Streams

American Inequality, Part 2

Friday, April 01, 2011

Continuing the discussion Joseph Stiglitz began, Glenn Hubbard, dean of the Columbia Business School, offers a different take on the question of inequality and the American system.  He was a member of Bush administration economic team and is the co-author with Peter Navarro of Seeds of Destruction: Why the Path to Economic Ruin Runs Through Washington, and How to Reclaim American Prosperity (FT Press, 2010)., 

From It's a Free Country:

Welcome to Politics Bites, where every afternoon at It's A Free Country, we bring you the unmissable quotes from the morning's political conversations on WNYC. Today on the Brian Lehrer Show, Glenn Hubbarddean of the Columbia Business School, continued the discussion Joseph Stiglitz began on Thursday.

It's not about the top one percent...

Yesterday, economist Joseph Stiglitz told Brian Lehrer that the number one option for rectifying income inequality in America was to have the richest one percent of earners pay more taxes—at least, more of what they should be paying. Spending more on education was number two.

Glenn Hubbard may share a campus with Stiglitz, but he doesn't share his colleague's priorities. For Hubbard, better education was one of the building blocks of a more equal society, but he said that all the attention paid to how well the rich are doing is misplaced.

For me, the issue is less whether the top one percent are doing well, but why we can't help the broad middle do better. I think we can. It starts with an improved education system, one with much more support for training for individuals between jobs, and it starts with a system that's less biased against saving and investment that could lead to more capital and higher productivity.

The health care sponge

Productivity actually has been increasing at a favorable rate, according to recent data. But the same reports also show that wages for American workers have failed to increase at a similar pace; they've essentially stagnated, even though people seem to be working harder. Hubbard addressed this point by making a terminology distinction: Wages are what workers take home at the end of the day. Compensation has in fact increased, but so has the amount removed from every paycheck, namely for health care costs.

He also said the health care overhaul passed last year would only make these matters worse.

[A] factor that doesn't often get mentioned is higher health care costs...Compensation has grown a lot, but what has been soaked up there is really just higher expenditures on healthcare, so workers' take-home wages have not kept pace. That's not a statement about the failure of the market to work, it's a statement that health care costs are rising too fast—again, another thing we can do something about.

Better living through...community colleges?

Hubbard agreed with Stiglitz that improving the education system was key to correcting wealth inequality in the United States. One of his suggestions for how to do that was by bolstering institutions that traditionally don't get much attention.

I don't think any economist disagrees with the notion that we need to have very strong support for public education, not just K-12. We need to have more support for community colleges; these institutions are doing a lot of skills training in our country, but they don't get the kind of public support major universities get.

Higher tax revenue, not higher taxes

On yesterday's program, Joseph Stiglitz lamented the fact that the wealthy aren't using or investing their money in manners that are productive for the country, and cited loopholes that the rich enjoy every April. Hubbard was with him on the latter point, but said that doesn't mean we should raise taxes.

Raising marginal tax rates would be a big mistake for the country. It would depress saving and investment and ruin our chances of growth. That doesn't mean we can't raise more taxes. Many economists have suggested that we scale back deductions and tax preferences that affluent taxpayers get. I've also suggested that we slow down the growth of Social Security and Medicare benefits for affluent taxpayers. Absolutely, we need to get affluent taxpayers to pay more.

Public, private share responsibility

Another Stiglitz sentiment was that the financial industry had gotten too much help from the government, despite playing the lead role in the recent financial crisis. Hubbard agreed to a point, but stressed that no single entity is entirely at fault: The collapse resulted from joint efforts.

Part of what happened in the financial crisis was government had advantaged lending in the housing industry, indeed encouraged lenders to reduce standards in the subprime market. So government did play a role, but frankly, so did Wall Street excesses. I absolutely agree with [Joseph Stiglitz] that we should not have spent so much money bailing out the financial sector. This could have been done much more efficiently, and we should be helping millions of Americans underwater in their mortgages.

"This is a policy problem"

According to Hubbard, wealth inequality isn't something that can be solved by looking at who has what and raising or lowering taxes accordingly. It's a "pre-tax problem," he said. The top one percent's wealth is not keeping workers wages from rising, for example. The real solution is smarter government policy—in education, in health care, and in regulation.

When I talk about health care costs and other things standing in the way of wages rising, this is a policy problem. American workers are the most productive in the world, they're not problem. As far as regulation, it's not a question of more or less, but good and bad. Regulation in the Dodd-Frank legislation unfortunately doesn't address many of the problems we actually went through. We need more regulation, but we need it of housing finance, capital requirements, and transparency in financial services. We didn't get any of it.

What do you think? Here are a few questions we'd like It's A Free Country readers to answer:

→ Between the government and the financial industry, is one more responsible for the financial collapse than the other?

→ Are taxes a red herring for the inequality problem?

→ Where and when have you felt the wealth gap?

Let us know in the comments below.

Guests:

Glenn Hubbard

Comments [51]

Bernie from New Jersey

Mr. Hubbard mentioned globalization, but did not follow through with a clear argument as to why this impacts the concentration of wealth. The increasingly global labor market, due to the shipping container and, more recently, the internet, is causing wages for workers in the US to fall. On the other hand, the wealthy get better returns on their investments due to the lower labor costs. Hence, the increasing divide between the working and investor classes in the US.

Apr. 01 2011 06:49 PM
Ari from Conn

I was thinking about what Hubbard said about compensation increased, but the increases went to health care. That sounded right to me until I remember that even though Americans pay more for health care than other developed countries our health care outcomes are not better (life expectancy, survival rates, satisfaction, etc)

We're still getting ripped off, and the PPACA is an actual attempt to change that.

Apr. 01 2011 01:42 PM
Eugenia Renskoff from Brooklyn, NY

Hi, Brian, There is too much inequality. Taking into account my own experiences with mortgage fraud and foreclosure and reading about many New Yorkers who don’t have enough to eat, I propose this: Have the some of the 58 billionaires in the city find people in need, real need. Some of these people in neighborhoods like Washington Heights have kids and these kids are homeless. Set up trust funds for them. The amount of each trust fund could be around one million to 5 million dollars. Find a way to get them better jobs (or in my case) a job, a well paying job. Those people with/without kids could also be given a home, since some of them live in shelters or their housing situation is iffy. Personally, I don’t mind rich people being rich. I think it’s great. But ever since my own personal crisis, I have come to realize that there are many have nots, too many of them. That, in a place like New York and a country like the United States, is simply unacceptable. Eugenia Renskoff

Apr. 01 2011 01:40 PM

Contrary to some comments, I found the debate worthwhile. And I am an admirer of Stiglitz's [the progressive] analysis; Prof Hubbard is not one of these knee-jerk Tea Party hysterics now controlling the House in Washington; I was struck by the number of things he admitted to agree w Stiglitz about which then lead to discussion of what can be done [and a vast improvement on the discourse coming out of Washington].

Apr. 01 2011 01:22 PM
Rosa La Raza from The border heading North

Sad to hear that the FCC has taken away WNYC's AM license to make room for a Spanish language station with all Mexican Mariachi Music - all the time. The FCC stated that they did this to bring real diversity to the middle of the NYC AM dial which is all news talk and news from 710 to 1010, sandwiched between sports stations. The Commission stated that Mariachi Music should bring a needed break from rich white people reporting on or arguing with each other about how many crumbs the poor people of Color should get.

Apr. 01 2011 12:08 PM
jgarbuz from Queens

To May,

The massive introduction of females into the workforce outside of the home, is indeed one the most significant economic factors of the last century. Starting in the USSR, and then gradually spreading to the US, and now even to the Muslim world, the economic empowerment, and massive introduction of female labor, often in competition to male labor, is indeed a major socioeconomic revolution whose full consequences are as yet to be fully absorbed, explored, or understood by academia and society as a whole.

Apr. 01 2011 12:00 PM
Becky Glenn from By my teaching blackboard.

Brian this is a much more important story then Chucky tunneling:

THIS NEWS JUST IN: 0bumer has just resigned stating that being President is just too much darn work. He went on to say that he was joining the professional golf tour and will sponsor his own line of golf equipment & clothing to be known as the "Allahu Akbar" line. The President continued to say that getting 200-300 days a year away from his wife, who he called the Queen will also be a pleasure. He concluded his brief statement by apologizing to everyone he deceived, but his final words were, "death to America and all Infidels." He then blew a kiss to Anderson Cooper and left the podium. Joe Biden was not available to be sworn in as President, because he was dead drunk at a pub in Georgetown. More details to come.

Apr. 01 2011 11:57 AM
Phil Henshaw from way uptown

You should have taken my call Brian. What happened to cause the extreme split in incomes is that earnings from providing work or services stagnated, beginning in ~1970, and the earnings from using money to make money continued to multiply. So the curves for wages and GDP went different directions exponentially.

Work and services provide earnings by in proportion to the services, and so in constant units. Earnings from money are in percent's, so they multiply. The one naturally increases linearly and the other exponentially.

So what we've seen is wages tending toward being constant and investment income doubling again and again... without finding anything really productive to do. What money has been making is more and more credit, that is not being used in the productive economy.

I have a nice article on how that core dilemma is affecting the global economy, about to be published in New European Economy, called "A decisive moment for Investing in Sustainability"
http://www.synapse9.com/drafts/SustFuture-Article.pdf

Apr. 01 2011 11:55 AM
Diane from brooklyn

April Fools!
NY Chunnel - ha!!

Apr. 01 2011 11:53 AM
jgarbuz from Queens

Morality and economics have nothing to do with each other. If you want "morality," go read the Bible. At one time there was no such thing as a day off or "weekend." There was no such thing as charity to support the poor and indigent. Slavery was mandatory for a civilized life style. None of the Athenian philosophers found any moral problem with slavery. Human sacrifice to appease the gods was highly laudable. Killing for for sport in arenas was entertainment for the Roman citizenry. Economics and morality are two very different domains.

Apr. 01 2011 11:53 AM
Weiner Roast from I live in Manhattan!

*** Will there be parking tickets for bikes??? ***

Apr. 01 2011 11:52 AM
Matt

I'm sensing an April Fool's....

Apr. 01 2011 11:51 AM
Geoff from prospect heights

The gag was lame last year and it's even more so this year.
Get some fresh blood next year Mr Lehrer for a very subtle gag instead of the "not a chance in hell this is true" approach of the last few years.
Lame , lame , lame

Apr. 01 2011 11:50 AM
Thom

After the sham of a Nan Hayworth interview this morning, this Schumer Tunnel thing doesn't seem like much of a joke.

Apr. 01 2011 11:49 AM
AJ from Fort Greene

CHUNNEL!!!
Good Form.

Apr. 01 2011 11:49 AM
RCT from nyc


Bike Lane: April Fool to you, too, Brian!

Apr. 01 2011 11:49 AM
Amy from Manhattan

On your added segment (the one w/no link), ya had me going for a little while there! But then I remembered what day it was. This is possibly the most elaborate April Fool's Day joke I've heard you pull!

Apr. 01 2011 11:48 AM
art525 from park slope

This Schumer Tunnel thing is just so lame. Don't try to be clever. Please. It doesn't work. I know April Fools.

Apr. 01 2011 11:46 AM
may

One thing that the show hasn't addressed in regards to the changes in inequality in the last 50 years is the change from 1 wage earner to two in modern families. Middle class families really can't afford to have one parent (of either sex) at home raising children. What has this done to our children? Some of them are in great day cares or with sweet nannies but many are neglected and in overcrowded day facilities watching tv instead of being with a caring parent or family member. It is slightly off topic but I think still really relevant.

Apr. 01 2011 11:45 AM
RuthH from NYC

April Fool! Chunnel?
Not as good as last year, tho.

Apr. 01 2011 11:45 AM
Edward from NJ

@John from NYC, you point out a bunch of averages that have improved. Those are great, but they're *averages*.

Then you point to education as an example of "failure". Who is education failing? Education isn't failing the *average* student. It's failing the people with the bottom 10% of incomes. Their houses haven't doubled in size. They spend most of their income on food and shelter. Points to you: they may have nicer TVs than they used to. And with some saving, they may be able to afford a plane ticket to California, but they'll lose their jobs while they go on vacation.

Apr. 01 2011 11:44 AM
Cyd from Brooklyn

While I strongly agree with the issues of Wall Street greed but what no one seems to realize is the number of middle class people who would have become unemployed should there not have been a bail out. I worked for a TARP company and only a handful were responsible. Most of us were doing what we could to get through day, which was typically 14 hours. Talk about productivity. Poor comment about those hanging at the bars. Better to see all the office food deliveries after 7 p.m. on Wall.

Apr. 01 2011 11:43 AM
Stella Katz from Manhattan

No discussion of the socio-cultural ramifications of economic inequality is complete without considering the moral obligations of democratic society. Tony Judt's introduction to ILL FARES THE LAND states the problem eloquently:

"Something is profoundly wrong with the way we live today. For thirty years we have made a virtue out of the pursuit of material self-interest: indeed, this very pursuit now constitutes whatever remains of our sense of collective purpose. We know what things cost but have no idea what they are worth. We no longer ask of a judicial ruling or a legislative act: Is it good? Is it fair? Is it just? Is it right? Will it help bring about a better society or a better world? Those used to be the political questions, even if they invited no easy answers. We must learn once again to pose them.

The materialistic and selfish quality of contemporary life is not inherent in the human condition. Much of what appears “natural” today dates from the 1980s: the obsession with wealth creation, the cult of privatization and the private sector, the growing disparities of rich and poor. And above all, the rhetoric that accompanies these: uncritical admiration for unfettered markets, disdain for the public sector, the delusion of endless growth."

Apr. 01 2011 11:39 AM
mike from Manhattan

Rising health care costs don't contribute to overall wages and prevent monetary wages from rising when employer provided health care is reduced or when people loose their health insurance altogether. It is interesting that Dr. Hubbard agrees with Dr. Stieglitz on almost every significant point.

Apr. 01 2011 11:39 AM
BIg Diky from queens

Damn, I love this guy solution to health problem..

If we dont pay for health insurance we would get more money...

What happens when you or your kids get sick????

Apr. 01 2011 11:39 AM
John from NYC

Brian should invite former Senator Byron Dorgan for a conversation. He wrote a book about companies and outsourcing titled "Take this Job and Ship It"

Apr. 01 2011 11:39 AM
mike from Manhattan

Rising health care costs don't contribute to overall wages and prevent monetary wages from rising when employer provided health care is reduced or when people loose their health insurance altogether. It is interesting that Dr. Hubbard agrees with Dr. Stieglitz on almost every significant point.

Apr. 01 2011 11:39 AM
Bret from NYC

When does Dr. Hubbard think that we will discuss Tax Reform? What is the impact of a combined Flat Tax and VAT?

Apr. 01 2011 11:37 AM
jane

The last caller needs applause. This 'expert' is a fraud.

Apr. 01 2011 11:37 AM
Brian from Bronx

I would be interested in Mr. Hubbard's reaction to the documentary in which he appeared, namely "Inside Job".

Apr. 01 2011 11:37 AM

Thank you caller (Joe)! Right on!

Apr. 01 2011 11:37 AM

Thank you caller! Right on!

Apr. 01 2011 11:36 AM
Lemuel Morrison from New York, NY

Does anyone else find it ironic that two Columbia professors are talking about the economy for the rest of 99%. Are they representative of the general population?

Apr. 01 2011 11:36 AM
Bob from Riverdale

Brian --

It makes no difference whether tax deductions are eliminated or the marginal tax rate is raised. The result either way is that more tax is paid. And the wealthy will not agree to either one, and they have the lobbying clout to prevent either or both from happening.

Apr. 01 2011 11:34 AM
jgarbuz from Queens

One major thing overlooked in these economics discussion, is the TSUNAMI of free competition unleashed with the death of communism. Between 1949 and 1989, there was no ECONOMIC competition between us and China, India, Russia or the former socialist countries. But that ended by 1991. Now we have 3 billion or more new capitalists and free workers that we have to compete with, as well as try to sell to. That tsunami of competition liberated by Reagan's destruction of communism never gets noted in these discussions.

Apr. 01 2011 11:34 AM
Big Jiggy from brooklyn

This guy ois right on point...

Trying to make sure that health care is available to everyone in the country is the problem....

The well to do have no problem paying for thier health care.....

You go man you got all right...

Apr. 01 2011 11:33 AM
sanych

My cell battery is dead -- cannot call.

Mr. Hubbard is wrong. Technology jobs are/were outsourced to other countries, and techies are replaced in this country by cheap non-immigrant workers. The dead mantra of "better education" is not supported by facts.

Stiglitz is right -- the golden rule works -- the man who pays the gold sets the rules.

Apr. 01 2011 11:32 AM
Wm

"We don't know" if trickle-down economics works. Over 3 decades. WHAT?????????
He's giving me a brain hemorrhage Brian.

Apr. 01 2011 11:32 AM
Xtina from E. Village

Rising health care costs aren't mentioned as a problem to business? Is he kidding? Has he been listening? And he says we can do 'something' about rising health care costs, but of course fails to say what.

And if this economy is 'biased against' investment, I'd hate to see the one that isn't.

Apr. 01 2011 11:31 AM
John from NYC

The truth is that since 1975:
- The size of the average house has doubled.
- The percent of income going to food and clothes is half
- The cost of a TV is half, and taking into account inflation, is one tenth
- The cost of a cost-to-cost round trip is half, and taking into account inflation, is one tenth

What is a disaster is education, etc., etc., handled by the GOVERNMENT.

Apr. 01 2011 11:31 AM
Bell Amber from nyc

All these people that think that everyone can go to Harvard and be a lawyuer and doctor is BS.....

our contry in on a bell curve as far as inteligence is concerned that means that we will not all go to HARVARD...

Pushing money to the select few is the problem...

Apr. 01 2011 11:29 AM
carolita from nyc

I don't understand this guy. He thinks its wrong that there's such a disparity income but he thinks it's only a matter of higher productivity? The more the middle earns, the higher everything costs, and the more the rich get out of the pie! What nonsense! Does he think we all still believe in Santa Claus?

Apr. 01 2011 11:29 AM
jgarbuz from Queens

Please ask your guest what he would suggest that the US due to increase economic competitive advantages of the US. Once our advantages were obvious: Massive natural resources. Economic and political freedom. Relatively cheap energy sources. But those advantages are not what they used to be, so what do we have to do now?

Apr. 01 2011 11:26 AM
Jane

This person has a very slanted view of economics.

Apr. 01 2011 11:23 AM
jgarbuz from Queens

Here is the reason why a globalized economy creates greater wealth inequality between workers and investors (owners of capital):
Capital is mobile; labor is stuck. In other words, while capital can rapidly move from country to country quickly find higher returns, by contrast, labor cannot move from country to country to find higher paying jobs. In the US, some workers can move from state to state relatively quickly, they cannot easily go to Tokyo, or Beijing to get work at better pay or living conditions. So the owners of capital are always ahead of workers whose mobility is limited. So "free trade" cannot really beconsidered free as long as borders prohibit labor from moving as rapidly as does capital. So the rich will always get richer, as long as there is globalized trade, while workers will just crawl along. After WWII, trade was limited because the war had destroyed many of our trading partners, and so workers here got a break for 25 or so years after WWII. Then we went into debt to try to keep it going, until that crashed and burned.

Apr. 01 2011 11:09 AM
madman

So internationally respected economist Joe Stiglitz is invited on the program, and can barely finish a sentence, before Brian starts repeating the absurd claims of supply-side economics, because that's what "some people say" -- the claims which have been discredited on a yearly basis, for the last 30 years.

So to "balance" this outrage against the delicate sensibilities of "conservatives", we need a "conservative" economist on the program -- immediately, to refute a position which was never set out in the first place.

And, of course, the "conservative" will be given free rein and allowed to lie with impunity. In any case, Brian doesn't know Stiglitz's position well enough to offer it as a refutation. What "some people say" on this issue is, unfortunately, restricted to what Brian himself knows, which is precious little.

It's really terrible being a "liberal" station, ain't it? Especially when you're not even liberal. Gotta feel guilty anyway, though. The "conservative" point of view is never heard in American media, don't you know.

Apr. 01 2011 11:05 AM
John from NYC

Maybe Brian could ask Mr. Hubbard about his appearance in the movie about the financial crisis "Inside Job".

Apr. 01 2011 11:04 AM
GM from Queens

Brian - if you're looking to balance the conversation with a more conservative economist than Stiglitz, surely you can find one with a better reputation than Hubbard?

Beyond his foolishness in 'Inside Job,' his new book is a rushed product with little actual insight.

Apr. 01 2011 11:01 AM

Gee, Bush economic team... oxymoron(s).

Bush brought us to war in Iraq for no reason. None. Cost us American lives as well as Iraqi.

These guys are responsible for a debt rise by 4trillion + over Bush's term. They worked with Wall Street insiders who forced us to eat another 3 trillion under Pres. O.
Brian, these folks have nothing to offer except same ol same ol. Libertarians economists should be right at home on the dust bin of history together with Communist economists. 10 year plan anyone ?

Apr. 01 2011 10:54 AM
eli

hm.
member of bush economic team....opining on economic equality. that is literally a contradiction in terms....unless of course he is opining on how best to INCREASE inequality. in that case i would take him at his word.

Apr. 01 2011 10:24 AM
Oscar from Ny

Regardless of these vain devils trying to win at any cost there are some of us that care more about who we were and what have we become, we control the world from our rooms...the world has changed and our power is coveted by this universe...

Apr. 01 2011 09:50 AM

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