America's Inequality Trap
by Nathan J. Kelly
University of Chicago Press, 2020
Cloth: 978-0-226-66547-4 | Paper: 978-0-226-66550-4 | Electronic: 978-0-226-66564-1
DOI: 10.7208/chicago/9780226665641.001.0001
ABOUT THIS BOOKAUTHOR BIOGRAPHYREVIEWSTABLE OF CONTENTS
ABOUT THIS BOOK
The gap between the rich and the poor has grown dramatically in the United States and is now at its widest since at least the early 1900s. 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.
Nathan J. Kelly argues that a key reason for this is that rising concentrations of wealth create a politics that makes reducing economic inequality more difficult. Kelly convincingly shows that, when a small fraction of the people control most of the economic resources, they also hold a disproportionate amount of political power, hurtling us toward a self-perpetuating plutocracy, or an “inequality trap.” Among other things, the rich support a broad political campaign that convinces voters that policies to reduce inequality are unwise and not in the average voter’s interest, regardless of the real economic impact. They also take advantage of interest groups they generously support to influence Congress and the president, as well as state governments, in ways that stop or slow down reform. One of the key implications of this book is that social policies designed to combat inequality should work hand-in-hand with political reforms that enhance democratic governance and efforts to fight racism, and a coordinated effort on all of these fronts will be needed to reverse the decades-long trend.
AUTHOR BIOGRAPHY
Nathan J. Kelly is professor of political science at the University of Tennessee. He is the author of The Politics of Income Inequality in the United States.
REVIEWS
“This is an important book that makes a significant contribution both in the original research it contains and by incorporating existing studies into a broader narrative about inequality and American politics. It is very well written, combining a 'friendly' and casual tone with complex discussions of both theory and empirical analyses. It draws from and speaks to a wide range of previous research and offers sophisticated original analyses to push the discussion forward.”
— Martin Gilens, coauthor of Democracy in America? What Has Gone Wrong and What We Can Do about It
“In America’s Inequality Trap, Kelly argues that rising economic inequality in recent decades has changed politics in ways that makes 'reducing inequality more difficult.' The United States suffers from a spiral in which economic inequality induces political changes that subsequently make economic inequality even worse. Each chapter explores a different pathway by which economic inequality leads to these political changes, through public opinion, elections, policy stagnation, and 'inegalitarian policy convergence' between the two political parties. A fascinating read for all alarmed by the country’s path.”
— Andrea Campbell, author of Trapped in America’s Safety Net
TABLE OF CONTENTS
One / Contemporary Politics and the Perpetuation of Inequality
DOI: 10.7208/chicago/9780226665641.003.0000
[elections;public opinion;inequality;racism;public policy;Donald Trump]
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.
Two / An Inescapable Plutocracy?
DOI: 10.7208/chicago/9780226665641.003.0001
[pluralism;relative power;time series;inequality;top income shares]
This chapter theoretically and empirically defines an inequality trap asa situation in which increasing levels of inequality make future reductions in inequality less likely. A theoretical account of feedback between economic and political inequality is developed which, in contradiction to theoretical approaches to democracy through pluralism, is rooted in relative power theory that emphasizes strong connections between economic and political power. The chapter then conducts time series analysis using Vector Autoregression to present initial evidence that rising inequality (as measured by top income shares) feeds back on itself in a manner that is consistent with the idea of an inequality trap. The chapter then summarizes the remaining chapters of the book.
This chapter is available at:
https://academic.oup.com/chica...
Three / Public Preferences and Economic Inequality
DOI: 10.7208/chicago/9780226665641.003.0002
[public opinion;redistribution;thermostatic model;Meltzer-Richard model;minimum wage;capital gains tax]
This chapter analyzes the response of public opinion to rising inequality. The chapter begins with discussion of the thermostatic model of opinion, which predicts an increase in support for redistribution as inequality rises(similar to the Meltzer-Richard model). Starting with aggregate time series analysis, the results show that opinion does not respond as predicted. Diving into micro-level regression analysis demonstrates that a subset of Americans tend to be LESS supportive of redistribution when inequality increases. This subset tends to be poorer and more racist than average. Importantly, these patterns hold regardless of whether general attitudes toward redistribution or attitudes toward very specific redistributive policies such as the minimum wage and capital gains taxes are analyzed.
This chapter is available at:
https://academic.oup.com/chica...
Four / Elections and the Inequality Trap
DOI: 10.7208/chicago/9780226665641.003.0003
[elections;racism;gerrymandering;Repubilcans;Democrats;House;Senate;turnout;geographic sorting]
This chapter examines feedback between income inequality and election outcomes. Aggregate time series evidence shows that rising income inequality is associated with larger Republican seat shares in the House and Senate, and larger margins of victory for Republican presidential candidates. These political outcomes tend to produce higher levels of inequality. Several mechanisms for this self-reinforcing pattern are considered, including differential turnout patterns, gerrymandering, geographic sorting, declining political trust, and racial animus. Micro level analysis of congressional voting behavior points to racial animus as an important driver of the positive association between inequality and weaker Democratic electoral performance. Gerrymandering and geographic sorting also play some role in these patterns.
This chapter is available at:
https://academic.oup.com/chica...
Five / Partisan Convergence and Financial Deregulation
DOI: 10.7208/chicago/9780226665641.003.0004
[policy change;deregulation;globalization;income stagnation;campaign finance;mixed-methods;Glass-Steagall Act]
This chapter conducts a mixed-method case study of financial deregulation, showing that rising economic inequality made it easier to achieve a bipartisan majority in favor of inequality-inducing deregulatory policy change (culminating in repeal of the Glass-Steagall Act). A combination of qualitative and quantitative analysis shows that rising inequality contributed to financial deregulation in a variety of ways. First, electoral losses for Democrats become more common. Republicans were ideologically committed to deregulation, and their increased power set the stage for policy change. Second, rising inequality created strategic incentives for Democrats to join Republicans in supporting deregulation. With middle class income stagnation, households increasingly were forced to rely on credit to maintain living standards, and deregulation was framed as a way to reduce credit constraint. As well, Democrats became increasingly reliant on corporate sources of campaign finance, which may have softened their opposition to deregulation. Finally, politicians representing districts increasingly exposed to foreign competition due to globalization were easier to convince that financial deregulation would increase U.S. competitiveness in the global economy. In sum, rising inequality made it more likely for an inegalitarian policy change to occur, which provides yet another example of how politics can serve to reinforce inequality.
This chapter is available at:
https://academic.oup.com/chica...
Six / Polarization and Policy Stagnation
DOI: 10.7208/chicago/9780226665641.003.0005
[status quo bias;policy making;policy stagnation;polarization;income inequality;institutions]
This chapter argues that status quo bias induced by numerous veto points in the American policy making process contributes to an inequality trap. Time series analysis is conducted showing that rising inequality changes the distributional consequences of status quo bias. When inequality is low and policy stagnates, this policy stagnation has no effect on inequality. But when inequality is high, policy stagnation tends to push inequality even higher, thereby creating a positive feedback loop between policy stagnation and income inequality. The analysis also shows that party polarization is not part of a feedback loop with inequality. Rather, it is the policy stagnation that polarization sometimes produces that is connected most directly to the inequality trap. A key conclusion of this chapter is that the American politicalframework via institutionscontributes to entrenched inequality.
This chapter is available at:
https://academic.oup.com/chica...
Seven / Can We Escape the Trap?
DOI: 10.7208/chicago/9780226665641.003.0006
[inequality;status quo bias;Great Depression;Great Recession;implications;policy recommendations]
This chapter reviews the core arguments made in the book and considers some of the implications for the possibility of reversing the trend toward higher inequality. One key point is that any effort to alter economic inequality should tackle both the economic and political side of the coin. Without reducing political inequality alongside economic inequality, reductions in inequality are less likely to happen and be durable. However, since economic and political inequality tend to reinforce each other, progress on either side of the coin could have reinforcing consequences on the other. So undermining economic inequality will tend to reduce political inequality and vice versa. Another key point is that economic inequality is particularly entrenched in contemporary America partly because inequality is so concentrated at the top. It is likely that top-heavy inequality induces economic inequality more than inequality in the middle of the distribution does. A comparison of the Great Depression and the Great Recession bolsters this point. Undermining racism, reducing status quo bias, expanding the political power of middle income groups, and prioritizing economic equality are discussed as policy recommendations toward escaping the inequality trap.
This chapter is available at:
https://academic.oup.com/chica...
