With income inequality on everyone's radar today, the Center on Budget and Policy Priorities tweets this:

Quite so. This gives me an excuse to repost one of my favorite tables. It compares how much income various groups make today vs. how much they would be making if everyone's incomes, rich and poor alike, had grown at similar rates since 1979. As you can see, by 2005 the bottom 80% were collectively earning about $743 billion less per year while the top 1% were earning about $673 billion more. It's sort of uncanny how close those numbers are. For all practical purposes, every year about $700 billion in income is being sucked directly out of the hands of the poor and the middle class and shoveled into the hands of the rich.

One of the points this drives home is just how much the story of growing income inequality really is a story of the top 1%. Inequality has increased within the bottom 99%, but not all that dramatically. It's really the top 1% and the top 0.1% where all the action is. So if the Occupy Wall Street folks are ever looking for an alternate slogan, they might consider "Give us back our $700 billion."

You can, of course, try to concoct some story in which growing income inequality has boosted economic growth, so that the gains of the rich have been solely from income that nobody would have gotten otherwise. But it's a pretty tough story to tell, because there's simply no evidence for it. The American economy hasn't been growing any faster over the past 30 years than it did in the 30 years before, it's just distributed the gains of its growth disproportionately to the rich.

To bring this home a little more vividly, take a look at the row labeled "41-60." That's the dead middle of the income distribution. If all income groups had grown at the same rate over the past 30 years, that median household would today be making about $10,000 more than they are. That's the price we pay for our growing plutocracy.

Want more charts? This one comes from the chart pack we did for my article earlier this year, "Plutocracy Now." Click the link if you want to read it, or else click here if you just want to browse the charts.

Via Brad Plumer, here's the latest data from Common Sense Media about the media diets of young children in America. To be honest, I'm a little surprised that TV watching is only two hours a day for 5-8 year-olds. On the other hand, I'm sort of appalled that 75% of 0-2 year-olds watch TV, and of those, the average TV-watching time has increased from 1:02 to 1:30 over the past six years. In that age group, it probably ought to be zero. Other interesting nuggets:

  • 30% of kids under two have a TV in their bedroom.
  • Only about 60% of kids read or are read to every day. More reading, please.
  • 92% of high-income kids have high-speed cable. Only 42% of low-income kids do. The divide is about the same along the educational spectrum.

More at the link.

Wall Street is the New Wal-Mart

Matt Yglesias has an interesting notion today. He suggests that selling luxury goods to the wealthy is all well and good, but if you want to get truly rich you need to sell to a mass market. Think Henry Ford, Sam Walton, and Bill Gates. But what if you peer into the future and conclude that the middle class is going to be fairly stagnant while the rich are going to get ever richer and richer? What kind of mass market is there in goods for the rich? There are only so many yachts they can buy, after all.

Another of way saying this is that as the rich get richer, they spend a smaller and smaller share of their income on ordinary consumption. That leaves more and more money to be socked away as savings:

But rich people also don’t just “save” money in the way that middle class people do on a larger scale. They purchase large quantities of financial services. So to the extent that you anticipate income to be increasingly concentrated at the top, it makes more sense to go into selling financial services than into selling non-finance items. The people who get rich with non-financial enterprises (Bill Gates, the Walton family) are all selling to mass markets. Lots of people make a living selling luxury goods to the top 1 percent, but nobody becomes a billionaire that way. Unless they’re selling financial services.

As a corollary of sorts, I'd note that people have a tendency to do dumb things with money. That should come as no surprise. But when middle-class folks do dumb things, the consequences just aren't that bad. The consequences might be bad for them, but on a macro level, the middle class just doesn't have all that much money to do dumb stuff with. That's because they spend most of their income on food, clothes, housing, gasoline, and so forth.

But rich people? When their money starts to pile up so high that it's burning holes in their bespoke suits, they start doing dumb stuff on an epic scale. And Wall Street is there to cheerfully cater to their every dumb whim, and then toss in a few even dumber ones that they'd never thought of before. If you keep this up for a few years you get 2008. Social justice to the side, this is, in my mind, one of the key reasons why we should care about reducing income inequality. The middle class can more or less be trusted to do useful things with the bulk of its money. The rich can't.

How We Shop

Shopping expert Paco Underhill explains how we shop:

Some people predict that the Internet is going to replace the retail store. It's already killed Borders. What impact could it have on, say, buying a bed or a toaster?

Buying an electronic appliance generally involves three visits, or missions. A scouting mission, a narrowing mission, and a purchasing mission. Of those three missions, at least one or two might be happening online, whereas it previously would be happening in store. The role of the Internet is an information-gathering -- scouting and narrowing -- vehicle. It doesn't mean less buying. It means less day-to-day traffic.

That sounds disturbingly accurate. I need a new laptop, and a couple of weeks I started my scouting mission. On the internet. Last week I spent an afternoon on a narrowing mission, visting Fry's, Micro Center, Best Buy, the Microsoft Store, and the Sony Store. Two days ago I accidentally noticed a sale on one of the models at the top of my list, so today I'll probably head out on my purchasing mission.

Of course, I could just as easily have accidentally noticed a sale on the internet, in which case our local bricks-and-mortar retailers would have been out of luck. Still, Underhill has a point. The internet probably spurs nearly as much shopping as it cannibalizes.

Also of note is his anecdote about a Japanese department store that has a private club for loyal customers. Interesting! Sounds like something Nordstrom should try.

The Future of #OWS

Dahlia Lithwick says that the media's bafflement toward the Occupy Wall Street movement is the result of its obsession with simple storylines that can be explained in 60 seconds or less:

Mark your calendars: The corporate media died when it announced it was too sophisticated to understand simple declarative sentences. While the mainstream media expresses puzzlement and fear at these incomprehensible “protesters” with their oddly well-worded “signs,” the rest of us see our own concerns reflected back at us and understand perfectly. Turning off mindless programming might be the best thing that ever happens to this polity. Hey, occupiers: You’re the new news. And even better, by refusing to explain yourselves, you’re actually changing what’s reported as news. Because it takes a tremendous mental effort to refuse to see that the rich are getting richer in America while the rest of us are struggling. Maybe the days of explaining the patently obvious to the transparently compromised are finally behind us.

By refusing to take a ragtag, complicated, and leaderless movement seriously, the mainstream media has succeeded only in ensuring its own irrelevance. The rest of America has little trouble understanding that these are ragtag, complicated, and leaderless times. This may not make for great television, but any movement that acknowledges that fact deserves enormous credit.

I'd like to think this is true. Unfortunately, my instincts tell me that the corporate media is stronger than Lithwick gives it credit for. As weeks drift into months, and the OWS movement continues to shun the very idea of alliance building, political action, or stronger messaging, it looks more and more as if it's going to drift into irrelevance without accomplishing anything. Heavy-handed police action could change that, of course, but at this point it sort of looks to me as if its most promising destiny is to be v1.0 of whatever springs up in its wake. If things go well, OWS will inspire someone else to create a similar group that's better at mobilizing public outrage, but OWS itself won't be part of it. That's no bad thing if it happens that way, but not what OWS's creators were hoping for.

This chart from the Pew Economic Mobility Project is actually a few months old, but it seems newly relevant in light of the Occupy Wall Street protests. If you want to know why people are angry, this tells the story. If you want to know why people don't think much of government, this tells the story. If you want to know why people are overwhelmingly in favor of increasing taxes on the rich, this tells the story. Basically, this chart tells a lot of stories.

Rick Perry has figured out the answer to his embarrassingly bad debate performance. He's just not going to participate in debates anymore:

“We are going to evaluate each debate as it comes and take each one on its own merits,” said Perry spokesman Mark Miner, adding that for now, Mr. Perry is confirmed only for the next GOP debate, set for Michigan Nov. 9th....“The primaries are right aroud the corner and there is simply more to do than there is time to do it,” Mr. Miner said.

But isn't this going to open up Perry to charges that he's scared to face his opponents? Don't be silly, says Perry's South Carolina chairman, Katon Dawson:

“You have to prioritize exactly what you’re campaign is going to do and what it’s going to look like and what you’re best at,” he said in an interview. “I don’t think Rick Perry has ever hidden from anything.”

So there you have it. Perry's not hiding from anything. He's just choosing to stay off national TV because it makes his dimness a little too painfully obvious to voters who are trying to choose a leader of the free world. Better to focus instead on what he's best at: attack ads and laughably flimsy policy proposals.

Jon Chait has an epic takedown of Paul Ryan's much-ballyhooed speech today about class warfare (Ryan is against it) and the politics of fear and envy (he's against that too). It's worth a read.

But Ryan's weak grasp of facts aside, what I'm really curious about is why Ryan gave this speech. You see, it was a fairly nasty speech, and Ryan doesn't usually give speeches like that. After all, he has a reputation as a policy wonk — the Republican Party's star policy wonk, in fact — and partisan stemwinders do nothing but undermine that reputation. So why did he do it, instead of giving a milder, numbers-heavy address that said pretty much the same thing?

My guess: Obama has gotten to him. Back in April, Obama invited Ryan to a speech about the budget and then ambushed him. With Ryan sitting expectantly in the front row, Obama ripped into Ryan's budget plan and reduced it to shreds. Ryan was stunned. Since then, following a brief respite to fight over the debt ceiling, Obama has kept up his attacks. I think this has rattled Ryan, causing him to lose his famous cool.

That's just a guess, of course. But regardless of whether this upsets David Brooks, it suggests that Republicans are finally feeling a little heat, which is forcing them to defend the indefensible a little more loudly and a little more explicitly than they're really used to. Good.

Several years ago, when I was working at the Washington Monthly, Paul Glastris recommended that I read a piece about Social Security private accounts written by Phil Longman. I read it, and my reaction was meh. That turned out to be a mistake. I'm still not really in favor of private accounts (pay-as-you-go funding works fine), and the transition costs would need to be honestly funded if you adopted them, but once I gave Longman's plan the thought it deserved, I realized that it was probably about the best private account plan out there. Details here, if you're interested.

All of which is just a long way of explaining that I'm now a lot more careful about dismissing anything Longman says. And yet....I guess I'm going to do it again. In the current issue of the Monthly, he takes on Medicare, which he says is a genuinely big problem that neither party is really addressing properly:

Here’s a better idea—one that offers a relatively painless and proven fix that will also vastly improve the quality of U.S. health care. Approximately a third of all Medicare spending goes for unnecessary surgeries, redundant testing, and other forms of overtreatment, according to well-accepted estimates. The largest single reason for this extraordinary volume of wasteful and often dangerous overtreatment is Medicare’s use of the “fee-for-service” method of compensating health care providers that dominates U.S. medicine, under which doctors and hospitals are rewarded according to how many procedures and tests they perform. To fix this, the federal government should do the following: announce a day certain and near when Medicare will be out of the business of subsidizing profitdriven, fee-for-service medicine.

Going forward, Medicare should instead contract exclusively with health care providers like the Mayo Clinic, Kaiser Permanente, the Cleveland Clinic, Intermountain Health Care, the Geisinger Health System, or even the Veterans Health Administration. All these are nonprofit, mission-driven, managed care organizations widely heralded by health care experts....Because doctors working at these institutions are not compensated on a fee-for-service basis, they are neither rewarded for performing unnecessary tests and surgeries nor penalized financially for keeping their patients well. And unlike for-profit HMOs, these institutions are not pressured by shareholders to maximize earnings through withholding appropriate care.

So here's my question: are these nonprofit HMOs really that great at controlling costs? Over the past 30 years, if their costs have been going up by even a little less than average — say, two percentage points less a year — their premiums would cost half the average of your standard fee-for-service plan.

So has that happened? I'm not sure where to get reliable data on this, but I doubt it. If nonprofit HMOs were really accomplishing a minor miracle like a 6% annual cost increase instead of an 8% increase, every corporation in America would be contracting with them for business by now. But that doesn't seem to be the case. As a single data point, here's an OPM summary of premiums for various healthcare plans for federal employees. Kaiser is the only one of Longman's nonprofits on the list, and their average price for an individual premium is $235. The average price for an individual premium from all the national fee-for-service plans is $230.

A single data point doesn't mean much. For one thing, the Kaiser plans were both for California, which is a high-cost state. And government regulations probably compress the price list. Still, they certainly don't seem to be charging dramatically less than the big national guys.

Maybe I'm missing something here. I'm a fan of the Kaiser/Mayo/Cleveland Clinic model, and I'd like to believe that it could be scaled up nationally and serve as the basis for lower-cost Medicare coverage. But except for the VA, which is something of a special case, Longman doesn't provide any numbers to suggest that nonprofit HMOs have found a consistent formula for keeping costs down while still providing high-quality medical care. More data, please.

Tribalism and Taxes

Andrew Samwick:

I couldn't agree more with Pete on the discussions of tax policy that are now occurring as part of the Republican primary campaigns. The Republican primary campaign almost always gets sidetracked by some inane proposal for tax reform. This year it is the 9-9-9. And now we have another version of the flat tax, as if the crushing irrelevance of Steve Forbes to the primaries in 1996 and 2000 were not an indication of how unproductive the discussion will ultimately be. What are the prospects that a Republican President would actually be able to implement such a change if elected? They are equal to the chance that Republicans will both retain control of the House and secure a filibuster-proof majority in the Senate in 2012. In other words, absolutely zero.

True. But you have to look at this through a different lens. In the modern Republican Party, tax policy isn't really about tax policy anymore. It's mostly just meant to be evocative, a demonstration that you're really, truly part of the family. So the crazier it is, the better. Nobody—least of all Republican voters—seriously expects any of these proposals to become law.

What's really mind-blowing, though, is the precise nature of the tax policies that rich Republicans have so thoroughly succeeded in adding to the canon. Middle-class conservatives have become completely convinced that "good" tax policies include a flat tax, lower capital gains rates, and repeal of the estate tax, all of which are designed to benefit the rich almost exclusively. It would be as if Democrats had somehow convinced Wall Street that the key to prosperity was higher taxes on yachts, private jets, and Hamptons getaways.