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Subsequent work by economists David Autor at MIT, David Dorn at the University of Zurich and Gordon Hanson, now at Harvard’s Kennedy School, documented how the surge in imports from China since roughly the early 1990s had devastated communities across the United States that relied on manufacturing for sustenance.

Princeton University scholars Anne Case and Angus Deaton made the case that these dynamics were deadly, producing an epidemic of suicides and overdoses that they called “deaths of despair.”

“Inequality and death are joint consequences of the forces that are destroying the white working class,” they wrote. “It is the deeper forces of power, politics and social change that are causing both the epidemic and the extreme inequality.”

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This narrative is consistent with a constellation of data documenting the poor health of American society — from the nation’s short life expectancy and high infant mortality rate to a poverty rate that exceeds that of other wealthy democracies.

And yet, the straightforward story might be wrong.

Critics have left some dents in the “deaths of despair” thesis: The availability of opioids, they point out, does a better job explaining the overdose mortality patterns than socio-economic despair. The mortality trends look different when adjusted by age. The rise in mortality among the less educated is mostly about cardiovascular disease, not suicide, alcoholism or drug abuse. And it afflicts a small sliver of deeply disadvantaged Americans, not the working class writ large.

The accepted story of America’s intertwined ills has been challenged from a more fundamental front by new research suggesting inequality might not have evolved as most of us thought. The most prevalent story among economists, following the seminal work by Piketty and Saez, has argued that the rising concentration of income in the hands of the richest Americans has drastically shrunk everybody else’s share of the pie.

Advertisement

But a recently published alternative estimate, by economists Gerald Auten of the Treasury Department and David Splinter of Congress’s Joint Committee on Taxation, suggests that the share of income going to the top has remained roughly flat since 1960.

Inequality has increased, for sure. Yet once they include the effect of redistribution, adding taxes and government programs such as food stamps, Medicaid, Social Security and the like, the academics find that the poorest one-fifth of Americans drew roughly the same share of income in 2019 that they did about 60 years ago.

The new analysis has fueled a scholarly mini brawl over the true depth of American inequality. And it raises a prickly but critical question: How can we explain the fraying of the social contract if inequality hasn’t soared? The inverse can’t be true: It’s tough to fit the short life expectancy, the suicides, the extreme obesity and the high incarceration rates in a story in which inequality is tamed and desperation isn’t deadly. It leaves the United States littered with a trail of scattered ailments without the connective tissue of a narrative.

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In an honest effort to find a workable new synthesis, here’s a suggestion: Inequality might not cause these symptoms on its own. Instead, many of America’s social maladies stem from the strategies it has chosen to mitigate the lopsided distribution of income, which leave its citizens singularly vulnerable.

The U.S. government doesn’t do much to affect how the market allocates prosperity. Unions are weak; the federal minimum wage is becoming irrelevant; retraining is patchy. If trade or a sudden technological shift makes swaths of the workforce redundant, there is next to nothing out there to help workers back on their feet.

Redistribution, then, must do most of the work. The U.S. government raises considerably less in taxes than do other Western democracies. But it does so more progressively, taxing people at the top most heavily. At the bottom, it largely provides help in cash. The earned income tax credit, for instance, is one of the most critical tools for lifting the income of low-wage workers. Poor families with children benefit from a child tax credit that puts money in their pockets.

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Europeans are more aggressive about reshaping prosperity. Their unions are more powerful. Worker councils protect workers from swings in the market. Labor laws are more protective of incumbent workers.

European redistribution, moreover, is not just larger but different. European governments raise money more regressively, relying heavily on consumption taxes that take bigger bites out of the pockets of the poor. They use much of the money to pay for rich, often universal, welfare programs such as universal health care and housing, child care and early child education.

These institutional differences can help explain the chasm between workers’ experience on either side of the North Atlantic. In Europe, bigger job and wage protections have gone some way to prevent the spread of precarious, low-pay work, which has become prevalent across the U.S. service sector. And their redistribution might have also done a better job at preventing deeper social maladies.

Advertisement

Cash is not a bad tool. An economist will tell you it is, in fact, the best — with more power to increase welfare than any government service. Still, research suggests that poverty hurts economic decision-making. This could make a case for governmental paternalism in the European vein: redistribution aimed at some specific, desirable outcomes rather than just supporting the income of the poor.

Europe’s strategy is not without costs. Labor protections there shift unemployment onto the young. Still, it seems indisputable that European workers — and those in other rich economies — are surviving global capitalism without as many casualties, even though they have less money. The earned income tax credit might be a good tool for supporting the income of vulnerable Americans, but it has proved unable to mitigate America’s dysfunctions.

This might appear like some trivial academic brawl. But America’s dysfunctions are convulsing its politics. They could end up convulsing the world. It makes sense to figure out where they come from and try to fix them.

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There is a grim, fairly popular story of the American social contract that goes roughly like this: Motivated by entrenched racial hostility, the greed of the rich (or maybe something else), the richest country on the planet refuses to develop a true welfare state that might secure the well-being of its citizens.

Taxation and redistribution have been successfully resisted, branded as illegitimate scams to feather the beds of welfare queens. Globalization and technological disruption have been embraced even as the institutions designed to protect the most vulnerable workers — unions, minimum wages — have lost their power to provide for a dignified living.

In this American story, the less fortunate — Black, Brown and White — are left to scratch by as best they can, often falling into a deep well of misery. The rich engorge themselves way beyond anything seen in other wealthy, industrialized societies of the West. And yet, though the destitution is clear for all to see, recent research suggests that the story built around it is, at best, incomplete.

The accepted narrative was built on the back of pathbreaking research by Thomas Piketty, now at the Paris School of Economics, and the University of California at Berkeley’s Emmanuel Saez, which established just how far inequality had been allowed to rip through the fabric of society.

Subsequent work by economists David Autor at MIT, David Dorn at the University of Zurich and Gordon Hanson, now at Harvard’s Kennedy School, documented how the surge in imports from China since roughly the early 1990s had devastated communities across the United States that relied on manufacturing for sustenance.

Princeton University scholars Anne Case and Angus Deaton made the case that these dynamics were deadly, producing an epidemic of suicides and overdoses that they called “deaths of despair.”

“Inequality and death are joint consequences of the forces that are destroying the white working class,” they wrote. “It is the deeper forces of power, politics and social change that are causing both the epidemic and the extreme inequality.”

This narrative is consistent with a constellation of data documenting the poor health of American society — from the nation’s short life expectancy and high infant mortality rate to a poverty rate that exceeds that of other wealthy democracies.

And yet, the straightforward story might be wrong.

Critics have left some dents in the “deaths of despair” thesis: The availability of opioids, they point out, does a better job explaining the overdose mortality patterns than socio-economic despair. The mortality trends look different when adjusted by age. The rise in mortality among the less educated is mostly about cardiovascular disease, not suicide, alcoholism or drug abuse. And it afflicts a small sliver of deeply disadvantaged Americans, not the working class writ large.

The accepted story of America’s intertwined ills has been challenged from a more fundamental front by new research suggesting inequality might not have evolved as most of us thought. The most prevalent story among economists, following the seminal work by Piketty and Saez, has argued that the rising concentration of income in the hands of the richest Americans has drastically shrunk everybody else’s share of the pie.

But a recently published alternative estimate, by economists Gerald Auten of the Treasury Department and David Splinter of Congress’s Joint Committee on Taxation, suggests that the share of income going to the top has remained roughly flat since 1960.

Inequality has increased, for sure. Yet once they include the effect of redistribution, adding taxes and government programs such as food stamps, Medicaid, Social Security and the like, the academics find that the poorest one-fifth of Americans drew roughly the same share of income in 2019 that they did about 60 years ago.

The new analysis has fueled a scholarly mini brawl over the true depth of American inequality. And it raises a prickly but critical question: How can we explain the fraying of the social contract if inequality hasn’t soared? The inverse can’t be true: It’s tough to fit the short life expectancy, the suicides, the extreme obesity and the high incarceration rates in a story in which inequality is tamed and desperation isn’t deadly. It leaves the United States littered with a trail of scattered ailments without the connective tissue of a narrative.

In an honest effort to find a workable new synthesis, here’s a suggestion: Inequality might not cause these symptoms on its own. Instead, many of America’s social maladies stem from the strategies it has chosen to mitigate the lopsided distribution of income, which leave its citizens singularly vulnerable.

The U.S. government doesn’t do much to affect how the market allocates prosperity. Unions are weak; the federal minimum wage is becoming irrelevant; retraining is patchy. If trade or a sudden technological shift makes swaths of the workforce redundant, there is next to nothing out there to help workers back on their feet.

Redistribution, then, must do most of the work. The U.S. government raises considerably less in taxes than do other Western democracies. But it does so more progressively, taxing people at the top most heavily. At the bottom, it largely provides help in cash. The earned income tax credit, for instance, is one of the most critical tools for lifting the income of low-wage workers. Poor families with children benefit from a child tax credit that puts money in their pockets.

Europeans are more aggressive about reshaping prosperity. Their unions are more powerful. Worker councils protect workers from swings in the market. Labor laws are more protective of incumbent workers.

European redistribution, moreover, is not just larger but different. European governments raise money more regressively, relying heavily on consumption taxes that take bigger bites out of the pockets of the poor. They use much of the money to pay for rich, often universal, welfare programs such as universal health care and housing, child care and early child education.

These institutional differences can help explain the chasm between workers’ experience on either side of the North Atlantic. In Europe, bigger job and wage protections have gone some way to prevent the spread of precarious, low-pay work, which has become prevalent across the U.S. service sector. And their redistribution might have also done a better job at preventing deeper social maladies.

Cash is not a bad tool. An economist will tell you it is, in fact, the best — with more power to increase welfare than any government service. Still, research suggests that poverty hurts economic decision-making. This could make a case for governmental paternalism in the European vein: redistribution aimed at some specific, desirable outcomes rather than just supporting the income of the poor.

Europe’s strategy is not without costs. Labor protections there shift unemployment onto the young. Still, it seems indisputable that European workers — and those in other rich economies — are surviving global capitalism without as many casualties, even though they have less money. The earned income tax credit might be a good tool for supporting the income of vulnerable Americans, but it has proved unable to mitigate America’s dysfunctions.

This might appear like some trivial academic brawl. But America’s dysfunctions are convulsing its politics. They could end up convulsing the world. It makes sense to figure out where they come from and try to fix them.

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America’s social ills are not simply due to inequality and despair

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25.01.2024

Follow this authorEduardo Porter's opinions

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Subsequent work by economists David Autor at MIT, David Dorn at the University of Zurich and Gordon Hanson, now at Harvard’s Kennedy School, documented how the surge in imports from China since roughly the early 1990s had devastated communities across the United States that relied on manufacturing for sustenance.

Princeton University scholars Anne Case and Angus Deaton made the case that these dynamics were deadly, producing an epidemic of suicides and overdoses that they called “deaths of despair.”

“Inequality and death are joint consequences of the forces that are destroying the white working class,” they wrote. “It is the deeper forces of power, politics and social change that are causing both the epidemic and the extreme inequality.”

Advertisement

This narrative is consistent with a constellation of data documenting the poor health of American society — from the nation’s short life expectancy and high infant mortality rate to a poverty rate that exceeds that of other wealthy democracies.

And yet, the straightforward story might be wrong.

Critics have left some dents in the “deaths of despair” thesis: The availability of opioids, they point out, does a better job explaining the overdose mortality patterns than socio-economic despair. The mortality trends look different when adjusted by age. The rise in mortality among the less educated is mostly about cardiovascular disease, not suicide, alcoholism or drug abuse. And it afflicts a small sliver of deeply disadvantaged Americans, not the working class writ large.

The accepted story of America’s intertwined ills has been challenged from a more fundamental front by new research suggesting inequality might not have evolved as most of us thought. The most prevalent story among economists, following the seminal work by Piketty and Saez, has argued that the rising concentration of income in the hands of the richest Americans has drastically shrunk everybody else’s share of the pie.

Advertisement

But a recently published alternative estimate, by economists Gerald Auten of the Treasury Department and David Splinter of Congress’s Joint Committee on Taxation, suggests that the share of income going to the top has remained roughly flat since 1960.

Inequality has increased, for sure. Yet once they include the effect of redistribution, adding taxes and government programs such as food stamps, Medicaid, Social Security and the like, the academics find that the poorest one-fifth of Americans drew roughly the same share of income in 2019 that they did about 60 years ago.

The new analysis has fueled a scholarly mini brawl over the true depth of American inequality. And it raises a prickly but critical question: How can we explain the fraying of the social contract if inequality hasn’t soared? The inverse can’t be true: It’s tough to fit the short life expectancy, the suicides, the extreme obesity and the high incarceration rates in a story in which inequality is tamed and desperation isn’t deadly. It leaves the United States littered with a trail of scattered ailments without the connective tissue of a narrative.

Advertisement

In an honest effort to find a workable new synthesis, here’s a suggestion: Inequality might not cause these symptoms on its own. Instead, many of America’s social maladies stem from the strategies it has chosen to mitigate the lopsided distribution of income, which leave its citizens singularly........

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