prospect that the strain on employers will be so great that businesses, particularly small ones, will be forced to eliminate positions, especially entry-level jobs, resulting in more bust than boom for American workers. The other side usually represented asserts that since raising the minimum wage provides more disposable income for the lowest paid workers struggling to meet their needs, the increase will function as an immediate economic stimulus since the money earned will be immediately pumped back into the economy, which is largely driven by consumer spending. These proponents who see the increase as economic stimulus tend to downplay the Congressional Budget Office’s forecast that while 24.5 million workers will get a raise, 500,000 workers might lose their jobs were the federal minimum wage to be raised to $10.10.

While there is plenty of illogic in this debate, first we have to highlight the ill-conceived nature of the question itself, as asking whether increasing the minimum wage will hurt or help the economy leads us down a dead end.

Here’s what I mean:

From a progressive political perspective, what if we discover that raising the minimum wage would hurt the economy? Should we then cease to advocate for the infinitesimal redistribution of wealth that would help low-wage workers, who play such a key role in producing the wealth of our nation, meet their basic needs? Should the progressive position be that those working for low wages must continue to do so and stop asking for more, regardless of whether or not they can meet their basic needs on those wages, so that more people aren’t thrown out of work and the economy isn’t hurt?

Of course not, but progressives need to re-frame the debate. To those who argue that raising the minimum wage will hurt the economy, we need to ask how smartly organized is an economy in which those who do vital and necessary work cannot afford to meet their most basic needs.

The health of an economy, it seems to me, should correlate directly to the health of the people living within it, not to their economic impoverishment. If a healthy or strong economy requires that those who work within it to produce and distribute goods and services are not able themselves to access those goods and services to meet their needs, then we need to question the human viability of that economy, not worry about whether we’re hurting the economy with our policies. Indeed, an economy that achieves health when the people working within it suffer is one that we need to hurt by dismantling and overhauling it. The economy is supposed to serve us; we aren’t supposed to serve the economy.

What we need to do is remind ourselves that the purpose of an economy is, in the most efficient way, to produce and distribute goods and services to meet the needs of those living within the economy. As the wealth gap increases, it seems clear our economy is not doing that. Malcolm X famously said, “We didn’t land on Plymouth rock. Plymouth rock landed on us.” We might adapt this saying to characterize an economy that seems to land hard on the people who work within it rather than working hard for its people.

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Tim Libretti

Tim Libretti is a professor of U.S. literature and culture at a state university in Chicago. A long-time progressive voice, he has published many academic and journalistic articles on culture, class, race, gender, and politics, for which he has received awards from the Working Class Studies Association, the International Labor Communications Association, the National Federation of Press Women, and the Illinois Woman's Press Association.