Ignorance Fills the Income Gulf

[JI7]

This article is from 5 years ago but i thought it was interesting.



At a recent Washington social gathering in honor of graduating seniors heading to elite colleges, the subject turned to the new tax cut. "Isn't it too tilted toward the wealthy?" one parent asked. Another retorted, "Why give tax breaks to the poor? All they will do with it is buy more Cokes or another pair of Nikes. We need to stimulate investment to create new jobs and wealth."

This is, of course, exactly the rationale the Bush administration used to justify the tax cut. Yet the remark is deeply troubling, in ways that go beyond the usual policy debates. As economic policy, it is simply wrong-headed. The economy is well below capacity and needs demand, not investment stimulus. An extra $30 billion a year in the hands of millions of lower and middle class families would buy a lot of Cokes and Nikes. Meanwhile $30 billion in the hands of a few investors may eventually lead to more jobs and investment, but that could be a long way off.

But are the people at the party right about what plain folks want? Perhaps they want better health insurance - or just some health insurance. They might need to spend the tax break on college for their kids. Indeed, in-state tuition at many state universities is going up by 10 to 20 percent in just one year. Yet these facts are simply not part of the current political debate. In part this is because those who frame the debate find these facts almost impossible to imagine. It's not that they are mean-spirited; on the contrary, they are well-meaning people who give generously to charitable causes. It's just that they find it hard to believe an extra $500 or $1,000 for the typical American family could make a real difference.

Ultimately what drives these attitudes is ignorance about how others actually live, a gulf between the haves and the have-nots in American society that seems to widen every year. It is not only ignorance on the part of the haves, however, that keeps this system in place. A surprising number of have-nots expect that they, or at least their children, will eventually be attending parties just like this one. An October 2000 Time-CNN news poll showed that 19 percent of Americans thought that they were in the high income group that would benefit from proposed tax cuts - defined as roughly the top 1 percent of the distribution.

The strong belief that the United States is the land of opportunity helps explain why support for income redistribution is low in America compared to Europe. A study by Roland Benabou and Efe Ok of Princeton University, for example, finds that the majority of Americans believe they will be above average (mean) income in the future, a Lake Wobegon fantasy if there ever was one.

more at...........

http://www.brookings.edu/opinions/2003/0623useconomics_graham.aspx

[ThoughtCriminal]

1. They should take that survey again

The 2000 Time/CNN survey said more about how people project themselves in polls than about real income status. They also tend to overstate things like charitable giving and church attendance while understating how much alcohol and drugs they take.

Also, the future looked very different a month before the 2000 election. Alsmost everyone was optimistic about the future - and looking back at the Clinton years - had good reason to be. I bet the same survey today would bring a different result.