The Dialogue Project — Income Inequality: Robert Kuttner, Tyler Cowen & Jeff Greenfield

So we're going to be talking about income inequality. And we're doing it in a way that is new, certainly for the decades I've been here, a more structured kind of conversation. And when you're talking about something like income inequality, you're talking about a complicated subject. That demands people who can talk about it in ways that ordinary human beings can understand. And that's why we got lucky. We've got two people here who both span a wide terrain of discourse. Both are endowed teachers. Bob Kutner at Brandeis, Tyler Cowen at George Mason University. They are both prodigiously productive authors and writers. Whole forests have been deforested just to get the paper to print the books and articles they've written. Tyler Cowen is also a columnist at Bloomberg Opinion.

Yes.

He co-hosts the Marginal Revolution blog, and he hosts a podcast called Conversations with Tyler that I've recently discovered that probably has the highest most interesting level of conversation since Bill Buckley was around on Firing Line. Robert Kutner has for almost 35 years been at the American Prospect, which he co-founded. He serves on the board still, I think, of the Economic Policy Institute that he founded. He has written any number of books and articles, and his most recent book from 2022 is called Going Big: FDR's Legacy, Biden's New Deal, and the Struggle to Save Democracy. You might be able to figure out from that on which side of this argument he will find himself. So we are going to do two segments right away, a 5-minute segment from each of these participants, followed by a 3-minute rebuttal, and then a conversation, and then I'll tell you what happens later. A coin was flipped backstage, It was honestly done. Tyler Cowen won the toss. Robert Cutney will be first to go. So let's pose the question, what you might call a meta question, where I hope we will wind up. Is income inequality a threat to American stability and cohesion, or has it been overstated? To the extent that it needs to be addressed, is the federal government and federal programs the antidote, or can they be an example of the cure being worse than the disease? Robert, the next 5 minutes are yours.

Well, I'm glad, I think I'm glad that we're not gonna debate whether income inequality has been increasing. In reading some of Tyler's work, I think there have been points where Tyler has said, "Well, it's not increasing very much, and if it is increasing, it doesn't matter that much." Clearly, any reasonable data set that you look at demonstrates that inequality of both income and wealth have been rising in the past 30 or 40 years to levels close to that of the Gilded Age. So I think it's— we can debate the data. I hope we don't have to, because almost any data series that you look at demonstrates this. There's a famous one by the Economic Policy Institute Tyler Cowen, where there are two lines. One shows the growth of productivity of the United States economy. The other shows median wages. And until the mid-'70s, the two curves increase in lockstep. And then at that point, productivity keeps going, but wages don't. And so however you look at it, whether you look at the top 100th of 1%, the top the top 1%, the top 20%, the top 10%. The top has been pulling away from everybody else. I think the more interesting question is, what are the causes of this? What are the implications of this for our society? What are the ramifications for politics and democracy? And I, seemed like a good thing to do in week 2 of the Trump era, I paid a pilgrimage to Hyde Park this morning. To the Roosevelt Library. And I think the story of how America became so terribly unequal since Reagan is a fairly simple story. As a legacy of the New Deal, we had this unique period after World War II where the economy not only grew at unprecedented rates, but it actually grew more equal. And the reason for that was several mechanisms. We regulated finance, so finance did not go crazy. And pull so much of the income out of the rest of the economy. We allowed strong trade unions to bargain for a reasonable share of the total national product, so worker wages went up in real terms. We had a very progressive income tax code. We had minimum wages. We had antitrust laws so that too much concentration would not lead to money going to the very top. And as a consequence of this and other things, including housing policies and debt-free higher education, we had a period where the society actually became more unequal even as it became more prosperous on average. And then we had a bad decade where the '70s, because of the OPEC oil shock, gave people like Milton Friedman, who had not been taken terribly seriously, another turn at bat.. And people who said, well, the Great Depression, that was just an anomaly, and really things work better if you just leave markets alone, they got another turn. And then you had 3 Democratic presidents in a row who sort of felt that maybe if we were more like the Republicans, things would be better for the Democratic Party. That was known as neoliberalism. Liberalism in the classical sense of the term, economic liberalism, free markets, neo in the sense of, hey, let's do it again. And what happened was that ordinary working people who got the short end of the stick more and more and more felt that the government really had stopped being on their side, that the Democratic Party in particular had stopped being on their side. And that was the road that ended with Donald Trump. And I think the ramifications of this are that how well you do in the economy is more a function of how affluent your parents are. This is known as intergenerational inequality. People feel that their lives are not going to be getting better, most people. And you look at the average middle-class package, it is undone by college debt, it's undone by the cost of housing, it's undone by the fact that ordinary people don't have pensions anymore, only about 15% have traditional pensions, that healthcare is unreliable. And so it isn't just inequality in a static sense, it's inequality in the sense of what the British call life chances. And I think there's a feedback loop. The more inequality there is, the more political power there is for people at the very top to make sure the rules are structured in such a way that there's even more inequality.

You still have 2 seconds.

Okay.

You'll have a lot more time.

I made my case.

Thank you, Robert. Mr. Cowen, the floor is yours.

Thank you all for coming. Thank you, Bob. A great honor to do this with you. Let me start with some good news. First, global inequality has been declining for decades. Also, and we do need to debate the numbers, I'm afraid, income inequality in the United States has been falling since at least 2019. If you read left-leaning Matt Yglesias, Matt stresses this. Left-leaning economist Aron Dube from UMass Amherst, he wrote a recent paper showing this to be true. It's just a fact. This issue is improving. But I think there's a more fundamental point other than just arguing the last 5 years, and that is the best way to relieve privation is just to try to have higher economic growth. To me, it's a very striking statistic that if you look at median household income, median,. In the US, it is clearly higher than in Norway, Denmark, or just about any other social democracy in the world. So simply having a wealthier economy with more innovation is the best thing you can do for the problems associated with income inequality. It's striking to me to look at the statistics on immigration. So if you come from the nation of India, a very poor country, per capita income about, you know, 2K a year, Not everyone who's coming there is from wealthy families. You know that if you're a New Yorker. The median income of an Indian migrant to the US is $152,000 a year. That's just stunning to me that our economy is generating that much opportunity. Really striking. And if you look at, say, immigrants from Haiti, they come with a less fortunate background, but they still have median family income of $66,000 a year. That's a remarkable opportunity for them. Bob mentioned intergenerational mobility. He claimed it declined. I had a debate with David Leonard a few months ago. David said the same thing, but recent research papers by Raj Chetty and others show that basically it's held constant for a long time in the US. And that's not counting the upward mobility of people who come from India, Haiti, South America, Eastern Europe, wherever. If you put what they would have earned into the numbers and then compare that to what they earn here. Intergenerational mobility in the United States is high and rising. And that's the key thing about America. What we are obsessed with is opportunity, not equality per se. We believe in equality of rights, but it's not about equality of outcomes. And if you're asking about opportunity and wealth and freedoms, this country is still doing relatively well for all of its problems. Crime is another cause of a different kind of inequality. It relates to income inequality, but just inequality of fear. Crime rates have plummeted, especially in New York City, since the 1990s. That's a very encouraging development. Obesity is now a problem we have a handle on. It's falling over the last year for the first time, due largely to biomedical innovation. With COVID not completely over, but more or less, you know, diminishing life expectancy, is rising again. Millennials have levels of wealth that are actually the highest of any generation. Maybe you read 3 or 4 years ago that wasn't true. We remeasured the numbers. Millennials, it turns out, in terms of wealth are doing great. So there's just a lot of numbers, you know, one heard maybe 5, 10 years ago that have turned out to be half-truths or just not true at all. You know, in the back I brought out all my papers. I like to bring these to debates. We can go through these if we need to, but let me just assure you, I've done versions of this debate 2 times in the last half year and studied these and reviewed them again. And, you know, I do have all the goods. It's a pretty good situation, all things considered, by global standards. There is an institute, it did a poll. 67% of Americans will say they think they're either realizing some version of the American dream or on a path to realizing it. Now that's a problem. 67% say yes, you know, that means a third say no. We need to do things to improve that problem. I'm all for that. There's all sorts of inequities, injustices, issues of poverty in this country, issues with homeless that we need to do more about. But I think the actual truth is really a very positive picture. The United States more than before, its economy at least, I'm not saying our presidential election, but it's the envy of the world. And immigrants want to come here to really a new and extreme degree, and it's because of the opportunities in our nation built on the ideas, you know, of liberty, of individualism, of capitalism, and allowing some inequalities because we as Americans see that as a way to make things better for the whole of our society. Thank you.

Thank you both. I'm awed. By the concision, and I appreciate it. Bob Cutner, you've got 3 minutes to rebut what Tyler Cowen said. He will then have 3 minutes to answer specifically what you said. So take— go for it.

Let me try to do this politely. It's possible to cherry-pick data to tell a story that's at odds with reality. Let me do a point-by-point rebuttal. Income inequality has been declining since 2019. Well, to the extent that it has, it's the result of the $5 trillion that Trump at first and then Biden injected into the economy with programs like the child tax credit, which cut child poverty in half, which was only allowed to persist for, for one year. It's because checks were sent to people to keep the recession from turning into a Depression. But that's a very unusual period of time. If you go back the last 40 years, income inequality has been increasing. Is growth the solution? Well, we had higher growth and higher inequality in the '50s and '60s. So it's possible to have relatively high growth and extremes of inequality, which is what we've had for the past 30 or 40 years. Is global inequality declining? Well, if you say that, look at how poverty has been eradicated in China, yes, global inequality has been declining. But if you look at inequality nation by nation by nation within each nation, including China, and it's within each nation that we have a political community, we have democracy or we don't, inequality has been rising. Intergenerational mobility, please, if you look at a kid from an affluent family, you see the kind of endowments that that child gets that help that child to thrive, beginning with birth, where parents speak more words, according to all the studies, to their offspring. Good schools, good pre-K, enrichment programs in public schools or private schools. The one group of kids who gets free college education are kids who have affluent parents. And as the social supports that in my father's generation and early in my generation made it possible for non-rich kids to thrive— affordable housing, free college education, jobs that were not gigs, jobs that came with decent benefits— as those ladders, those social ladders, have been knocked away, the affluence or the poverty of your family of origin becomes more and more determinative of how well you do. And Raj Chetty, of all people, has spent a whole career documenting that. If he were on stage, I think he would corroborate that intergenerational equality has not been leveling off, it's been increasing.

Thank you, Tyler. Are you in complete agreement with everything Bob Cutner said, or do you have a few minutes to respond?

I'm gonna have to do what I did to David Leonard. I have the Raj Chetty paper here. It says very clearly, intergenerational mobility based on all of these measures, we find that children entering the labor market today have the same chances of moving up in the income distribution as children born in the 1970s. It is constant. So there's not some study you have that overrides Chetty. That's a word-for-word quotation. And I reread this paper recently. So on that, I just think you're wrong. On inequality reversing since 2019 or possibly earlier, it's really not the child tax credit. So it's inequality of wages also that's reversing, not government benefits, but even within wages. And again, I have that here. And I think that is wrong, frankly. In your first remarks, you talked about what happened to wages in 1973. You said productivity went up quite a bit, you know, wages didn't keep pace. Those series, that comparison is based on two different measures of inflation. That's why they diverge, because the two different measures of inflation diverge. Adam Żiemiec has pointed this out at length. This is a well-known, like, trick on Twitter every now and then. People fall into this trap and someone corrects them. But when you use the same inflation adjuster over both series for that period of time, the productivity and the wages, they move pretty closely together. You talked about the unconstrained growth of the financial sector. Finance intermediates wealth. It's been measured that if you take in America finance as a percentage of wealth, not income, percentage of wealth, It's roughly constant for decades. Now, we do have problems in our financial sector, I agree with that. But I think you're giving a misleading sense of the numbers. A general point, you know, income inequality per se, it is not a terrible thing. Let's— depends on what causes it. Let's compare Manhattan and Staten Island. Manhattan breeds many billionaires and it attracts many other billionaires. There's a lot of inequality in Manhattan. There's not that much inequality in Staten Island compared to Manhattan. Now, there's nothing wrong with Staten Island. It has great Sri Lankan food, all those bowling alleys. Like, I'm from New Jersey, I can't complain about Staten Island. But it's not some kind of model ideal. Like, Manhattan is wealthier and it produces more opportunity. And when I think what I want America to be like, I don't think we should be trying to level Manhattan. Into Staten Island. I think when you generate wealth and invite in immigrants and create opportunity, that's gonna produce inequalities. It doesn't mean every inequality is justified, but when people talk about inequality in the gross numbers as some bad thing, it's very misleading. You need to ask, if you look at this nation's economy, is it the envy of the world? And mostly to that, the answer is still yes.

For the next, thank you. I can just see that as a political slogan on the next mayoral campaign. Don't make Manhattan Staten Island.

They're working on it though.

Winning a landslide. But for the next 50 minutes, we're gonna have a conversation among us. There's not gonna be a clock, but I'd like to be, and even if I direct a question to one of you, obviously the other is more than welcome to chime in. I wanna start, Bob Kuttner, with you. Just the other day, 2 days ago, Lawrence Summers, former Secretary of the Treasury, former president of Harvard, was in a colloquy with John Ellis, a journalist, and he made two points that interested me for purposes of tonight. One was a political point, that inflation is always toxic to progressives. Any time a president is trying to get his party elected under inflation, he will lose. But the more important thing he said Tyler Cowen was that it affects the less well-off far more than the affluent, and it is in itself a huge contributor to inequality. And he, as you know, back in 2021 was very critical of the Biden administration for injecting too much stimulus into the economy that would, he predicted, cause inflation. The question is, as for progressives, do you and your colleagues pay enough attention to inflation as a generator of inequality?

Let me start off by taking issue with Larry's analysis, and then I'll respond to the other part of the question. So Larry Summers is probably as responsible for Donald Trump's victory in 2016 as anybody who served with Obama, because Larry was more concerned about not putting enough stimulus into the economy and reverting to, let's balance the budget, let's cut the deficit. And as a consequence, we had a very, very slow recovery from the collapse of 2008. We— it took much too long. What Biden did was he injected an adequate amount of stimulus into the economy so that we had a very short-lived recession. Now, the inflation, that was in the economy for 2 or 3 years, that was almost entirely the result of supply shocks. That was not macroeconomic demand-led inflation. And I think Summers' analysis is just flat out wrong. Now on the other question, is inflation bad for the Democrats? Yes, of course. Inflation's always bad for incumbents. And whether it hurts the poor more than the rich is something I've not paid a great deal of attention to. I suppose it does in the sense that Poor people have less discretionary income to play with, and so if prices go up, it hurts them more. But I think Summers has been profoundly wrong on one thing after another, beginning with the deregulation of finance that caused the financial collapse of 2008, and he's wrong about this too.

I'm more in agreement with Larry. There's a very simple comparative experiment. If you look at Switzerland and you look at Japan, who did not print money as we did, did not send around per capita nearly as much money as we did, and they kept relatively low rates of inflation. It's very simple. The countries that did a lot had higher inflation. Yes, there were supply shocks, but Japan, Switzerland, if anything, they're way more vulnerable to supply shocks than we are, right? They're not major oil-producing nations, and they had much lower inflation. So Larry basically was correct. Most people know it. Larry, in my mind, is an excellent economist.

Ah, good, because he made another point at Harvard that I'm not sure you'd be quite that enthusiastic about.

Let's hear it.

Well, that's my plan.

Yeah.

He also said he thought one of the most urgent things necessary for fiscal policy were tax increases, and he said they have to be directed principally at the wealthy. That's the man you just praised. How about that as a policy matter?

I've discussed this with Larry. I would say I am amenable to a bargain where we change the trajectories on spending for Medicare and Social Security, and we hope also in the longer run to lower the rates of interest we're paying on the national debt, which are now, you know, over 20% of the budget, and combine that with tax hikes which are going to fall on the wealthy. The more wealth the wealthy have. Obviously, that's where you go to find more tax revenue. But if we simply raise taxes and don't get spending under control, we will recreate the very problems we have, but at a higher level of government spending and with even fewer degrees of freedom. So we in fact need a fiscal bargain where both sides compromise.

This one is for both of you, because one of the proposals— certainly it was around during the 2020 campaign, about income inequality was a wealth tax. And I think Elizabeth Warren was a principal advocate. It turns out, and I guess this is, you can start with this, Bob, that all but 4 nations that have adopted a wealth tax have repealed it. I think mostly because they couldn't figure out how you taxed wealth. Are you, is a wealth tax in your eyes a good idea?

No, I think it's impractical, but I think there are ways of taxing high income and indirectly taxing wealth that we don't pursue, that we could be pursuing. We could have a higher capital gains tax. We could certainly have so-called carryover basis where when you inherit money, the capital gain in the securities that your father or grandfather were fortunate enough to leave you don't suddenly disappear. But you would pay capital gains tax on the appreciated value of the securities. We could have just a graduated income tax all by itself. I mean, during the boom years of the '50s and '60s, the graduated income tax was north of 70%, and the economy did just brilliantly. So you did not need to reward very, very rich people to the extent that we do today in order to have a healthy economy. But I think a tax on wealth per se— and we do have one, by the way, it's called the property tax. And the property tax, which is the basis of most school finance, is a tax on wealth. It just happens to be a tax on real estate. But I think a tax on financial wealth is very difficult to do in practice.

No wealth tax for me. I think of the real estate tax as a tax on the consumption of housing services. Economists usually favor consumption taxes. At the margin, I would like to see us have more consumption taxes and fewer taxes on capital, but we'll see what comes out of a larger bargain.

I wanted to ask you, Tyler, it's implicit if not explicit, actually explicit in Bob's opening. Is it a coincidence to you that during a time of almost confiscatory taxes, I mean, around and after World War II, and relatively more, or relative less inequality in terms of the often talked about spread between CEO and average worker, that the country had this sense of a kind of an ongoing permanent increase in prosperity. I mean, is that just correlation without causation, or was there something about the kind of policies that Bob was talking about, tough regulatory policies, tough antitrust, high taxes, that in fact did produce not just less inequality but more prosperity.

I think in 1973 we had in this country a technological slowdown, rates of productivity growth plummet, they're high again for some parts of the mid to late 1990s, but if you have slower productivity growth, you will have slower wage growth. I'm hoping that is over now. We've seen a string of years with much better data. We see a lot more actually innovation in our economy. We're seeing major biomedical advances such as the COVID vaccine. We're seeing artificial intelligence. I think artificial intelligence, if anything, is likely to boost income equality because what it does is it takes what you call the word cell class and they face more competition. From the machines, but people who are gardeners, carpenters, who do hand labor, so-called working-class individuals. AI is not competing as much with them. So we don't know how it's all going to play out, but the best guess is we're in for a big gain here on the equality issue.

We are assiduously avoiding politics here, which I hope you all appreciate. But there is something about the incoming administration that may be on point. If the embrace of Donald Trump by some of the wealthiest big tech, high tech people, who if the time's just right today, are expecting a return on their investment in the form of tax cuts, in the form of less regulation. If in fact we are going to have the imposition of a lot more tariffs, which I assume will increase the price of many things, that's what I think works. If we are really going to have Elon Musk and Vikram Swamy looking to cut $2 trillion out of the federal budget, is it fair to say that we may be about to see a set of policies that effectively trim the safety net, enrich the richest, and in fact add to income inequality?

I'm against the possible tariff hikes. I think what they will achieve, you know, for better or worse, will be far, far less than what they say they will achieve. The margin in the House is very slim. When I look at politics more generally, what I see this cycle especially, the Democrats have never more been the party of the wealthy, never. And overwhelmingly Silicon Valley is still Democratic, New York City, which is wealthy, is highly Democratic. And this was the year where the Democrats lost control of all branches of government. So the notion that, oh, now the wealthy people just get their way because there's been so much inequality. Trump is not overall the candidate of the wealthy people. Of course he has some wealthy supporters, but we're seeing the exact opposite. If anything, the influence of very wealthy people over government is going down, not up. I would rather— I would love it if Michael Bloomberg were president. I work for him, to be clear. But if he were president now, I would be a happier man.

Okay.

It's hard for me. I have to concede or acknowledge you. It's hard for me to imagine Donald Trump as Huey Long. Share the wealth. I don't think that's where he is. But Bob, you may want to respond a little more substantively.

Tyler is half right. The wealthy have both parties. The wealthy have both parties. And what's anomalous about Trump and ominous about Trump is that lower-income, non-college-educated people voted overwhelmingly for Trump because they felt looked down upon by people who use words like flyover states, by people who live in places like Manhattan. Whereas the wealthy supported Donald Trump for the reasons that you suggested, because they expect him to deliver on his tax cuts and his deregulation. The Democrats, meanwhile, opted for social and cultural liberalism and gave up delivering for the working class. And so the working class, defined again the way most political analysts define it as non-college educated, had no place to go. And so they voted their their anger, and they voted for Donald Trump. So I agree with Tyler that both the Democrats and the Republicans are the party of the wealthy, and that's why we got Donald Trump.

You want to respond, or can I ask—

No, next question, yeah.

If your analysis is correct that, in fact, income inequality is declining and that this is a misnomer, this is somehow an illusion. I keep thinking, and these may be too anecdotal and not systemic, you've got more and more companies now telling their employees, we're not doing healthcare the way we used to. You kind of have to kick in a little more. The impact of inflation on the less well-off has meant everything from— this is what a politically potent point— trying to get a new house, trying to pay for your healthcare, trying to afford college, trying to pay your grocery bill. Is it wrong to think that all those things are getting harder to pay for?

It's a lot of different issues in that question. I would say, first of all, many more Americans have healthcare now than they've ever had before, in large part due to the Medicaid expansion, right? That has gone relatively well. That's a big change and it's in a positive direction, also reducing inequality. Homes are far too expensive. I'm a big fan of what is sometimes called the YIMBY movement. We need more freedom to build in this country. We see Americans in large numbers moving to Texas and Florida in large part because the cost of living there is lower. So we're partly addressing the problem. We could do much more. We have a big issue there. Food prices are especially high, in part because of supply shocks and in part for reasons we don't completely understand. We should look at that more, but my guess is they're just not going back down again, and the best thing we can do is boost rates of economic growth and wage growth so more people can afford it.

In a minute or two, we're going to turn to the audience questions, but Bob, I guess this is dangerously closer to a political question than I'm But it is one of the things that happened, I think, in this election was that, and it is related, I think, to what Tyler was saying, is the outpouring of support for Harris from celebrities, from very wealthy people, may have turned out to have had a kind of a backlash. In other words, every comedian who every night was assailing Trump, was a coastal liberal. All of these celebrities that embraced Harris, our income is probably a rounding error. So to some extent, did the failure at the polls reflect a notion that a lot of people, you addressed this to some extent, just looked at the Democrats and said, that's not my party.

The Democrats squandered the legacy that was left to them by Franklin Roosevelt of being the party of ordinary working people. And they kept moving left on social and cultural and identity and politically correct issues and debating about whether any actual Latinos use the word Latinx. And they stopped doing the bread and butter stuff that used to make them the party of working people. And I think Hillary Clinton was one of the worst examples of that. But in general, unless you go to the left wing of the Democratic Party, my particular hero there is Elizabeth Warren, who understands American capitalism, I think, better than any other public figure. You find Democrats too cozy with rich people, not enough sympathetic, not sufficiently sympathetic to working class people. The fact that celebrities lined up for Harris didn't help. Might have hurt.

OK. We have a few questions from the audience. And I think actually you've addressed this, but it might be worthwhile to underline and then see what Mr. Kuttner says. If my income is increasing, which it is— congratulations— Why should I care how much money other people have?

I have never thought income comparisons are the main issue. The real question is, are we doing well by most Americans, and are we making special efforts to help those who are the very worst off? I think on the first question, most Americans are doing a great job. The second question, we're doing a so-so job, you know, maybe modestly better than what many people think., but we could do better. But income inequality as a framing, in my view, is the wrong framing. It's about absolute levels and it's about actual opportunity. So I agree.

Okay, now I'll frame this in a slightly different way. Maybe we don't, whether you care how much Bill Gates or Elon Musk has or this competition which I can describe in highly almost genital way of whose yacht is biggest, it's fun to talk about. But does it matter? In fact, does it matter the famous example that the average, that the CEO pay compared to the average worker has geometrically increased? So what? If the worker on the assembly line is doing better, why do we care if the CEO is raking in big money?

Well, two reasons. First of all, and again, we're just going to have to disagree on reality here. The worker on the assembly line is not doing better. And because of the ease of outsourcing, real worker wages in most industries relative to the cost of living have fallen. So to the extent that the CEO— and it's not just the CEO, by the way, it's the shareholders, and shareholding has become more and more narrowly concentrated. So to the extent that the shareholders— you have things like stock buybacks. Which are a perversion of the way capitalism is supposed to operate. And so the extent that the money manipulators and the traders are making off with more of the product, ordinary working people are getting less. But also that has an impact on democracy because concentrated wealth translates into concentrated power. And the more wealth is concentrated and the more wealthy people invest in both parties, the more wealthy people get to rig the rules, to use one of Elizabeth Warren's favorite expressions. So it matters for the well-being of regular people. It matters for the health of democracy. And can I just respond to the question from the audience? I mean, I think we all wear two hats here. One is, how well am I doing? I hope I'm doing well financially.. But we also wear a citizen hat. And I think the citizen hat— and I'm horribly torturing a metaphor here— but as citizens, we ought to care about the collectivity and whether inequality is not so extreme that it starts impinging on democracy.

Tyler, I think—

I very much disagree with what Bob said. It is not true that real wages are falling in most sectors. It's just not true. Flat out untrue. And if you look at consumption, it's doing great in America at the median. If you look at these high home prices, which is not just Riverside Drive, it's most of the country. If real wages are falling in so many places, how are these homes so expensive? Some small number of shareholders buying everything? It doesn't make sense. The actual data show that starting at a certain point in time, real wages did rise more slowly than they had before 1973. Recently, real wages have been rising at a pretty good clip. Consumption's been doing great. Household debt is in remarkably good shape. And just the numerical portrait he is giving you, it's just not correct.

This really saddens me because I thought we could at least agree on facts and then get into some ramifications. So we can sit here for the rest of the evening, and I wish I had brought a sheaf of alleged data as thick as Tyler's. It's not helpful. I mean, I think by most indicators—

You're challenging motives when you should be citing facts and figures. I have brought very reputable Raj Chetty statistical analyses from the US government, and you're saying alleged because you don't like my facts.

No, I'm sorry.

I think you need to focus more on your own command of facts and citations.

I'm sorry.

And not challenge motives. I'm sorry.

Well, before this turns into a show on a cable network— no, I can— we did expect robust disagreement, not physical, hasn't yet, but it does illustrate an interesting point. The whole premise of this dialogue project is to find if there's some crossing the bridge, but I think whether Bob's numbers are right. The fact is, if in fact two people looking at an issue have real wages decline, cannot come to a common notion, yeah, they are, they aren't, or I guess this point is it depends how you measure it. I don't know.

It doesn't depend how you measure it.

It doesn't depend how you measure it. Correct. I'm wrong about that, okay.

No, you're not saying that. He's wrong about that.

All right. But let me try—

I'm sorry. If you look at any of the Congressional Budget Office data series, and that's a bipartisan office, you will show that income inequality has been dramatically increasing.

Real wages, are real wages rising was the question. You're switching to income inequality.

Well, that's the subject of the debate, and you've challenged that as well. So real wages are the primary indicator of rising income inequality. Because most income for ordinary working people is wage income. And capital income, which is the primary source of income for wealthy people, has just skyrocketed relative to wage income. So wage income has gone up about a percentage point thanks to the Biden stimulus, which we've been disparaging. But for the longer period since the mid-'70s, wages in real terms have been relatively flat. So we can argue all night about which data series is more accurate. I don't think it's very productive.

You switch from real wages are falling to relatively flat, right? That's not the way one should speak. It's better to say I was wrong about real wages. They've been rising at a lower rate than they were before 1973.

This is—

but if you want daily median income, it depends on which time period you're talking about, Tyler. So it's possible that real wages have gone up a little bit since 2019, but they've gone up a lot since then. But well, what's a lot?

At normal rates of increase, was that several percentage points a year?

Real wages have gone up several percentage points a year.

The Trump years are very good for real wages, not because of Trump.

Several points a year, several percentage points a year. Where do you get that?

We will email each other data. Real wages have not been declining in this country for extended periods of time.

Wow.

Talk about wealth. Thank you.

I will take your guidance. Has the wealth disparity increased, and should we care about that?

There is more wealth inequality because we have more innovative businesses, and they sell to more people in the world. So a world where Apple sells iPhones to China and all over, Apple shareholders, executives, of course in relative terms they will be more wealthy than in a world that isn't so globalized. But that's a good thing, and it's also good for other countries. So yes, wealth inequality is up.

We have more wealth inequality because of more financial engineering and the annihilation of the antitrust laws, so that one of the ways that Apple and Meta Facebook and Google protect their monopoly power is they buy up anybody who might conceivably be a competitor. And until Elena Khan became chair of the FTC, the antitrust police, such as they were under either political party, let this orgy of—

But the question is—

It's funny to cite two companies, Meta and Google, that give away their main products for free. Well, obviously they're— As a cause of rising inequality.

Well, gee, how do they make their money then?

Advertisements, of course.

Look, the question I keep coming back to is, my parents, who were Mensheviks, despite the fact that they were very hostile to the Soviet Union and communism, they had a book called Proletarian Literature in the United States. And I mention this because all the fiction of that era written by devotees of the Soviet Union, featured enormously wealthy people who grabbed everything and left nothing for the masses. And the question that I'm asking, and that I hope Tyler Cowen, well, you may, can also address, is does it matter? Is there something about the enormous aggregation of wealth? Somebody wrote a book, I should have looked at it, called The Winner-Take-All Society. And the argument in that book—

Bob Frank, yeah.

And was he— his argument was that's what we've evolved to, that there is this group that has almost everything and the rest have relatively little. I assume that you are not an advocate of that idea.

There is something seriously wrong in American politics. I don't pretend to have a comprehensive explanation of what it is, but I will say if you took the 50 wealthiest people in this country, put them in a room, and let them elect a president, we would get something very different from what we have. Very different.

And that demonstrates to you what? That the 50 wealthiest people don't carry, don't control the— Correct.

Absolutely.

But that's not quite what I'm asking, I don't think. I'm asking whether or not the enormous aggregation of wealth has left other people relatively less well off.

No, it's gains from trade for the most part. There's some rent-seeking, some people get wealth by manipulating government for tariffs or other favors or subsidies. But for the most part, it is wealth that is produced resulting from gains from trade under capitalism.

Well, if you look at the deregulation of finance that then led to the 2008 collapse, which was corruption on the part of both parties, Robert Rubin being the principal protagonist on the Democratic side, Barack Obama was very fortunate that it all fell apart in September of an election year, and he did better in those debates, and so it fell to him to do something about it. And he hired the very people who brought about the deregulation that caused the collapse. And so the deregulation created this enormous bubble, and then look at all the wealth that was wiped out when it all collapsed, most of which ended up hurting ordinary people who lost their homes. The Obama administration policy was to prop up the banks, the very people who caused the collapse, and the wealthy ended up better off than ever. So I think there's a tremendous amount of political corruption, there's a tremendous amount of rent-seeking, to use the technical economic term, in all of these exotic securities that enrich traders, that enrich insiders, that lead to colossal concentrations of wealth, And to say that, well, that's just the result of better innovation, I think, is to really misunderstand the corruption that has afflicted our politics and our economy for the past 25 years.

Before we wrap up this part of the evening, something you said struck me, Tyler. And maybe I'm simply wrong to paint you as left-right. A mistake anyway. But if Medicaid expansion, you say, has helped diminish inequality of a sort—

Many millions have coverage who did not have before.

You think that public education is a major, would be a major contributor to ending or mitigating inequality if it was properly run?

It's not good enough. There's a problem with the system. We need to fix it. I'm not sure how to fix it.

Well, fair enough.

It helps many, yet It dams others. It's complicated.

What I'm getting at is that, just to be clear about where, as they used to say, where you're coming from, you don't— it's not that you are opposed to public investment as sources of mitigating inequality and making life better. Medicaid expansion, public education, right? These are not privately funded operations. This is the government, right?

Yes. Most of all, I would like to see us invest more in science. Which in fact would probably increase income inequality, but would be great for the country.

I'm sorry, would—

I'd like to see us invest more in science, say biomedical science, space programs, artificial intelligence. It's gonna make a lot of people rich. I think it will help most Americans, but probably inequality will go up if we do the right things.

So the counterweight to this is, and I speak as the son of a public school teacher who was a militant member of the United Federation of Teachers. I don't know what the investment over the last few decades has been in public education if you count state and federal. It's gotta be in the trillions of dollars. It has not seemed to produce anything like what you would want an education system to produce, which is why so many people, including a lot of people in the in the minority communities want to break the public education monopoly, go to charter schools and stuff like that. As a progressive, is this something that you say, no, that's not the way we want to do it? Or do you say, you know what, the government's bollocksed this up enough that we at least ought to try to find competitors who maybe can show us a better way to do it?

Let me start with another statistic. If you look at schools where less than 10% of the kids are school lunch eligible, which means suburban schools with low poverty percentages, those kids rank at the very top of the international test scores. It's the American average that is low. And that says to me that the problem is mostly poverty. Public education works very nicely in the suburbs. Thank you very much, because they're affluent parents.

Just a second. Poverty at home or a lack of investment in those public schools?

No, no, there is a ton of investment in those public schools. You're dealing with poor kids from deprived families, many of whom are working 2 and 3 jobs in order to put bread on the table. So I can see from the point of view of a parent in a city that doesn't have very good public schools wanting something better. The problem is a lot of charter schools and a lot of voucher schools are not what they seem to be. They skim the cream. They take the kids who have the most eager parents and leave the public schools with an even tougher population. So I'm ambivalent. I think if you have good regulation of charters, you— and in a lot of communities, by the way, If you set up a charter school, that comes right out of the pocket of the public education budget. So I think it has to be carefully regulated. A lot of for-profit companies, even though these are nominally public schools, end up getting management contracts. I think with the right degree of care and regulation, I'm in favor of some charter schools.

Because we're going to turn to the questions soon, I'm going to usurp the moderator's privilege and make one point. If I might. My first job out of law school was working for Robert Kennedy in his Senate and the campaign. One of the things that struck me—

sorry?

Robert Kennedy Senior.

Oh, Senior, yes. The fact that you have to say that is kind of depressing. Yeah, we did have to get rid of two staff members whose Brains had been eaten by worms, but I don't wanna get into that. But the point is that he was not a conventional liberal. He was not a conventional progressive. He believed that the money spent on public schools was largely being misused or wasted. He was in favor of letting kids in school leave school to get jobs part-time so they could learn work. My point about this is one of the things that I think, and you've sort of touched on this, that may be sorely missing in this whole conversation about what to do about income inequality is any kind of creativeness, is any kind of looking beyond the official lines of left, right, whatever, and saying, what works? What might actually get things in better shape?

I'm for charters, more voucher experiments, and there's plenty of recent papers that show they haven't hurt the public schools,. But I suspect that's not the main issue. I think it has something to do with parents. Again, I don't have a fix for it. I'm not sure how well I understand it. But if you look at, say, a lot of immigrant Asian parents in this country, their children do unbelievably well, including Indians, but for many countries. I'm not sure I can pinpoint what's the relevant cultural difference, but I think we have some problem with parents. Too many families are only single parent. It's a tough issue.

With that, and now I am treading on very dangerous ground because this requires me to do something almost vaguely technical. So if I short out the Northeast power grid, please forgive me. We asked you folks and the folks watching at home to answer a couple of poll questions. We're curious to see what the impact, if any, of this conversation has. So I believe it is now my job to ask that the results of this— well, talk among yourselves. I'll give you a topic.

Aren't we supposed to say like the one thing we took away from the other? Should we do that now?

I see. I'm sorry. This is what I— before we vote again, you are each— this is what I screwed up. You each have 2 minutes for a concluding statement. 2 to 3 minutes, actually, to just wrap up whatever it is you would like to leave the audience with.

I think it's very important to focus on concrete facts backed up with very specific citations and be very clear what the numbers say. What I'm saying with the numbers, it's in accord with common sense. If you could imagine a hypothetical auction of, say, passports in our world and just ask, "Which country's passport would auction for the highest price?" I don't feel I've really ever met a person of any political views who thinks it's anything other than the American passport. And it's not just that the wealthy would buy. I mean, some of the wealthy, they wanna go to Monaco or other places, but it's people who aspire to have better lives and build companies and do great things for their children and grandchildren. And they want to come to America. And that's reflecting something real about the system, that we're not a country of falling wages or disappearing opportunity. And I think if you live, work in New York, or visit here, you just see that every day. And you see and you feel the energy. You also see a lot of inequality. Some of that is problematic, but a lot of it reflects the greatness of this nation and that people have built companies and innovated and done important and wonderful things in really many different areas. That's the strength of New York as a city. It's not just a one thing, but it can be art or music or different kinds of creativity. And you find it here in New York, and people come here for that chance. And you could call those like tournaments, like inequality results inevitably from those. And I think you see that more in New York than say you would in Cleveland. And not every city in the country is going to be like New York or like Manhattan, but ultimately we've got to decide those features of this place. Do we love them? Do we embrace them? Do we want to improve them? Yes. But do we accept them and appreciate their strengths and virtues? Absolutely. Thank you for moderating.

And apologies for getting this slightly wrong.

Jeff says—

We're going to ask you to vote again. That's the key. But before— Mr. Kuttner.

You know, yes, people from all over the world want to come to the United States. That completely ducks the question of whether inequality is rising in the United States and whether that's a problem. Why do people want to come to the United States? Some people want to come to the United States because the places they live in are hellholes. Some people want to come to the United States at the other end of the spectrum for entrepreneurial opportunities. And God bless them. We have a real problem now because far more people want to come to the United States than President Trump wants to let in. And if you look at who does the service jobs in this economy, the people who President Trump wants to deport, they are low-income workers who are working for less wages than most Americans want to work for, some of them undocumented, some of them documented. And I think we're gonna see more inflation under Donald Trump because he's gonna deport a lot of immigrants who are doing low-wage work that benefits other Americans. But the fact that immigrants wanna come to the United States says nothing about the subject that we are ostensibly debating, whether income inequality within the United States is getting worse and whether it's a problem. And I think We can cite different data series, we can argue about whether wages have been flat or declining or rising slightly in some periods, but the big picture is that compared with what was a golden age bequeathed to us by Franklin Roosevelt after World War II, when we had growth and we had much greater inequality, much greater equality, that has slowly gone down the drain for most people. Vast chasms of unequal wealth, rising inequality of income, and despite the fact that a lot of people want to come here, that's its own very serious problem and it's bad for democracy as well as bad for the economy.

Thank you. This is what I was supposed to do now. Take out your phones and vote again. That's what we are asking to do so we can measure whether this conversation has any impact on people's minds. It's going to take a couple of minutes. I really want to thank the both of you for being here. This is a work in progress. We are trying to figure out whether this format actually will yield some kind of— I don't know what— some kind of common understanding. And I just am really grateful that you guys both did it. I don't know if you have suggestions to what we might do better other than making sure I follow the format. Does this make sense to you as a way to deal with an issue like income inequality?

You should have them vote on it. But I would say do more of these, absolutely.

Well, that's the plan. Yeah. And what's really— but I have to salute the 92nd Street Y for this. They're not taking this easy. The next of these is globalism and isolationism. Nice, sexy, easy topic. The one question I've always had, you know, there are so many groups. I'm sure you speak to many of them, both of you. The Aspen Institute, and I don't know, and everybody's looking for how do we get more civil? How do we find some kind of common ground? And my own sometimes response is the people who participate in them are the people who least need to, that the folks at the fringes, I don't know, may not do it. Have you been doing anything like that?

I run my own podcast. I think there's 300 episodes now. If I think of myself as broadly moderate libertarian, Maybe 5 or most 10 of the people I've had on would be that same point of view, which means there's 290 or more who are different points of view. And I'm not paid to do that. I do it because I want to do it. So bring it on. I think in the long run, one should be optimistic. I understand there's so much brutal stupidity and intolerance out there now, but I do think most people are good people, and that if one sets an example of trying whatever, in the long run, I believe in this country and its citizens, and indeed most of the world.

Robert, you have read probably about 50 postmortems since a week ago Tuesday, and a number of them say the problem with the Democrats is we're not meeting the people where they are. That's— I don't know if it— you want to explicate on that just a little bit while we tabulate this? What's your sense of that? Is that a fair rap?

I think although Biden did a quite good job with a very difficult economy, one, of course, he was too old, but the other problem was that given the trajectory of 40 years of diminished prospects for ordinary people, 4 good years of a little bit of wage growth was not enough to compensate for the fact that people can't afford homes, people feel insecure about their healthcare, people feel bad about having to incur debt to go into college. And so the general situation of ordinary people who don't come from wealthy families to give them a stake didn't change very much, couldn't change very much. And so it would require something more transformative on the part of Democrats, and also backing away from some of the cultural leftism, which is really hard. Seth Moulton, congressman from Massachusetts, got into all kinds of trouble by very gingerly saying that maybe people who were born male should not be allowed to compete for women's sports, and the trans community just pounced on him. That's a tricky question because you can make a scientific argument that if you're born male, even if you're trans, you have different physical capacity. So the Democrats are caught between their cultural leftism and the fact that it's more and more difficult to deliver something transformative for working people.

Okay, got the results. Doesn't look good for Kamala Harris. Sorry. Interesting though, at the beginning of the program, we asked this audience, is income inequality overstated? 39% said yes and 61% said no. End of the program, is income inequality overstated? 67% yes, 33% no. That is a— that is a— I'm frankly surprised. But that argument convinced a lot of people. But here's the other part. And this is a completely different kind of thing. Is the federal government the best way to solve income inequality? There has been absolutely no change in the audience. 40% say yes, 60% said no. After the argument, 40% said yes, 60% said no. So this audience came in skeptical of the federal role and stayed that way. But clearly, some of this conversation led people to think, hmm, maybe we've overstated this. Which is, maybe that's a kind of optimistic notion that people's minds, whether you're happy with the change or not, people's minds are subject to change, you know, under the right or powerful information. Whether this, you know, we probably, I think actually Tyler made a good point, we probably should poll whether or not you folks think this is a good idea, whether we should continue this kind of dialogue or not. What do you think? Well, it's gonna happen thanks to the Y. So gentlemen, Thank you very much. I really appreciate your time.

Thank you, Bob.