The New Physics of Inequality: Compounding Advantage for the Rich and Accelerating Disadvantage for the Bottom 60 Percent
Researchers examine how inequality is becoming more durable and intractable.
Even rich people sooner or later have to drive over bridges. So why aren’t the wealthy screaming about America’s inadequate — and increasingly unsafe — basic infrastructure?
Investing in infrastructure used to be a political no-brainer. Politicians of nearly every ideological stripe regularly supported government spending on infrastructure staples, everything from school buildings to bridges.
These pols would, to be sure, disagree on emphasis. The more conservative would push for more spending on highways, for instance, the more liberal for investments in mass transit.
But most all elected officials took as a given the necessity of publicly funded infrastructure investment. Businesses simply couldn’t thrive, even conservatives understood, without quality systems in place for transportation, communication, education, and every other basic underpinning of a modern society.
Among the American people this consensus for investing in infrastructure remains as solid as ever. Only 6 percent of Americans, one poll last year found, consider infrastructure “not that important” or “not important at all.”
But support for infrastructure investing among America’s lawmakers has ebbed considerably. One example: Over the past two years, Congress couldn’t even get its act together to pass a basic transportation funding bill.
Overall, U.S. investing in infrastructure has fallen off dramatically from mid-20th century levels. Back in 1968, federal outlays for basic infrastructure amounted to 3.3 percent of the nation’s gross domestic product. This share has sunk by nearly two-thirds. Last year, infrastructure investing made up only 1.3 percent of GDP.
Various national groups have translated the story these percentages tell into dollars and cents. The American Society of Civil Engineers estimates that we would need to spend $2.2 trillion, over five years, to adequately “maintain and upgrade” America’s roads, dams, drinking water, school buildings, and the like.
But lawmakers in Congress are currently cutting, not adding, dollars for infrastructure. The 2013 budget that has passed the House of Representatives slices “transportation infrastructure investment per capita by 28 percent.”
What do stats like these mean for our daily lives? Potholes. Brownouts. Overcrowded buses. Even bridge collapses.
None of this makes any sense. We ought to be witnessing, here in 2012, a historic surge in infrastructure investing. Indeed, contends Economic Policy Institute analyst Ethan Pollack, the stars have all aligned for an infrastructure renaissance.
On the one hand, we have more motive than ever before for making sizable infrastructure investments. After so many years of disinvesting, things are falling apart. Our basic infrastructure systems desperately need repair and replacement.
On the other hand, we have opportunity: The cost of borrowing to fund infrastructure projects, EPI’s Pollack points out, has hit record “low levels.” And the private construction companies that do infrastructure work remain desperate for contracts. They’re asking for less to do infrastructure work.
“In other words,” says Pollack, “we’re getting much more bang for our buck than we usually do.”
And if we spend those bucks on infrastructure, we would also be creating badly needed jobs that could help juice up the economy. Notes Pollack: “This isn’t win-win, this is win-win-win-win.”
Yet our political system seems totally incapable of seizing this “win-win-win-win” moment. What explains this incapacity? Center for American Progress analysts David Madland and Nick Bunker, see inequality as the prime culprit.
The pair have just pulled together all the various studies, from both within and outside the United States, that link levels of infrastructure spending to income and wealth distribution. The evidence from these studies all points the same way. The more wealth concentrates, the more feeble a society’s investing in infrastructure.
Our long-term decline in federal infrastructure investment — from 3.3 percent of GDP in 1968 to 1.3 percent in 2011 — turns out to mirror almost exactly the long-term shift in income from Americas middle class to America’s rich.
And the U.S. states where the rich have gained the most at the expense of the middle class turn out to be the states that invest the least in infrastructure.
Why should this be the case? Madland and Bunker cite several dynamics at play here in their new Center for American Progress infrastructure paper.
One set of dynamics revolves around the state of a society’s middle class. In more equal societies, middle classes will be more robust and politically powerful.
Why does this power matter for infrastructure investing? Middle class people have a vested interest in healthy levels of infrastructure investment. They depend on good roads, schools, and transit.
Wealthy people don’t. If public services frazzle, they can opt out. They can send their kids to private schools. They can commute by helicopter to avoid traffic congestion. And the more inequality in society, the more political leaders will lean their way — and deny public goods and services the funds they need to thrive.
Some wealthy, Madland and Bunker acknowledge, do see the connection between infrastructure and healthy economic development. But increased investment in infrastructure demands higher taxes, and lower tax rates have always been among the “more cherished priorities of the rich.”
“So when push comes to shove,” Madland and Bunker posit, “infrastructure is likely to take a backseat to keeping taxes low.”
A deeper dynamic also seems to be at work. Higher levels of economic inequality, studies show, “can breed a selfish orientation toward public policy.”
By contrast, notes the new Center for American Progress analysis, people in more equal, strong middle-class societies “feel they share a similar fate” and more willingly make investments that may not personally benefit them directly.
A “significant body of evidence,” the analysis concludes, “suggests a strong middle class is important for public investments.” Unequal societies — like the 21st century United States — have weak middle classes.
That leaves Americans with a basic choice. We can press, on every front, for greater equality. Or spend more time looking out for potholes.
Sam Pizzigati co-edits Inequality.Org.