America's Inequality Trap

My latest solo-authored book is a collaboration with the University of Chicago Press. With a February 2020 release date, this book marks my most recent contribution to the study of economic and political equality. You can find more information about the book, including chapter summaries, short excerpts, online appendix material. and data and replication materials below.

The book can be purchased directly from the press or from Amazon if you prefer.

Summary

The gap between the rich and the poor as big as it's been in the past century. While by most measures the economy has been improving, soaring cost of living and stagnant wages have done little to assuage economic anxieties. Conditions like these seem designed to produce a generation-defining intervention to balance the economic scales and enhance opportunities for those at the middle and bottom of the country’s economic ladder—but we have seen nothing of the sort.

I argue that a key reason for this is politics. Rising inequality changes politics in several key ways that make combating inequality harder, thus creating a difficult to escape trap. Along the way, I address a series of important questions about how economic inequality and American politics shape and respond to each other over time. I ask how public opinion shapes distributional outcomes and how the public responds to rising inequality. I assess the effect of inequality on elections and how who controls government influences the gap between the rich and the poor. And I address the two-way relationship between the policymaking process economic disparity.

I find that, when a small fraction of the people control most of the economic resources, they also hold a disproportionate amount of political power. Among other things, the rich support a broad political campaign that undermines public and policymaker support for policies to reduce inequality. They also take advantage of interest groups to influence Congress and the president, as well as state governments, in ways that stop or slow down reform while at the same time generating policy changes that further contribute to their economic advantage. A key implication of this book is that social policies designed to combat inequality should work hand-in-hand with political reforms that enhance democratic governance as well as efforts to fight racism. A coordinated effort on all of these fronts will be needed to reverse the decades-long trend.

Contents

This chapter discusses the 2016 presidential election contest between Donald Trump and Hillary Clinton as a continuation of a pattern in which rising inequality feeds back into politics in ways that maintain or increase economic inequality. The core arguments of the book are summarized, including a brief description of an inequality trap and the types of feedback between inequality and politics that a trap implies - in elections, public opinion, and public policy. Some of the key findings in the book are quickly summarized, and their implications are briefly discussed. The chapter concludes with an outline of the remaining chapters in the book.

This chapter has four main goals. First, the concept of an inequality trap is introduced and some of the empirical markers of such a trap are discussed. Second, I review previous research on the political underpinnings of economic inequality and discuss several potential theoretical linkages that could create feedback from inequality to the American political system. Third, I discuss in very general terms the analytical strategies used later in the book. Finally, I present preliminary tests establishing the first key requirement of an inequality trap - inequality that feeds back on itself to perpetuate inequality.

This chapter begins with a discussion of thermostatic public opinion and dynamic representation, which I see as the two core components of a modernized median voter model. Discussing these two models and then applying them to income concentration provides the foundation for a potentially self-correcting feedback relationship between public opinion and income inequality. Such a self-correcting relationship would undermine an inequality trap. I then introduce a series of arguments that suggest a breakdown in the self-correcting inequality-opinion relationship. Many of these arguments are connected to anti-pluralist theories and suggest that as income is concentrated in the hands of a few and political power is concentrated in those same hands, mass preferences are likely to shift against the very policies that could level the economic playing field. I then present an analysis that combines macro level time series and individual-level data. I find evidence of a self-reinforcing opinion-inequality link among a subset of Americans. For these people, rising inequality appears to trigger less support for the very policies that would reduce income inequality. One of the key markers of this group is racial resentment. Those who don't respond to rising inequality in a self-reinforcing fashion basically don't respond at all. There is no public backlash to rising inequality, meaning that the public provides at best a flawed backstop against extreme levels of inequality.

The question I turn to in this chapter is whether inequality feeds back into politics by shaping election outcomes. Elections, in this chapter, are another possible pathway for inequality to shape politics in either a self-reinforcing or self-correcting pattern. In the previous chapter the focus was on public opinion. Many of the same factors that connect opinion and inequality might generate a similar feedback effect between inequality and election outcomes. By shifting the focus to election outcomes and voting behavior I ascertain whether the attitudinal patterns discussed earlier also reveal themselves in political behavior. In short, they do. As inequality rises, Republicans perform better electorally, which creates a dynamic that serves to reinforce inequality.

This chapter shows that rising inequality affects the U.S. policymaking process. The shifting electoral fortunes of the parties and (to perhaps some extent) changes in public preferences are only part of the reason that policies exacerbating inequality have been successful even in the face of rising inequality. How America's policymaking institutions aggregate preferences and process input from competing interests also plays a prominent role in the spiral of inequality. I argue that inegalitarian policy change can be at least in part explained by a combination of factors, ranging from unequal political voice to differences in the organizing strategies and success of the left and the right, to the rise of a neoliberal Washington consensus on many aspects of economic policy. Importantly, the factors that drive partisan agreement on inegalitarian policies are more likely to be in place as economic inequality rises. The core message is that U.S. institutions contribute to America's inequality trap.

This chapter explores how status quo bias in the American policy process can contribute to an inequality trap. The core question here is how America's policymaking institutions and the actors situated within those institutions deal with rising inequality. In focusing on the policymaking process, this chapter builds substantively on the analysis from the previous chapter. There, we saw evidence that rising inequality can facilitate inegalitarian policymaking. Thus, rising inequality can help overcome the status quo bias of the American policy process, specifically for a subset of policies that further increase economic inequality. In this chapter we will see that the distributional consequences of status quo bias change as inequality increases. When inequality is low, status quo bias has no effect on income concentration. But when inequality is high, the distributional effects of the policy stagnation resulting from status quo bias tends to be inegalitarian in its consequences. To some extent, the emphasis in this chapter is the institutional setting of the United States and the ways elements of constitutional design such as separation of powers and bicameralism shape the policy response to changing levels of inequality. But the chapter also explores how elite behavior within these institutions is shaped by inequality.

The weight of the findings from the prior chapters leaves us with a pressing question: is there any way out of America's inequality trap? The evidence suggests that breaking the vicious cycle will not be easy. This chapter seeks to illuminate this central question. I begin this effort by comparing the the government response to the 2008 economic crisis and to the Great Depression. Through this discussion I illustrate just how tight the inequality trap's grip is on contemporary U.S. political economy, and I point to strategies for loosening that grip.

Appendix material available here in .pdf format.

Figure Image Files

Data and Code: Coming Soon!