Last month, I was invited to speak at the National Academies of Sciences, Engineering, and Medicine about historical examples of sustainable financing institutions to improve population health.
Below is the video of my talk.
The holiday season is supposed to be a time of giving. We give presents, money and love. We give to show we care, and we give to share our good fortune. But giving isn’t what it used to be.
Years ago, the richest Americans gave a lot more of their income than they do now. Back then, the economy was healthier, the middle class was wealthier, and the nation was less divided. The American experience was a shared experience. Giving, after all, is sharing.
Today, the income gap is growing. It hasn’t been this high since the Great Crash of 1929. The wider it grows, the less the rich associate with the rest of us, and the less they feel the need or the desire to give back.
Recent work by the psychologist Paul K. Piff has shown that people become more narcissistic as they get richer. Contrary to the conventional wisdom that the poor and the middle class feel “entitled” nowadays, Piff finds that entitlement is higher among the rich.
But Piff has also discovered something that should give us hope. In one experiment, before he tested them for narcissism, he asked them to write down three benefits of treating other people as equals. Suddenly, their narcissistic tendencies disappeared. In the rest of the experiment, they stopped thinking of themselves and started thinking, well, like everyone else.
The economy is stuck in a rut right now. Most Americans’ inflation-adjusted income hasn’t increased since the onset of the Great Recession. But Piff’s research shows us that this trend doesn’t have to be permanent. We have the power to change it.
That’s what I tried to do in my book Letter to the One Percent. In it, I reached out to the richest one percent of American households. I asked them to do what they did in Piff’s experiment: to think of their fellow citizens as equals.
But the real world is not an experiment. Outside the lab, changing hearts and minds takes a little more convincing.
In another recent experiment, marketing professors Saerom Lee, Karen Winterich, and William Ross found that most people drew a sharp distinction between deserving and undeserving recipients of aid. They were far more likely to donate money, for example, if they were told that a person was poor because he could only find a low-wage job than if they were told that the poor person had a drug problem. They didn’t think of these people as equals.
Since publishing my book, I’ve heard people make this distinction often in response to my message to the One Percent. And so, over the past year, I’ve written op-eds showing that the rich aren’t rich because they work harder than the rest of us; that the poor don’t lie and cheat any more than the rest of us (and in fact the rich lie and cheat more); that you can’t simply get rich by choosing to get an education; that people can’t make more money by being poor or unemployed; and that much, if not most, of the difference between the rich and the poor can be explained by childhood experiences over which they had no control.
Some of us have made better decisions than others. Some have been given better opportunities than others. But the belief on which this nation was founded, “that all men [and women] are created equal,” rings as true today as it did in 1776.
No one is arguing for complete equality of income. Not even close. We celebrate the success of the One Percent, and rightly so. All we ask, especially in this time of giving, is for the compassion, the humility, the shared experience that existed only a few decades ago.
Your voice is more powerful than you might realize. The researchers James Andreoni and Justin M. Rao conducted an experiment where they showed that people tended to give away four times as much of their money if the recipient simply asked for it. If the recipient was silent, the giver only donated a tiny fraction.
The message is clear: Speak up. Vote. And if you can afford to, give back.
Want to know how to get rich? Wilbur Ross has the answer: Go to school.
“Education is the way that people get out of the ghetto and into, if not the One Percent, something close to it,” said the billionaire investor in an interview earlier this year.
That’s it. So simple.
So simple, in fact, that you have to wonder: Why doesn’t everybody do it? Why don’t we all study our way into the One Percent?
Actually, many have tried. Over 73 million adults have a college degree in this country, but less than 2 million of them are members of the One Percent. Most earn less than a fifth of what they’d need to qualify for the One Percent.
The same is true of postgraduate degrees. Approximately 38 million adults have a master’s, professional, or doctoral degree, and over 37 million of them earn less than the One Percent. Most aren’t even close. To be a member of the One Percent, you have to earn more than $393,000 a year. The average PhD grad earns less than $93,000.
And it’s getting worse. New college graduates entering the workforce today are earning wages 5 percent lower, after adjusting for inflation, than their predecessors earned a decade earlier. Over half of them can’t find full-time work, and half of the ones who do get a job aren’t using their degrees. Even law school grads only have 50/50 odds of finding full-time legal jobs. As a result, college graduates are this nation’s fastest-growing group of food stamp recipients.
That’s a far cry from the lucrative lifestyle that Wilbur Ross promised them.
It’s not hard to see why Ross would make this mistake. The average member of the One Percent is more educated than the average member of the 99 Percent. Ross looks around at his fellow One Percenters and sees their education and assumes that’s how they got there. It’s like the old joke about the guy who was born on third base and assumed he’d hit a triple.
Ross’s own life is a classic example. His father was a graduate of Yale, one of the most elite universities in the world. He sent his son to the college preparatory Xavier High School in Manhattan, where the current annual tuition is $14,450. From there, Ross went to — surprise, surprise — Yale, where his faculty adviser got him his first summer job on Wall Street.
Contrast that story with the childhood that most Americans experience.
The divergence starts before they even set foot in a classroom. By the age of 3, low-income children hear 30 million fewer words than their wealthier peers. Kids whose parents can afford to send them to high-performing preschools are more likely to graduate from high school, half as likely to get arrested, and almost three times more likely to own a home in adulthood.
If they overcome those odds, lower-income children attend schools that have lower education ratings, and they spend less time in those schools because they have to work or take care of family members. They also miss more days because they’re more likely to be sick.
It’s a myth that lower-income parents spend less time exploring school options or engaging their kids in home-learning activities. Contrary to what Wilbur Ross may tell you, low-income parents are just as committed to their kids’ education as their wealthier counterparts, according to studies of thousands of families across America. The problem is, they are less able to navigate the educational system because they are less informed. They also have less money to spend — and the gap in money spent on “enrichment activities” has been growing for the past four decades.
These problems become painfully clear when it comes time to apply to college. Most high-achieving, low-income students don’t even apply to elite universities like Yale because they don’t know how. No one encourages them. No one shows them how to pay for it. They see high tuition costs — and financial aid that has been going more and more to wealthy students in recent years — and they opt for lower-rated schools instead. If you take a rich kid and a poor kid with equally high achievements and test scores in high school, the rich kid is twice as likely to attend an elite university, simply because he comes from a wealthier family.
And even if the average American child manages to overcome all of these obstacles, they still face daunting odds to reach the hallowed One Percent. According to the Pew Economic Mobility Project, “rich kids without a college degree are 2.5 times more likely to end up rich than poor kids who do graduate from college.” It turns out that education isn’t a silver bullet after all.
Wilbur Ross is right about one thing, though. “I think the right focus would be how do you help the lower classes elevate themselves,” he said in the same interview. “And I think what’s disappointing with all the rhetoric, they’re not doing anything to fix the educational system.”
It is possible to give all Americans the same opportunities that young Wilbur Ross enjoyed. We can pay for all children to attend preschool. We can create home visitation programs that read to kids at an early age and help parents create a healthy environment for them. We can raise the minimum wage and create more jobs for parents so their kids don’t have to skip school to pay the bills. We can equalize funding for public schools between rich and poor school districts so all students have the same level of quality education. We can return to the days when Pell grants and other financial aid allowed kids to go to the college of their choice without onerous student loans. And once they’re in the workforce, we can invest in the kind of research and development that puts those advanced degrees to use.
But every one of those solutions requires Wilbur Ross and his fellow One Percenters to share a little of their good fortune with the 99 Percent. The only question is, do they really want to be a part of the solution? Or is “education” their scapegoat for an unjust inequality of opportunity that they are content to enjoy as long as it benefits them?
This op-ed was originally published in the Huffington Post.
“A gaffe is when a politician tells the truth — some obvious truth he isn’t supposed to say.” — Michael Kinsley
Mitt Romney really stepped in it this time. His only saving grace is that no one noticed…yet.
In a recent interview with Fortune magazine, Romney indicated that, under his tax plan, “high-income people would continue to pay the same share of the tax burden that they do today.”
This quote doesn’t sound like a gaffe until you put it together with the rest of Romney’s promises. Under his tax plan, those “high-income people” would face much lower tax rates.
This seemed odd to me. The same tax burden with lower rates? Wouldn’t that mean they’d have to earn a heck of a lot more money before taxes?
As it turns out, yes. Yes, they would.
If Romney gets his way, the top 1 percent will pay an average federal tax rate of 22.5 percent, down from the 28.3 percent rate they paid in 2007. The average federal tax rate for the nation as a whole will fall from 19.9 percent to 17.4 percent. (This is assuming Romney doesn’t eliminate a bunch of deductions and credits, in which case most people’s tax rate would actually go up and the number I’m about to report would be worse. I’m giving Romney the benefit of the doubt here.)
In 2007, the top 1 percent paid 26.2 percent of the nation’s taxes. In order to maintain that share of the tax burden, as Romney suggested in his interview, the top 1 percent would have to earn 33.9 percent of the nation’s pretax income.
33.9 percent. One in three dollars of our nation’s output will go into the pockets of the richest 1 percent. To put that into context, in 2007, the top 1 percent pocketed 18.7 percent of pretax income. In 1979, they earned 8.9 percent.
Let’s take Romney at his word. Let’s try to imagine what the world will look like if the top 1 percent earns 33.9 percent of pretax income.
In order to earn that much income, CEO compensation will soar. The financial sector will probably double its share of corporate profits. Leveraged buyouts and other short-term gimmicks will become more prevalent, and many more manufacturing jobs will disappear, replaced by low-wage, no-benefit service jobs — if they’re replaced at all. Wages for the average worker will decline relative to inflation. Most households will have to work more hours just to maintain their standard of living, but even that won’t be enough. Households will sink deeper in debt just to stay afloat. As a result, financial crises will become more frequent and more prolonged. Wall Street will thrive, creating ever more complex financial securities that prey on ever more naïve borrowers.
That’s another thing: Lack of education. Well, you can expect poverty to go up, and therefore students’ test scores will go down. But don’t expect the government to pick up the slack with more funding because the top 1 percent is no friend to high public education spending — or food stamps or Medicaid or pretty much anything that would help poor kids.
And in a world where they’re earning one-third of the nation’s income, the top 1 percent is going to have twice the influence they currently have in Congress. So you can expect plenty of corporate subsidies, especially for Big Oil. Forget about clean energy. We’ll import all that stuff from China. You see, the 1 percent doesn’t like to nurture new industries when they threaten the old monopolies.
Of course, not everyone in the 1 percent thinks or acts the same. They’re a diverse and brilliant and, in many ways, admirable bunch. But 1 percent of the population should not control one-third of the economy, no matter how impressive they may be.
You may think I’m an alarmist. Surely the future won’t be that bad.
Well, guess what: Everything I just described has been happening for the past three decades. And it all happened while the 1 percent doubled its share of pretax income.
Welcome to the future. How do you like it so far?
This op-ed was published in today’s South Florida Sun-Sentinel.