Republic, Lost_ How Money Corrupts Congress--And a Plan to Stop It - Lawrence Lessig [69]
For the top one-tenth of one-tenth of 1 percent (0.01 percent), it’s even more extreme: the average after-tax income increased from about $4 million in 1979 to more than $24 million in 2005.99 In Hacker and Pierson’s terms, “Broadland was dead. Richistan was born.”100 Broadland is where most of the gains go to the bottom 90 percent of households; and Richistan is where most of the gains go to the top 1 percent. Indeed, were it not for the increase in hours worked over the past thirty years, the middle class would not have gained at all, and the lower class would have fallen behind, while the highest-income groups have exploded.101 “The bottom went nowhere, the middle saw a modest gain, and the top ran away with the grand prize.”102
Whenever anyone starts talking about inequality, the first reaction of many (at least on the Right but also in the middle) is to turn off. Our Constitution is not Soviet. We are not committed to the philosophy of Karl Marx, or even John Rawls. That there are rich and poor in America is a fact of American life. Some believe it explains the innovation in American life. And no set of clever graphs demonstrating “how the rich get richer” is going to move those who believe that the “unalienable right… [to] Life, Liberty, and the Pursuit of Happiness” includes the right to get rich faster than your neighbor.
Likewise, there are important differences between the wealth of the Gilded Age and the wealth today. The rich today are different. In 1929, as Rajan and Zingales put it, “70% of the income of the top .01% of income earners in the United States came from holdings of capital… The rich were truly the idle rich. In 1998, wages and entrepreneurial income made up 80% of the income of the top .01%.”103 The rich are not idle anymore. Indeed, they work harder than most of us: “in the 1890s, the richest 10 percent of the population worked fewer hours than the poorest 10 percent. Today, the reverse is true.”104
My point in introducing Hacker and Pierson is not to reinforce the arguments of egalitarians, or the socialist Left. For the critical insight that they add to this debate is not that inequality is growing. It is instead the reasons that inequality is growing. Conservatives might well and consistently believe that there’s nothing wrong with getting rich. But from the birth of conservative thought, conservatives have always objected to people getting rich because of the government. It’s one thing to invent the light bulb and thereby become a billionaire (though, sadly, Edison wasn’t so lucky). It’s another thing to use your financial power to capture political power, and then use political power to change the laws to make you even richer.
So then what explains our move to Richistan? Is it geniuses producing endless wealth? Or is it government regulation that is protecting endless wealth?
Hacker and Pierson work hard to suss this out. Maybe the rich were better educated. Maybe that education produced this difference in rewards. But the rich in Hacker and Pierson’s account are not what most people would call rich. The rich are the super-rich—the 0.1 percent or 0.01 percent. Those people are not better educated than the top 1 percent. Indeed, as Gilens finds, “fewer than one-third of Americans in the top income decile are also in the top education decile, and vice versa.”105 If there’s a reason that we became Richistan, it’s not because of Harvard or Berkeley or MIT.
It isn’t raw smarts, or native talent. So, then what accounts for our leaving the happy world of Broadland and becoming Richistan?
According to Hacker and Pierson, and astonishingly: changes in government policy. A whole series of interventions by the government beginning in 1972 produced an enormously wealthy class of beneficiaries of those changes. This is not the neighborhoods of Desperate Housewives. Or even Hollywood or Silicon Valley. It is instead a kind of wealth that is almost unimaginable