The wrong question

Thomas Edsall had a piece in the New York Times asking "why democracy has failed to stem the growth of inequality."  Building on work by Thomas Piketty, he proposes that the answer can be found in the changing composition of Democratic and Republican voters.  In this account, educated people have shifted towards the Democrats because of their position on various "social issues."  Since educated people tend to have high incomes, they are not very interested in programs to help the poor:   "the highly educated constituency currently controlling the party has been ineffective in protecting the material interests of the less well off."  That means that people with low incomes have less reason to vote for the Democrats, so some of them shift to the Republicans, increasing the influence of educated voters in the Democratic party, and further weakening its support for equality.

In fact, spending to help people with low incomes has increased substantially during the period of rising inequality, as I discussed in a post in July.   The American state doesn't do as much for people with low incomes as many European states do, or as much as some people (including me) think it should, but it has "stemmed the growth of inequality" if you focus on the gap between the poor and the middle class.

The question we should be asking is why the government hasn't done much to limit the gains of those at the top.  The shift of college educated voters towards the Democrats doesn't help to answer this question.  Edsall notes that between "1988 to 2012, the inflation-adjusted income of college graduates increased by 16 percent and for those with advanced degrees by 42 percent."  However, almost all of these gains occurred before 2000--since then, average incomes at all educational levels have been flat, and only people at the very top of the income distribution have made substantial gains.  So the majority of both more and less educated people seem to have a material interest in redistributing the wealth at the top.  There has been very little discussion of why this hasn't happened, but I have considered it here and here.  One important factor is that people are not very aware of how high incomes are at the top end:  when people are asked how much the chief executive of a national corporation makes, the average estimate is only about $500,000.  The high incomes of celebrities and sports figures get a lot of publicity, but those of CEOs and people on Wall Street generally do not.  Another factor seems to be that people just don't like the idea of very high taxes on anyone (see my second paper for further discussion).  As a result, public opinion doesn't put much pressure on the government to redistribute income away from the top.  On the other side, politicians seem to be less concerned with bringing attention to business misconduct or excess than they used to--this may be because of the increased importance of corporate contributions and the chance of making a good living as a lobbyist if you lose office.  I was struck by how quickly the Equifax security breach dropped out of sight as an issue--in the 1970s or 1980s I think there would have been congressional hearings, pointed comments about the generous salaries of the people in charge and questions about what they did to justify those salaries, and calls for new regulations.  Instead it was in the news for a few days, and then everyone moved on (and Equifax stock started rising again).    This lack of publicity means companies don't face much pressure to limit the growth of top incomes.