Wednesday, July 29, 2009

In Sickness and in Wealth

I agree with Elliot Spitzer when he asks the all important question of: "... why we have socialized the risk of failure but allowed the rewards of success to remain private."
The debate about bank bailouts and health care is missing a critical piece of context: The American economy hasn't been working for the working- and middle class for decades. It is impossible to determine who should pay for what or whether it is "fair" to ask the wealthy to contribute more to the health care of those who are uninsured, without better understanding the winners and losers in the U.S. economy over the past several decades.

One of the great accomplishments of the American economy, or at least the mythology so claims, is the creation of an enormous middle class after World War II. Americans all shared in the wealth generated by the most dynamic economy the world had ever seen. At one end of the economic spectrum, we reduced the number of people living in poverty, while at the other end, we applauded those whose work benefited the entire economy.

Between 1947 and 1967, this was a somewhat accurate image, as the distribution of income made the population look more and more like a bell curve with each passing year. Yet since 1967, this story has reversed course. For more than 40 years, income has been distributed less equitably. As we consider the policy remedies to crises that are of immediate impact—such as the crisis in health care or in our financial system—it is critical to understand the larger arc of this socioeconomic narrative. How we think of distributing the costs of reform should be informed by this larger story.
It's no secret that the rich keep getting richer, while the rest of us struggle to keep the bills paid. It's one of the reasons the public is so ready for true health care reform. Unfortunately, it doesn't appear we are going to get it.
Before 1987, it might have been reasonable to argue that overall income growth was softening the effects of rising inequality. But since then, the rate of overall growth for all but the top quintile has slowed dramatically, with the lowest quintile seeing its income grow by only 7.8 percent in the last two decades, while income for the top quintile grew by 28 percent. And looking at after-tax income, which factors in the impact of favorable tax policy for the rich, the numbers are even starker: Between 1979 and 2004, the top 1 percent of all earners saw their income grow by an astounding 176 percent.
So what does this have to do with the current health care debate?

It points to the justification for asking the wealthy to step up to the plate and give a little back!
The outcry over Wall Street salaries and bonuses is more understandable when you realize that, over the last 40 years, there has been an inexorable shift of wealth and income toward the upper end of the income spectrum. With the return to profitability of many of the institutions that needed bailouts, taxpayers are wondering why we have socialized the risk of failure but allowed the rewards of success to remain private. Where is the public's fair payback for playing banker to the bankers?

But the significance of this 40-year cycle of income distribution may be playing out most clearly in the context of health care. One of the current debates is how to pay for the costs of expanded access to health insurance. A restructuring of the system will save some money, but more will be needed, and one proposal is to get it from a higher tax on the upper strata of income earners. Given income distribution trends over the past four decades, it is difficult not to support asking wealthier Americans for some help in closing the gap in our effort to give all Americans health insurance.
Sounds like a good idea to me.


Dr. Zaius said...

I sure hope that Obama's Healthcare plan passes. :o|

Dr. Zaius said...

Dana Milbank and Chris Cillizza dis Secretary of State Clinton. ( ! )