Virtual Roundtable: The Rise of Economic Inequality

Thursday, September 30, 2021
Spencer Platt/Getty Images
Jason Furman

Aetna Professor of the Practice of Economic Policy, Harvard Kennedy School

Valerie Wilson

Director, Program on Race, Ethnicity, and the Economy, Economic Policy Institute


Mary and David Boies Distinguished Fellow for U.S. Foreign Policy, Council on Foreign Relations

The rich have gotten richer as workers’ wages have stagnated, social mobility has declined, and regional economic divisions have sharpened. Who wouldn’t be angry? In this second session in The Threats to American Democracy Roundtable Series, two of the world’s leading authorities on the subject discuss.

The Threats to American Democracy Roundtable Series explores various threats to American democracy.

This meeting is part of the Diamonstein-Spielvogel Project on the Future of Democracy.


ROSE: Hi, everybody. Welcome to another session of our CFR roundtable on Threats to American Democracy. We had a great one last time with Theda Skocpol and Paul Pierson on the Rise of Political Partisanship. We have what looks to be another fabulous one today with Jason Furman and Valerie Rawlston Wilson on the Rise of economic inequality. The point of this series, to repeat what I've said before, is to understand basically what's happened to our country, why are we in the situation that we are in that is not what, shall we say, was predicted and expected by the wise men and women of elite circles of all kinds just a few short years ago? So we're exploring all sorts of various trends that have seemingly undermined the stability of the order really in which we lived across the economy, the political sphere, the society, and so forth. We did political partisanship. Today, we're doing economic inequality. Future sessions, we'll do social hierarchy. And future sessions, we'll do technology. We have a whole roster of fabulous speakers. With that... And I'll like to say that this meeting is part of the Diamonstein-Spielvogel Project on the Future of Democracy, and we're very grateful for that.


With that, to the subject. In Jerry Maguire, there's a great scene when Renée Zellweger looks on the plane up at Tom Cruise ahead of her and says, "First class used to mean a better meal, now, it's a better life." That was in 1996. In the 25 years since, the stratification, economically, of American society has only continued. Spectacular growth, but ever narrower, in many respect, distribution of that growth. And the rise and continuing persistence and increase in economic inequality is one of the great drivers of unrest in our society today. And the question that we are going to explore with our guests is what happened and why? Jason, you were the chairman of the Council on Economic Advisers, the Hakham of these issues in the entire government.


Okay, what I learned about capitalism, and it was supposed to be rising tides lift all boats and trickle down so that the money gets reinvested that goes to rich people and benefits everybody, and society was... Capitalism and democracy were supposed to go together because they both worked for the good of everybody. We've seen that democracy isn't really working that well for the good of everybody now, it seems like neither is capitalism. So my question to you, starting out, was, Was everything I was taught by my neo-liberal professors in college and graduate school wrong, and is Piketty right, that the inevitable tendency of capitalism is towards extreme economic stratification, absent some wacky external event, like a terrible war?


FURMAN: So, Gideon, I don't know exactly what you were taught, so I'd hate to criticize those teachers. I think there is nothing inevitable about the level of inequality we have in the United States. I think there's nothing inevitable about the change in inequality. And to back up the statements, just look at other countries. You have other countries with lower levels of inequality, you also have places where you haven't seen as big an increase in inequality. The increase we've seen has mostly been in the Anglo-Saxon countries. You see it in the UK, Australia, United States, you haven't seen the same type of increase in continental Europe. So I think this very much reflects a set of policy choices about how we run the economy, the bargaining power of workers, the inputs we give to children, educationally, and the way we handle it after people have made whatever money they have. And we can go deeper into all of that, but I'll leave it at that for now.


ROSE: So Piketty was right about the trend, but wrong about the driver, and it's a self-driven set of political choices by the societies in question rather than some inevitability of structural determinism?


FURMAN: Yeah, I mean, he has this very simple formula that's related to R and G, I think, that has not withstood any academic scrutiny at all. There's no one simple explanation as to what happened. It certainly doesn't come down to two letters. So his contribution was the data he assembled and the trends he documented, not that particular theory of the relationship between interest rates and growth rates.


ROSE: Okay, but you're saying there is a simple explanation, it's just a different... And that simple explanation is the choices we have chosen to make.


FURMAN: Yes. But then under that simple explanation, there are about eight bullets that I think are important. There have been big debates among people, "Was inequality caused by X, was it caused by Y, was is it caused by Z?" I tend to think it was caused by X, Y, and Z. Some of those are the traditional competitive labor markets, race between education and technology, there's skill bias technological change, we're not producing educated people at the same rate we used to, and then on the other side, the set of institutional explanation centering around labor unions power, minimum

wage, bargaining, all of that. I think both these competitive and institutional explanations, both are an important part of the story.


ROSE: And both of those are limited to essentially the Anglo-Saxon countries that you've described, because in other countries, the institutional frameworks and choices were different?


FURMAN: There are two things. One, the institutional choices were different. And two, if you look, we've seen... We had a big increase in the number of people attending college for decades that stopped in the early '70s. That increase happened a little bit later and ended up going further in especially a lot of continental European countries. So both the education side and the bargaining power side are important parts of this.


ROSE: Great, thank you. Valerie, same question to you, and point out all the things that were wrong in what he said or don't associate and take it to the next level.


WILSON: Thanks. So I agree. I think the point is that the economy does not function on autopilot, the way that the nation's income and wealth flow is determined every day by the kinds of policies that we implement. The other point that I would add to what Jason has mentioned is the issue of race in this country. This is not a monolithic society. We have people from a variety of racial and ethnic backgrounds, gender diversity in our society, in the economy. And those factors, I think, add another dimension to inequality. So even at a time when people felt like we were in the glory years of everyone had an opportunity to rise, that still was not true for a significant sector of our society, in particular African-Americans, other communities of color, women. And so even as inequality has come to the fore and maybe hit a broader segment of the population than... That we felt immune from that before, a lot of those issues were things that are... That had long been a problem and a challenge for people of color and women being able to be economically mobile in the society.


ROSE: Okay. So the next logical question, I guess, to both you, but to you now, Valerie, first, what are the... Both of you suggest that there's large potential upside in terms of inequality reduction and social improvement that hypothetically is waiting to be realized if we would only get better policies and wiser, more sensible structures to handle and address these issues. Okay, what are those things that would make our society better, more equal, healthier that we're not doing now?


WILSON: So first of all, I think the most important thing is that we make sure that people who go to work every day, the majority of people in this country, receive income through working. We need to make sure that our labor policy, workplace policies, are more equitable. I think Jason mentioned the minimum wage earlier, and we go years in this country without an increase in the minimum wage. And in that time period, the purchasing power of those dollars is diminishing. Prices don't stay the same over decades. The other issue that's important, and we're talking about the economy in the context of democracy, is the idea of democracy in the workplace, unions, people's ability to collectively bargain, to join a union and to have a say in the working conditions, to be able to bargain effectively in terms of their pay and benefits and really feel like they have a stake and a say in what happens in the workplace where people spend so many hours of their lives every week.


ROSE: Okay. Add to the wish list, Jason, what are the things... The other things in addition to the... Do you disagree with any of those, and what would you add to the wish list?


FURMAN: Yeah, I'm happy to second everything Valerie said. Education plays a big role. If you

have more education, you're more robot-proof in terms of automation in the future, you're less likely to lose your job the next time we have a recession or a crisis, and you end up with higher wages. I think more broadly, a form of inequality, which is inequality in who's working and who's not, is particularly important and troubling to me, not just that some people are getting paid more than others. But you look there's been for men a steady decline since the 1950s of the number of men who are working. For women, there was a steady increase until 2000, and it's leveled off and fallen since then. So some things to facilitate people getting into jobs, flexible workplaces, child care, paid leave, all of that, matters more to women, but it matters to both men and women. And for men, just things like investing in infrastructure and the like, creating jobs for a set of people who are losing jobs in another set... Part of the economy, I think, is an important part of that, getting at the inequality of who's working and who's not working.


ROSE: Okay. Great. So we have problems, we have solutions, or at least policies that would improve the problems and make things better. Now, the question becomes why haven't they been adopted, why could they be adopted, are they actually real solutions and so forth? We'll tackle them in turn. First, are they real solutions? Presumably, since you guys know all this stuff, there are examples you could point to for all the various things you described in which some country somewhere or some state somewhere is doing this, and it's actually working, so we know these aren't just pie in the sky I would like this to be something I throw money at, but an intervention that has real evidence behind it, that if you pay the money for this thing, it'll work. Is that correct? . . .Are we basically saying, "Just go to Denmark or... And Sweden and copy them," or Singapore or God knows whoever? Essentially, all the things you're talking about, somebody has tried and done well with, correct? Both of you?


FURMAN: Yeah. I... Yeah. A lot of this is not that novel, high tech, brilliant and new thing. It's, I think, reasonably well understood.


WILSON: Yeah, I also don't think that these are new or novel ideas or even that we need to come up with new and novel ideas, because they are things that have been done before and have been effective to some extent. I will refer back to the issue of unions and collective bargaining, and you look at longer-term trends even in this country, going back to the mid 1940s when unionization began to decline, that also is consistent with a period where we start to see a larger share of income going to the top 10%. So it's clear that there was some, at least, corresponding outcomes to people having less power in the workplace and getting less of the income that was being generated in the economy.


ROSE: Great, thank you. One big thing used to be said against the kind of large social welfare state that would presumably be implied by a lot of the policies you guys are talking about, was the cost. It now seems that the notion... Not that everybody is a modern monetary theorist now, but the fears of inflation, the fears of spending too much money and crashing your economy seem less significant now. As I follow the debates, the inability to gin up real scariness about the $3.5 trillion bill is astonishing to me. Whether it goes through or not, the point is, a generation ago, even a decade ago, this would have been politically impossible entirely, just because we wouldn't have thought conventionally, you could spend that kind of money without crashing everything. Is one of the reasons we haven't done programs like the ones you're talking about in the past, a sense among mainstream economist types that we couldn't afford it, which allied with the political conservatives, and is there now a different understanding about the possibility and the need for spending, which is allowing even the mainstream economists, and let's say the Democratic Party, to be much more

progressive than they used to be, or is that just politics shifting?


FURMAN: So I'd like to think it was a piece I wrote for you when you were editing Foreign Affairs about the deficit and how you shouldn't be scared, and everyone read that, because it is the most influential publication. It's gone downhill a little bit in the last six months or the year. But no, I think thinking on deficits has changed, I think it's changed for good reason. For me, it's not modern monetary theory. Modern monetary theory claims to be a timeless truth. For me, it's not a timeless truth. It's just where we are right now in terms of interest rates and the balance of supply, of saving demand for investment and what opportunities that opens up.


I do want to sound a bit of a caution. E-even if you're willing to run a larger deficit, it gives you, let's say, 1% or 2% of GDP, more space to do things. That's probably not enough to do everything, certainly that I want, I suspect that Valerie would want to do. Then you can tax high income people more, that can give you a little bit... That can give you more space as well, and I think we should max out on that. That still doesn't give you the type of society I'd like to have, the type of society I think many want to have. And so at some point, taxing the bottom 99% more, doesn't need to be all the bottom 99%, it might be the 50th to the 99th percent, is going to have to be part of the answer. And how we get to that in the United States, I have no idea. You have a conservative government... Conservative governments in the UK will raise the VAT in order to give more generous National Health Insurance to people. In the United States, neither party can come close to anything like that. So I think we can buy ourselves some more room by worrying less about the debt, and that's good. We can buy ourselves some more room and more high income taxes, but at some point, if we don't, if we're not willing to do what every other country does, which is tax everyone a bit more, to give everyone a bit more, it's going to be hard to make progress.


ROSE: Got it. Valerie, why are Americans so resistant to ponying up for communal social goods the way most other modern capitalist democracies have come to be?


WILSON: Yeah, I think there's something really interesting about the psychology of paying taxes and what we're paying those taxes for, or what this additional money is for. There's a notion about deservingness or worthy kinds of spending that often has to do with whether the beneficiaries of those increased taxes are people who deserve that or have earned that. I think the problem with that is that we don't consider all of the ways that we already give a lot of money to folks who maybe don't need it as much in a lot of other ways. We talk about raising taxes, but we also have to consider that a lot of money is spent in terms of things that we call tax expenditures through various kinds of tax credits that, I admit, would be very unpopular to get rid of.


The mortgage tax deduction is one that often comes up as not being as progressive as it could be, but I think that is the challenge to sort of using our tax policy and restructuring of the tax code in this country so that it is more progressive than it is. It is, essentially, a progressive system, but thinking about all of the various pockets where we could get additional revenue from if we simply shifted some things around, again, within the context of how visceral a reaction people have to paying more taxes to support what we term as welfare programs for people that folks feel are undeserving, they just need to work harder. That, I think is a bigger challenge than just the math involved with figuring out how to make everything balance out.


ROSE: Thank you. How much... And this is to both of you, how much of the rising inequality that has occurred over the last generation has been deliberately engineered by economic elites to reap

more of the rewards from what's been going on? There's an article, great article by Fiona Hill in the new FA that talks about the irony of the US experience with post-communist Russia in which we went... We thought that would converge with them coming to us, and instead we've converged with us becoming like them. So consider this the privatization and oligarch side of the question. Have American oligarchs and their help mates inside the system rigged it so that they cream off the good things from the new economy?


WILSON: Yes. [chuckle] That would be my quick and simple answer. I think that that's pretty obvious. I don't think that human nature has changed so much that people are suddenly angrier than they were, historically. I think that we've gotten more savvy at thinking about how we use the political system and change laws to make it easier to sort of skim off the wealth in this country. But yes, by all means, I think the trends in growing inequality, as we were saying earlier, are directly connected to changes in policy.


ROSE: Jason, American Oligarchy for 200.


FURMAN: I cannot... To use the word oligarchy, but that might be my failing, rather than a failing of the hypothesis, tend to talk about the policies I like and don't like. If I were trying to understand the politics that brought us here, certainly the political system magnifies the power of wealth. I think a lot of that's not even just through campaign contributions. You could cut campaign contributions in half, and if somebody comes into your office and they say, "Hey, I'm from a business that creates a lot of jobs in your district, and if you do this, you're going to have fewer jobs in your district," you're going to find that person... That sort of sounds credible when someone is saying something like that. I certainly think another part of all of this, which is linked to the rise in inequality, it's probably the fourth biggest factor, but it's a non-trivial one, is just the increased monopolization in the economy, the rise of concentration in more businesses. And certainly that's a place where the law has become increasingly friendly to incumbent businesses, increasingly unfriendly to the businesses that don't exist yet, that might grow up to challenge those incumbents and has just become more permissive about both mergers and behavior in a way that includes an increasing bargaining power vis-a-vis workers. So I think there's a number of places where you see this in our economy.


ROSE: Okay, I used to tell authors of simple four-part structure for an FA article, identify a problem, say the great solution, then explain why that solution isn't the actual policy, all the things keeping it from being policy, and then part four, okay, so given that, now what? Do we just have to live with what we have? You guys have just... Having described all the wonderful things we could and should do to make our society better and more equal and healthier, and then listed all of the reasons why there's these big impediments in the way. Given all the institutional, political, cultural, historical and other kinds of blockages in the system, are we so sporadic at this point as a body politic that none of the possible goods that you're talking about will be... Collective goods will be realized because we're just too inertially stuck to do it, or is the negotiations going on right now, the start of a new progressive era in which all the things you're talking about will emerge, get funded a little bit, be so obviously successful that they'll be doubled down on, and we'll be like Sweden in 25 years?


WILSON: No, go ahead.


FURMAN: Yeah, the one premise you had at the very beginning, Gideon, and I didn't want to be

rude since I felt you invited me to help solve the democracy problems you're struggling with, I'm not sure that's solving all the economic problems I'm worried about is going to solve the democracy problems you're worried about. I think some cases, it might even make the democracy problems a little bit worse, so I'd like to think that that's not the case, but take something like the Affordable Care Act. That, in some ways, was the type of thing everyone was looking for. There is going to be winners and losers from a capitalist economy. We want to protect the people who don't do as well in it, reduce inequality, give people more flexibility, etcetera. That wasn't hugely popular, and it's for six years, it became more popular when President Trump tried to take people away from it... Take it away from people. But to some degree, when you had something like the Affordable Care act, you ended up with somebody at the 40th percentile of the income distribution wondering why someone at the 38th percentile of the income distribution was getting something they weren't. And there's evidence that in country states that are more divided along ethnic, racial, and other lines, that the level of common feeling and desire to reciprocally benefit others isn't as strong a political force.


And so I think some of these things would be popular and would help. I think some of them might be more polarizing and might contribute in a very small way to the democratic problem while helping in a big way on the economic problem, so I'd still advocate doing them... So not everything we're talking about is popular, not everything we're talking about is going to solve our democratic problem. The very last thing I'd say is that, part two, I think it was in your FA or your part three, why it isn't happening, what all the obstacles are, I wouldn't be 100% negative. The response to COVID last year, for example, was enormously progressive on the economic side. As a result, the poverty rate actually went down last year. After tax inequality fell, even though it was the most vulnerable people that lost their jobs. We did, not a perfect job, could have done better. I'm sure Valerie and I both have things we would have done differently, but broadly speaking, we did something right. I think this year, this is largely talking about something right, some of the highest priority things on my list are under consideration in Congress right now. So I think we can make some progress. I think we shouldn't be totally defeatist about it, but I don't think we should kid ourselves that it's going to solve our democratic problems. In some cases, it may even make them a little bit worse.


ROSE: Valerie. Thank you, Jason. Valerie, how much progress is possible?


WILSON: No, I tend to lean towards trying to be more optimistic that we will make some progress on a lot of these things. At the same time, I'm very realistic about how things actually happen and the time that it takes really to make change. And even change doesn't happen in a consistent forward motion. I think that is a positive thing, that coming out of the pandemic and the policy interventions that were put in place there, raise the bar a bit in terms of things that we can do. The expanded unemployment insurance benefits were extremely positive, had positive outcomes in terms of reducing poverty. The expansions to the Child Tax Credits, also were very effective at reducing poverty along with the economic impact payments. So those things really put some things on the table for discussion that maybe would not have been a part of the discussion or would not have easily been inserted into that conversation without having come through the crisis and having to do those things at that point. At the same time, I think what Jason is alluding to is the divisiveness in this country now, along the lines of race, class, obviously political affiliation, and all the insanity and misinformation out there about what various measures would do or wouldn't do or who would benefit from them, always create a challenge.


In addition to the fact that I think, politically, people often will capitalize on those divisions to do

things that are not necessarily good economics. So I think politics and racism, sexism, always come into play when we're trying to move the country forward as a whole, because we have not healed of those divisions.


ROSE: Thank you. Before I throw you to the wolves... Sorry, before I invite discussions with the rest of our study group, I want to give you one last one. There's been so much agreement between the two of you. Clearly, you share a whole lot. You also obviously don't have a lock on all everything. What would your smart critics... Each of you must have friends and colleagues who are just as smart as you, but have different political viewpoints, what would they say about what you've just said, what would their strongest criticism of your position be? Jason, you first and then Valerie.


FURMAN: I think there's two types of criticisms. There's an interesting cleavage in the Democratic Party right now, where you have Bernie Sanders focused on healthcare more for the middle class/upper middle class, expanding Medicare benefits, making them more generous for people that are decently well off in the grand scheme, and you have Speaker Pelosi focused on low income. So one set of arguments would be a political set of arguments that I would always put more of the dollars towards lower income households. For me, Medicaid for somebody that has no health insurance at all, that is below the poverty line and is not eligible, we have to do that before we make better dental benefits for an upper middle income senior. One argument against me would be a political one, and it would be, But Jason, if we do what you just said, you're going to be politically unpopular, you're not delivering benefits to... Chuck Schumer wrote a whole book where he kept at this mythical family called the Baileys and the like... And that that's the... That's a political mistake, even if it's well-intentioned.


There's a set of conservative arguments that the trend in thinking, I think this is true in economic research, you see this among development economists, for example, is more towards unconditional cash, and that cash is just a good solution to these things, but there's a conservative critique about what that does to work incentives and participation in the workforce, and then finally, there's a long-standing, and frankly from my perspective, mostly tiresome debate about whether the tax increases to fund all of this would do more economic harm than any of this would do benefit. So those are some of the types of arguments coming from different directions.


ROSE: Valerie. Thank you. What would you add? What critics would you add?


WILSON: I think probably the main criticisms would be that... The kinds of policies that I would like to see put in place that I think would be effective at reducing inequality, we talked about it earlier, the cost. We can't afford to spend all that money, we can't just spend, spend, spend, on all of these things without having a clear plan for how to pay for them. I think the other challenge or issue is, is that if we provide benefits and things that are overly generous, then people are not motivated to invest in their human capital or to do things that would make them more productive. I obviously don't agree with that view, but I think that is something that often gets raised when we talk about providing people with some basic kinds of economic supports that are necessary for their broader well-being. And I think also, there are, maybe not so much now, given the events of 2020, but a fair amount of people who would disagree about how strong a role race plays in determining economic outcomes, I think there are still folks that feel like, this is a meritocracy, and if you work hard, you can get ahead. Again, I don't disagree, I'm talking about what my critics would say obviously, but I would hope, again, coming out of the events of 2020, the death of George Floyd, Breonna Taylor, Ahmaud Arbery and many others, that there is more recognition that we are not a post-racial



ROSE: Thank you both very much. Let's open the discussion up now to questions from our study group members.


SPEAKER: We will take the first question from Robert Lifton.


LIFTON: Hi, I wonder if whether the real problem is that inequality is built into the human genome. I read in the New York Times, which is never wrong, that in China, 1% of the population controls 31% of the wealth. As compared to here, where 1% of the population controls 35% of the wealth. So in a totally different system, you have the wealth concentrated in a small group of people, and maybe what we can do is ameliorate some of the situations, but not change the basic equation where wealth ends up in the hands of a few.


ROSE: Jason, you wanted to take that? Go for it. Let's take another question, too. Jason, you want to take that?


FURMAN: I may answer this, just... As I said at the outset, there's a lot of variation in inequality both over time. There's more today than there was 40 years ago, even though our genomes are roughly the same, and there's a lot more inequality in, say, the United States than there is in France. Now, you may like the United States, you may like France, but I wouldn't put this down. Now, I think my goal would not be absolute equality. I agree, people have different talents, different tastes. Some people like more leisure time, some people like to work harder. We have a deep-seated notion that If you do contribute a lot, that you should be able to keep some of that success. I don't disagree with any of that. I think that's pretty deeply hard-wired, but there's a wide range of inequality that are compatible with that, and I think we're towards the upper end of that range right now.


WILSON: Yeah, I would say that I don't think it's a matter of, again, everyone being exactly the same, I think the issue and the challenge with inequality are the barriers that get erected that prohibit some people being able to reap the full benefits of what they can bring and contribute to a society. I think that's a bigger problem for inequality than just the fact that there are different outcomes across different individuals.


SPEAKER: Alright, we'll take the next question from Talton.


TALTON: Thank you everyone. Gideon, good to see you again. And with all respect to Jason and Valerie, who I have enormous admiration for, you are the big Hakham that I attribute to this session. My question for both panelists is, what do we think about the role of geographic mobility in exacerbating or reducing inequality? For most of our country's history, when people would pack up their families and move to places with more economic opportunity, that's how the West was settled, that was the Oregon Trail, that stopped, or that reversed around 40 years ago, which is... Seemed to exacerbate some of the situations we're seeing in Rust Belt states. And I'm wondering with the recent rise of work from home and people, again, moving into these almost forgotten cities across the rest of the country, are you optimistic in seeing that trend reverse itself, and do you think that that might address some of the topics you're talking about in terms of inequality?


FURMAN: So, yeah, people get paid in part because of their skills, in part because of the skills of the people around them, and the skills of people around them are... Spill over on to their skills, and

in part because of labor power and bargaining and the like. So we saw, for about 150 years, from around 1850 until 2000, and might have started earlier, we don't have data from earlier, convergence and more people moving to places where they could make more money, either because there was untapped land and they could get it really cheap, or because there were other skilled people.


In the last 20 years, you've seen divergence... Sorry, this is at the level of State, you've seen divergence where higher income States are seeing faster economic growth than lower income States. And places like New York, Boston, Washington, San Francisco, there, you can make more living in those. You can make more in almost any job that you have living in those places, but they're really expensive to live in. Now, before we were talking about oligarchy. One way that oligarchy manifests itself is the people who already own property in those places don't want their property values to go down, quite understandably, and so they're making it harder to build and harder to move to those places. So I think things like zoning reform, that enable more people to move to cities where they can make more money, would help a decent amount. Now, your question of will work from home and some of the smaller cities starting to rise, I think I'm a little bit skeptical. I continue to think that the greatest outpourings of creativity still require frequent face-to-face interaction, and that there's a reason that things are clustered in local areas, and that's not going to change with Zoom, especially hard to initiate new relationships on Zoom. But we'll see. No, I don't think anyone knows the answer to your question.


WILSON: Yeah, I think it's a really interesting question to considering why people are less mobile now, when it seems that perhaps they should be more so with all of the technological developments that we have. But one example, one thing I will raise with regards to the impact or relationship to inequality is at least in terms of... I do a lot of studying of racial wage gaps, and at least in terms of historically where... About the great migration where a lot of black workers moved from Southern agrarian economies to the Midwest where there were more factory jobs where they could get better jobs that are more likely to be... Have an opportunity to join a union, at that point in time, the wage disparities in the Midwest were a lot smaller than they were in the south or even some other regions of the country. But over time, as the general trend in inequality has increased, there's less opportunity for people to move somewhere else to get more equity in terms of their wages. And so whereas those opportunities used to seem more obvious and more available throughout the country, at least in terms of those racial wage disparities, people are facing, essentially, the same kind of gap regardless of where they are in the country.


ROSE: Okay, please keep your questions coming guys. We got to... If you want to get them in, we need people to get questions in. I will take this next one because I've got a point that, Jason, I'm glad you talked about the trend changing in 2000, because one of the things that I've been thinking about our discussion that I'm still a little bit unsure about is a lot of the stuff we've talked about is kind of eternal, death, and taxes, and so forth, and poverty, and yet something seems to have changed, and I'm still not entirely sure what it was, that how did the oligarchs learn the game to manipulate it better in 25 years, or why did racism and sexism increase and so that people are now getting more, or why have things gotten so much worse over the last generation when a lot of the factors we've been talking about are simple? One obvious thing that has changed is technology, and there are many who would say... And globalization. And so there were many would say the trends you're talking about are growing because of globalization, that's caused things to go away, and technological change that has also caused things to go away and concentrate. And those issues are beyond po

much about either of them. Are the people who focus on those kind of things just wrong?


WILSON: No, I don't think that they're wrong to raise those issues, and I think that's an important part of this discussion. We're talking largely about inequality in the context of United States. We're talking about American democracy, but we know that the economy is much more global now than it has been historically. So conditions and things that happen in other parts of the country do have an impact on what's happening here. Our trade deficit has an impact, things that are going on in different countries in terms of currency has an impact on the US economy. So I think it is a part of the discussion about what happens in the US economy, the US labor market in particular, when there is competition to produce goods in other countries where labor costs are cheaper, the cost of moving a company to another location, the tax benefits associated with that, so there is a broader universal sort of global scheme and economy to consider as we think about the kinds of policy changes that we need to be implementing domestically.


ROSE: So, Jason, does the structural and economic, the global and technological context, increase the head winds against all the things you want?


FURMAN: There's two questions. One is what's caused the rise of inequality, and that rise started around 1980, give or take. And then the second is what's changed our politics, and then is one of them causing the other. On the former, the economic side, I think we do have a better understanding. Things like the slow down in college attendance that started in the early 1970s, affected those workers in the 1980s, 1990s, etcetera. Some of the institutional changes like vis-a-vis labor unions and minimum wage, those were quite big in the early 1980s, so where... And then globalization, what role did globalization play?


I frankly think for a long time, we had globalization with countries with similar wages to the United States, then we had globalization with China where it was with a set of people with very different wages with the United States. I think that second phase probably contributed to inequality, but there was a lot of rise of inequality in the two decades before there was very much trade with China. And then on terms of technology, there's certain amount of evidence that technology was basically increasing pretty steadily in a pretty similar way, and what became different was the degree to which we trained people to use and benefit from that technology. So I think a lot of our problems are less that the technology landed on us, and that we didn't prepare ourselves and our workers to thrive with that. Now, in terms of the politics, I just don't know on the political side.


ROSE: That's okay. This is fascinating. Okay, so I'm honestly surprised that the exogenous factors play so little of a role in the analysis for you guys, not that... That's why you're the guests, obviously, but it makes the puzzle of our self-inflicted wounds even greater. If you were in the grip of some broader structural forces that you couldn't possibly control, then you could sort of understand policy inertia, but if what you're saying is, we've done the socio-economic equivalent of take Ivermectin rather than a vaccine and why should we be surprised we're not getting better? That still makes it sort of puzzling to me why we are... Why things changed?


FURMAN: Yeah, I think that's an interesting... What do I think exogenous was an important part of this? No, I mean, I think that also goes back to a little bit my starting out with the comparative at the beginning and how different countries have had different trajectories, but globalization exists everywhere. Sweden has globalized even more than the United States has and is much more global than the United States is, but it has different politics, different policies and the like. So yeah, I think

this is less... I think I'm going to stick with the position I started with in all of this, Gideon, and say this was more of a choice than a thing that happened to us.


ROSE: Valerie is nodding too. Okay, so let's go back to the queue. Okay, question.


SPEAKER: We'll take the next question from Jennifer Whitaker. Ms. Whitaker, please accept the unmute now prompt. There we go.


[overlapping conversation]


WHITAKER: Even though I was at the Council on Foreign Relations [chuckle] for a long time, I think it's very hard to get a grip on inequality globally, and it's very not hard to get a grip on inequality in the United States. And the politics of it clearly started with Ronald Reagan in the '80s, who told everyone that government was bad and that people should do their own thing. And we can see that playing out in the Trumpist revolution among a lot of Republicans, and with this very strong mental image or mental... This idea, very strong in a lot of Americans, that was really propagated during the '80s, '90s and '10s, by the descendants who thought that Ronald Reagan was the most successful and best president that was, and he really did change the way people thought in this country. The inequality of income, obviously, this is... Everybody here knows that, it began with... In the '80s, and it's gone downhill, not serially, perhaps ever since. So it's all about money, it's all about the tax system, and it's all about the idea that people have in their heads about what is good, what is great, what is right, what is wrong, what is good in terms of how people get ahead.


ROSE: So actually, I want to build on Jennifer's point, it's all in people's heads. I've actually become much more convinced to this myself the older I've gotten, as I've watched ideological waves go through the society at different times, and everybody thinks this, and then suddenly everybody thinks this, and sometimes it's backed up by evidence. And sometimes it's just sort of arbitrary shifts and drift, but it's clear that what we think collectively and individually does matter because there's no objective realities that force us to do X or Y. So Jason, you had said earlier that we're sort of at the bottom of a national trading range of inequality. We've been here at better, we've been at worse kind of thing, we've been more equal before, we've been this unequal at sometimes in the past, but we're kind of tending to the bottom of the range.


Are we in the midst, over the last couple of years, the pandemic relief, the later pandemic relief, the infrastructure bill, the potential new programs in the Reconciliation Bill, have we not just bottomed out during the early pandemic, but started a trend back in which there is a new consensus on the need for broader social spending, for broader collective goods, and that in retrospect, people will say, you timed this session a year or two too late because you already were at the upturn rather than the back turn? Valerie, to you first then Jason.


WILSON: I think the timing of our ability to really make some changes has been assisted by the pandemic, and as I was saying earlier, the things that were quickly passed because we had to do those things in a crisis, and the idea that that opened the door to other possibilities or opportunities to do things that could be effective. I think the point where we are on the inequality curve and the magnitude and the number of people that have felt the impact of that over the last 30, 40 years also builds momentum in terms of how democracy works, what people will vote for and demand and request.


We have much higher public approval of raising the minimum wage, than there appears to be political will in Congress to actually do that, interestingly. We've seen changes in a number of States with regards to even how people are handling criminal justice change. We went through a tough-on-crime phase in this country. And now things seem to be shifting in the other direction there as well. And I think another issue that's affecting our ability to have some more willingness to invest in social programs is the climate.


That's something that literally affects everyone. And although there are a lot of political discussions and a lot of naysayers about climate change, we all recognize that the climate is impacting all of us, the fires, the storms, there should be 100-year storms that seem be happening every year, that that's something that we really need to get a handle on. So I think there are a number of things that are helping to shift the momentum in that direction, but we still battle against what people think in their minds in terms of what's necessary. I'll stop, but I want to say, but as economists is like our constant battle, we deal with the numbers, we deal with the facts, and no matter how many graphs you put up, tables you display with the numbers, it's really hard to overcome what people just feel or believe about what's happening in the country.


ROSE: Thank you. Jason. Has the cycle bottomed out and started its trend back up?


FURMAN: So I'd distinguish between the level and the trend, and the level is what actually matters. If there's a lot of inequality or low income or whatever it is, that's what we care about. What gets attention and generates discussion, though, is the trend, because that's news, there's more of it this year than there was last year, that you get attention. It was high last year, it's still the same high this year, but has it gotten any higher? It hasn't. I have a hard time predicting the trend over the next 20 years. I think it is possible that it could level out. I think it's possible inequality could decline a little bit. If you look just at wage inequality, not wealth, but wages, that started declining around 2015, and declined from 2015 up until the onset of the pandemic, mostly attributable to very low unemployment and a different way of conducting macroeconomic policy that... Largely on the part of the federal reserve, that you saw both in the last years of Obama and the first years of Trump. And something like that change in macro policy, I think is actually potentially more stable and durable, though it depends on what happens with inflation and all that. Whole new session, we could do on all of that.


So I think there might be some continuity on the macro policy, that that might make a real difference in terms of earnings inequality that translates up slowly into other forms of inequality, like income, including capital income and wealth. So in terms of the policy stuff, I think this is all just lurching back and forth, and it's lurching in a direction I mostly like right now, but I'm under no illusion that this is the beginning of a progressive era. I think anything you do creates a reaction, so I don't know what's going to happen to trend. I do think the level is almost certainly going to be too high 10 years from now. The increase was so large that even if it levels off, even if it falls a little bit, I think it'll still be too high. So my worry is that there'll be less discussion because things will be moving in the right direction, but it will be a chronic problem rather than an acute and growing one, and chronic problems can be neglected and be neglected to our peril.


ROSE: I think that's a wonderful note on which to end. Thank you both. One of the things we always do with the council is end on time. This won't be any different. Thank you both. Thank all of you for participating and great subject. I wish we had better answers, but it's a really interesting discussion. And hopefully we will revisit this question in a few years and see where we are. Thank

you both.

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