(Credit: AP)

Have conservatives learned their lesson from the 47 percent debacle? A new paper from arguably the most influential conservative economist in the country, titled “In Defense Of The One Percent,” suggests no. Even worse, the paper shows how dividing America into Randian producers and naturally subordinate moochers is the only way to resolve a central contradiction in modern conservative economic thinking — meaning that the GOP will be stuck making a losing argument until it conducts a total rethink of its economic philosophy.

Harvard Economics Professor N. Gregory Mankiw, the author of “In Defense,” was the chairman of George W. Bush’s Council of Economic Advisers and counseled Mitt Romney on economic issues in 2006 and 2012. Despite his occasional heresies (Mankiw famously supports a carbon tax to fight global warming), Mankiw is one of the most-respected and most-representative conservative economist active in public life today.

Mankiw’s defense of the one percent proceeds from a fairly conventional script. He argues that structural transformations in the economy, principally caused by the advent of new technology like computers, “have allowed a small number of highly educated and exceptionally talented individuals to command superstar incomes in ways that were not possible a generation ago.” The recent spike in inequality, for Mankiw, is then largely caused by the smart and talented being able to express their talents freely. Much of Mankiw’s paper is devoted to arguing that punishing these talented individuals through more progressive taxation would be unfair because they earned it fair and square.*

This argument doesn’t work if you think, like many Americans, the economic game is rigged in favor of the already-rich. As Mankiw concedes, the evidence that inequality persists over generations — that is, people with rich parents tend to end up rich too — is overwhelming. If this reflected structural disadvantage like unequal access to health care and education, then it would be hard to argue that the best and brightest, rather than richest and whitest, were being rewarded by rising inequality.

Instead of trying to argue away the facts on inequality, Mankiw attempts to reexplain them. He proceeds in part by personal anecdote: “I do not see my children as having significantly better opportunities than I had at their age,” he writes, despite growing up wealthier than their middle-class father. Recognizing this impression to not be enough, Mankiw turns to the somewhat more surprising crutch of genetics. “Parents and children share genes,” which in Mankiw’s telling explains “intergenerational persistence in income even in a world of equal opportunities.” Though he disavows “genetic determinism,” Mankiw nevertheless thinks genetic transmission of things like IQ (a common conservative trope) make it “implausible to interpret generational persistence in income as simply a failure of society to provide equal opportunities.”

Even setting aside the obvious strawmanning here (nobody thinks persistent inequality is only caused by lack of opportunity), Mankiw’s analysis is unpersuasive. It can’t explain, for instance, why the United States has one of the lowest rates of intergenerational mobility in the developed world. Presumably, if genetics overwhelmed the effects of family inequality, more egalitarian distributions of wealth wouldn’t correlate with higher rates of mobility, but evidence from the developed world suggest they do.

But more fundamentally, follow Mankiw’s logic to its conclusion. He believes both that 1) the fact that the rich tend to stay rich, and the middle class tend not to become rich, are consequences of the natural distribution of talents and that 2) the most talented, morally speaking, deserve to keep what they earn.

In essence, Mankiw is arguing that a partly genetically determined upper class deserves most of society’s wealth and deserves to pass it on to their kids. It’s an argument that we’re living in a natural American hierarchy.
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The first three months of 2013 saw wages fall 3.8 percent – the largest drop in hourly pay in the 65-year history of that statistic – despite an increase in worker productivity. With high unemployment freeing employers from fears that their employees will turn elsewhere, the U.S. recovery has been marked by a decoupling of rising productivity from stagnant wages.

The gloomy milestone partly reflects the predominance of low-wage service jobs in the slow, steady streak of job growth since the recession. Increasing the minimum wage, as progressives in Congress hope to do, could help counter downward wage pressures at the bottom of the earnings ladder.

The recovery has been far more pleasant at the other end of the income spectrum. CEO pay is up to record highs for the second year in a row, at $9.7 million per year on average in 2012. In fact, 121 percent of total income gains from 2009-2011 went to the top one percent of earners – meaning everyone else lost ground.

The government could influence the private mortgage industry to remedy the ongoing racial, ethnic, and geographical disparities in the availability and quality of loans for would-be homeowners, according to a new report from the Center for American Progress and the National Council of La Raza.

By shifting the incentives faced by financial firms that package and resell home loans in the secondary mortgage market, lawmakers can take a big step towards reducing the persistent wealth gap between white families and everyone else. Racial disparities in lender behavior are not a relic of the past, despite a variety of federal laws designed to eliminate the most flagrantly prejudiced housing policies and lender actions. The report draws on a 2011 finding from the Center for Responsible Lending that even higher-income black and latino borrowers were more than twice as likely as high-earning whites to face foreclosure, and that minority borrowers with high credit scores were three times as likely to receive a high interest rate loan as their white counterparts.

The secondary mortgage market drives the decisions loan originators make on the ground. When the secondary market expressed an insatiable appetite for mortgage-backed securities during the inflation of the housing bubble, that drove originators to crank out as much mortgage paper as possible, with decreasing regard for the sustainability of the loans. This drove plenty of bad innovation – so-called NINJA loans, extended to people with “No Income and No Job/Assets,” for example – and the CAP/NCLR paper suggests ways the government could instead encourage good innovation.

CAP and NCLR suggest a model, pulled from a UNC Center for Community Capital analysis of 46,000 loans, for the sort of access-expanding mortgage innovation the secondary market could encourage. UNCCCC found that when lenders helped “nontraditional yet creditworthy borrowers buy homes they could afford with mortgages they could manage,” these low-down-payment, long-term, fixed-rate, flexibly underwritten loans actually had a substantially lower rate of serious delinquency than prime adjustable-rate mortgages.

The future of housing finance seems likely to rely upon private capital rather than the government institutions that already have incentives to expand credit access to the sorts of nontraditional yet successful borrowers identified by the UNCCCC study. CAP and NCLR therefore propose a tiny tax on securitized mortgages to raise money for a “Market Access Fund,” a sort of innovation bank that would field and fund proposed pilot programs to improve access to home loans for underserved populations.

The borrowers of the future will be less economically secure and less white, reflecting ongoing earnings stagnation and demographic shifts. As the structure of the secondary mortgage market evolves, the incentives it offers to lenders must evolve to. Otherwise, the report argues, America will miss a key opportunity to redress the inequality that’s undermining the nation’s economic future.

North Carolina lawmakers are seeking to shift much of the state’s tax burden off its wealthiest citizens and most profitable businesses and onto its low- and middle-income residents. After initially proposing to eliminate the state’s income tax outright, Republicans are instead introducing a flat income tax rate across all earning levels. The proposal unveiled Thursday would also expand the reach of sales taxes in the state, which hits low-income families hardest, and comes on top of the March repeal of a tax credit for 900,000 working families in the state.

The state’s effective tax rates already favor the rich. The North Carolina Justice Center, a progressive think tank in the state, explains that the richest one percent of tarheels pay 6.5 percent of their income in combined sales and income taxes at the state level, while the lower 80 percent of earners pay between 9 and 10 percent combined. Yet Republicans propose to give that top one percent a tax cut while hiking rates for those already paying more:

NCJC adds that the lost revenue from this plan “could be as high as $573 million” per year. Given that state law requires balanced biannual budgeting, the tax proposal is likely to force major cuts to public services if approved.

If all of this sounds familiar, it should. Supply-side economists have pushed for this sort of regressive tax reform in the name of economic growth for over 30 years, at all levels of American governance. Art Laffer, the chronically misleading godfather of this widely discredited approach to tax policy, helped press for the initial repeal proposal from North Carolina’s conservatives. Laffer’s had a prominent hand in the broad wave of state-level supply-side tax reform proposals since last year, and statehouse Republicans seem prepared to continue believing him even after his research for the American Legislative Exchange Council has been shown to be error-riddled.

The United States ranks toward the bottom among developed countries when it comes to work-life balance, according to the updated Better Life Index from the Organisation for Economic Co-operation and Development (OECD).

While the country tops the charts for income and housing, other important economic indicators, its worst ranking is in work-life balance. It clocks in at ninth-to-last out of 34 countries, thanks to longer than average work hours and less time devoted to leisure and personal care. The U.S. is in the top 14 for the number of hours worked among developed countries.

Long hours don’t just starve workers of time they could otherwise spend on personal needs or caring for family members. One study found that they push working mothers out of male dominated jobs, increasing occupational segregation and harming their earning potential.

The U.S. has fallen behind in some other ways when it comes to work-life balance, particularly for women workers. The country ranks at number 17 out of 22 developed countries on women’s labor force participation, down from a post at number six two decades ago. Those losses can be attributed to a lack of policies that can help working parents, according to researchers, including paid parental leave, protections for part-time work, and spending on child care.

The U.S. had some other low ratings in the OECD’s Better Life Index, including ranking at ninth-to-last for job security. While the country is number one for income and wealth, it ranks dead last for inequality in personal earnings among the rich and poor.

Income inequality around the world increased more during the financial crisis that it did in the previous 12 years, according to new data from the Organisation for Economic Cooperation and Development (OECD) released on Wednesday. The United States has one of the largest gaps along with Chile, Mexico, Turkey, and Israel. The top 10 percent of the income scale fared better than the poorest 10 percent in 21 out of 33 countries.

In the United States, the top 10 percent of the income distribution had 15.9 times the income at of the bottom 10 percent in 2010, compared to 9.8 times for the OECD on the whole. The U.S. also has a higher Gini coefficient – a measurement of a country’s income inequality – and a higher share of the population living on less than half the median income.

But there is a silver lining: The numbers would look much worse without social spending. Nearly a third of the country’s population would be living on less than half of the median income without the social safety net, but taking it into account drops that number to 17.4 percent. The Gini coefficient also falls significantly, proving that social spending is doing a lot to bring down income inequality.

That could change as the U.S. continues to cut government spending. The report “warns that further social spending cuts in OECD countries risk causing greater inequality and poverty in the years ahead.” The U.S. is set to cut $1.5 trillion in spending over the next decade, and new CBO numbers show that the deficit has dramatically dropped thanks in part to falling public spending.

The United States was already home to a persistent wealth gap between white and minority families before the Great Recession, but the downturn made that gap even worse, according to a new study from the Urban Institute. Before the recession, white families held about four times more wealth than the average nonwhite family. By the end of the recession in 2010, though, white families were six times as wealthy, as the New York Times reports:

The Urban Institute study found that the racial wealth gap yawned during the recession, even as the income gap between white Americans and nonwhite Americans remained stable. As of 2010, white families, on average, earned about $2 for every $1 that black and Hispanic families earned, a ratio that has remained roughly constant for the last 30 years. But when it comes to wealth — as measured by assets, like cash savings, homes and retirement accounts, minus debts, like mortgages and credit card balances — white families have far outpaced black and Hispanic ones. Before the recession, non-Hispanic white families, on average, were about four times as wealthy as nonwhite families, according to the Urban Institute’s analysis of Federal Reserve data. By 2010, whites were about six times as wealthy.

The gap between white and minority families increased for several reasons, mainly because the housing bust that sparked the recession was more pernicious for nonwhite families than it was for whites. Black and Latinos were twice as likely to have been affected by the housing crisis, thanks in part to predatory lending and foreclosure policies, and the loss of housing value and homes demolished accumulated wealth for those families.

Minority families were also more likely to lose jobs during the recession and have been slower to return to the workforce. That was only exacerbated by crunched budgets at the state and local level and federal spending cuts that led to a massive decline in public sector jobs, where blacks and Latinos are more likely to work. That left many families unable to weather the recession as well as white families, and, as the Urban report notes, led them to tap into retirement accounts and other long-term savings that further drained the amount of wealth they held. That blacks and Latinos were already more likely to be unemployed — and are still facing unemployment rates nearly double that of whites four years later — has only made it worse.

Previous studies have found similar results — an analysis of Census Data in 2012 found that the recession doubled the wealth gap between whites and blacks, and it has tripled in the last 25 years. And with the federal government continuing to turn its eye away from the people hurt worst by the recession, pursuing further spending cuts and largely letting banks off the hook for their role in the crisis, increasing the odds that the gap between white and minority families will only continue to grow larger.