What’s driving economic inequality? Reuters has some answers

I wanted to draw everyone’s attention to an important new series in Reuters on economic inequality in the states, called Redistributing Up. It has the usual jaw-dropping statistics: since 1989, inequality has increased in 49 of the 50 states, and the poverty rate has increased in 43 of those states. In Washington, D.C., which today’s story focuses on, the top five percent of households make 54 times more per year than the bottom 20 percent — and that shocking 54:1 ratio is up from 39:1 two decades ago. The article also includes some fascinating human interest stories, which makes it highly readable.

But the single most important story the article tells is the story of the powerful role our government plays in creating inequality and redistributing wealth upward. As the article’s authors explain, over the past 25 years or so, the government’s military spending and spending related to the global war on terror have led to an outsourcing boom. This outsourcing has helped the wealthy and hurt ordinary working people. Here are some of the deets:

The outsourcing boom has been particularly dramatic in the Washington [D.C.] region. Direct spending by the federal government accounts for 40 percent of the area’s $425 billion-a-year economy. The government spends more on private-sector procurement here than in any other metropolitan area or state – up 300 percent since 1990.

This boom, moreover, has

fostered a growing upper class of federal contractors, lobbyists and lawyers in the District of Columbia area. The federal government funneled $83.5 billion their way in defense and other work in 2010 – an increase of more than 300 percent since 1989, even after adjusting for inflation. Private industry poured more than $3 billion into lobbying to influence the government, nearly double what it spent a decade ago.

The growth of this elite class is accompanied by another, even more disturbing trend: the destruction of decent government jobs for working class and middle class Americans. Privatization, outsourcing, and government layoffs have caused those jobs to disappear, and the fortunes of ordinary working people in the D.C. area to plummet. Thus economic inequality continues apace. All too predictably, the revolving door between lobbyists and public officials has served to accelerate the outsourcing boom, and make the inequality even worse. Reuters does a fine job at explaining all this, but if you want to see a more academic treatment, I suggest that you have a look at this working paper by Professor James K. Galbraith and Travis Hale, which examines the subject in more technical terms.

The good news about the Reuters article, if you can call it that, is that the popular press is finally realizing that economic inequality is not some impersonal trend that we have no control over, but a deliberate political choice that our elected officials have made. The hard part — the excruciatingly difficult part, of course — will be figuring out a way to reverse course and to create a politics that works for the 99%, not the 1%. But at least our journalistic betters are no longer telling us that economic inequality is beyond our control. It’s taken long enough, but that’s a step in the right direction from what economists and economic journalists were telling us in the 1990s.

Kathleen Geier

Kathleen Geier is a writer and public policy researcher who lives in Chicago. She blogs at Inequality Matters. Find her on Twitter: @Kathy_Gee