The ‘Unintended Consequences’ of Letting the Rich Get Richer

What happens when a bold new idea for making America more equal hits our political center stage? Those comfortable with our unequal status quo — and those worried about discomforting those comfortable with our current inequality — invariably shout out two sage-sounding words.

“Unintended consequences!”

Making the proposed change, cheerleaders for our economic order go on to explain, will trigger a chain of events that will leave the intended beneficiaries of the bold new idea worse off than they had been.

We see this scenario play out every time a bid for a higher wage minimum threatens to advance. We’ve seen this scenario, for instance, play out this summer as the D.C. City Council, shoved along by the city’s restaurant industry, has moved to overturn a popular vote for a higher tipped-worker minimum wage.

We’ve also seen a textbook example of all this on the national stage in the month since Senator Bernie Sanders and Representative Ro Khana introduced legislation that would require worker-squeezing corporations to pay a special tax equal to the cost of the federal safety-net programs their underpaid workers qualify for and receive.

In other words, for every $1 million in food stamps that workers at Walmart qualify for, Walmart would face an additional $1 million in federal taxes.

Major U.S. corporations, if this legislation became law, would end up paying a lot more than $1 million in extra taxes. An estimated $152.8 billion a year is now going to fund federal safety-net programs that help low-wage workers. Over half of all fast-food workers in the United States, 52 percent, currently rely on taxpayer-funded programs to make ends meet.

“We do not believe,” note Senator Sanders and Representative Khanna, “that taxpayers should have to expend huge sums of money subsidizing profitable corporations owned by some of the wealthiest people in this country.”

Not so fast, say critics of the Sanders-Khanna proposal, the “Stop BEZOS Act” for short. Sanders and Khanna may mean well, critics charge, but their proposal — if ever enacted — would hurt the people that Sanders and Khanna profess to help. Their legislation would “discourage companies from hiring people they believe might need federal government assistance, or accelerate the transition to a more automated workforce.”

A USA Today headline put the matter more bluntly: “In Bernie Sanders vs. Jeff Bezos, Only Workers Lose.”

Unintended consequences!

The critics, at one level, do have a point. The Sanders-Khanna Stop Bad Employers by Zeroing Out Subsidies Act would, if enacted, have some consequences Sanders and Khanna can’t foresee. Egalitarian reforms do have unintended consequences — and the Sanders-Khanna legislation would certainly be no exception.

But let’s keep the larger reality in mind. Every legislative choice we make has unintended consequences.

Responsible lawmakers don’t let this larger reality paralyze our legislative bodies into inaction. Instead, they weigh pluses and minuses as carefully as they can. And if things don’t work as they planned and hoped, they make adjustments down the road.

No major piece of social reform legislation has ever come into the world without provisions and clauses that those hostile to the legislation’s intent can game and end run. So what have progressive lawmakers done down through the years? They’ve worked to amend the initially passed legislation and narrow and eliminate the original law’s flaws and loopholes.

Senator Sanders and Representative Khanna have made no claim that they’ve introduced a perfect piece of reform legislation. They fully expect their legislation to evolve as it moves through the legislative process.

But Sanders and Khanna, even more importantly, understand that inaction has its own “unintended consequences.” By “paying out gobs of taxpayer money to add decimal points to already-bottomless personal fortunes of people like the CEOs of Amazon and Walmart,” as Rolling Stone analyst Matt Taibbi colorfully puts it, we are letting our staggering level of inequality become staggeringly worse.

That has “unintended consequences” not just for the balance of political power in the United States, but for everyone who lives in our deeply unequal nation.

What sort of unintended consequences? The British epidemiologists Richard Wilkinson and Kate Pickett have some compelling answers in their powerful new book, The Inner Level.

The more unequal a society, the pair write, “the more people feel anxiety about status and how they are seen and judged.” And not just poor people, but people at every economic level.

Some respond by losing all self-confidence. Social gatherings “become an ordeal to be avoided.” The more they withdraw, the more they “suffer higher levels of anxiety and depression.”

“Others react quite differently to the greater ego threat of invidious social comparisons,” observe Wilkinson and Pickett. “Instead of being modest about achievements and abilities, they flaunt them.”

Narcissism becomes endemic in highly unequal societies, and the issues of dominance and subordination that become so much more intense in unequal societies also exacerbate other mental illnesses and personality disorders.

Maybe worst of all, greater inequality undermines the “social relationships and involvement in community life” that researchers have “shown repeatedly” to determine health and happiness.

“By making class and status divisions more powerful,” sum up Wilkinson and Pickett, rising inequality “leads to a decline in community life, a reduction in social mobility, an increase in residential segregation, and fewer inter-class marriages.”

Unintended consequences.

So let’s by all means debate the unintended consequences of bold egalitarian reform proposals. But let’s not stop there. Let’s make sure the debate on these proposals also addresses the unintended consequences of letting our our lives continue to become ever more unequal.

Sam Pizzigati co-edits Inequality.org. His latest book, The Case for a Maximum Wage, has just been published. Among his other books on maldistributed income and wealth: The Rich Don’t Always Win: The Forgotten Triumph over Plutocracy that Created the American Middle Class, 1900-1970. Follow him at @Too_Much_Online.