CSAD: The Doctor and the Guard

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Yesterday evening, members of the community gathered in Rosse Hall for the inaugural event of this year’s Biennial Conference sponsored by the Center for the Study of American Democracy. Addressing some of the fundamental background on the conference’s topic of economic inequality was Douglas Holtz-Eakin, a career economist who has served as Director of the Congressional Budget Office and Chief Economic Policy Advisor to John McCain’s 2008 presidential campaign. His mission was clear from the outset: lay out some of the basic questions underpinning our discussion about what drives inequality, whether or not it truly matters, and what, if anything, we should do about it.

Bold assertions and hard questions were abundant in his presentation, all deserving of serious consideration. The presenter probed issues ranging from empirical to idealistic; everything from the irrelevance of the wage gap to the myth of the American dream. Is the poverty line an appropriate and accurate metric for measuring economic strata? Is economic inequality a new problem, or just an old song played by a different instrument (namely the media)? Most importantly, leading into a conference on inequality, Mr. Holtz-Eakin asked whether or not we can in fact have a society of perfect economic equality, and whether or not this would even be preferred. The answer does seem to be no, especially when we consider the relevant concerns of competitiveness, economic growth and income distribution. As he put it: when we need to make value judgments about service providers in our society, who are we going to pay more: the doctor or the security guard?

The raw numbers also shed light on some troubling facts. Mr. Holtz-Eakin showed that as you continue to break down the numbers on wage distribution, specifically taking income and adjusting it for factors like taxes and multiple-member households, you see a general flattening out of increases in wages – with the exception of the top 20%. Solutions, too, seem either elusive or general; Mr. Holtz-Eakin emphasized the importance of education as well as immigration as a job creator, but each one in its own right seems worthy of its own Biennial conference. Add to that the Congressional Budget Office’s (CBO) predictions for a minimum wage hike (i.e. 500,000 less jobs with a federal wage of $10.10) and, and it’s not a pretty picture.

There still are, however, some promising ways forward. Mr. Holtz-Eakin placed particular emphasis on vocational training and investment in early childhood intervention, and strongly supported the Earned Income Tax Credit as a stimulant to economic growth and a way to reinvigorate the national economy. Also, despite the CBO’s predictions about the minimum, the Economic Policy Institute has projected that a bump up to $9.80 (as offered by the Harkin-Miller proposal) would result in a net-gain of 100,000 jobs and add $25 billion to the GDP during the implementation period. Policy changes that focus on the long term, said Holtz-Eakin, and on the inequality between where we are now and where we might be in the future, are going to the most effective strategies to stop the bleeding in the economy.

That approach, for me, represented an odd tension of principles in the discussion on how to move forward. Mr. Holtz-Eakin’s focus is clearly on growth across all sectors, and would even favor entitlement restructuring to make that happen. Yet at this moment, the wealth gap is as wide as it’s ever been, and Mr. Holtz-Eakin’s policy would be to gradually raise the tide that lifts all boats, without trying to salvage the many that are already underwater. Certainly the two causes are interrelated, but with the chasm that separates the rich and the poor getting wider and corporate profits at an all time high, there must be more we can do to alleviate the conditions of the working poor in the short term without neglecting our future.

This divide between the long-term growth of our economy, and the more immediate evaluation of our priorities as a society, presents one of the bedrock questions of the problem of economic inequality and of the basis of our democracy. The difference were crystalized during the question and answer period of the talk, during which Professor of Political Science Fred Baumann stood up to speak. His question was whether or not, in the face of growing concern for these problems in the public eye, we must sometimes do what may be economically unwise for the sake of what is politically (and perhaps morally) necessary. Holtz-Eakin’s answer: good economics must take emotion out of the equation.

Go back to the analogy of the doctor and the security guard for a moment. I think it reflects in crucial ways the distinction between these means of addressing such a pervasive and intractable issue. In the struggle for “equality,” real or imagined, whom do we value more? Is it the policy doctors, who observe, provide diagnoses and administer their prescribed remedy? Is it our representatives, governmental or otherwise, who we task with the security and protection of our basic liberties and rights as citizens?

Whatever the answer, the doctors are in for the next few days. I say we get a second opinion.

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