This week's New York Times Magazine leads off with "The Inequality Conundrum," a handy summation of the conventional wisdom on rising inequality in the United States. It endorses the usual New Democrat approach that it's all about pulling up the bottom not holding down the top. I would counter that when the rich get richer, we all get squeezed. But poking holes in that argument would take more than a blog post. That's why I wrote my book. But that doesn't mean I'm going to let the Times off the hook completely Consider this gem from the piece:
"Even though the United States is richer than Belgium, a poor person in Belgium is better off than one here. On the other hand, the price for being Belgian is steep: Belgium's median disposable income -- what people have left to spend after they pay taxes and collect welfare-type payments -- is only 72 percent as high as ours."
I'm not an expert on Belgium. I've never even been there. But I have spent plenty of time in Europe, including a fellowship in the Right's favorite whipping-boy country, Sweden (which makes a cameo in the Times piece). Professionals in Western European countries do make less than their American peers. But the idea that because a country's median per capita take-home pay is 72% of ours, we can assume that they only have 72% as much "disposable income" as we do is deeply misleading. It's the kind of mistake only an economist could make.
European countries all have a universal healthcare system. We don't. That doesn't mean we don't pay for healthcare; it just means we don't pay for it with our taxes. I'm self-employed, so each month I send a hefty check to Aetna for my coverage. I guess theoretically, this is a "choice." I could blow this money on beer (no, let's say wine -- my monthly premium would buy more beer than I could drink in a month). But healthcare isn't a luxury good like wine, it's a necessity. Belgians pay for it with their taxes; we pay for it out-of-pocket. Only an economist could call my monthly tithing to Aetna "disposable income."
And consider higher education. Think of all the American parents squirreling away tens of thousands of dollars for their children's educations. Four years of tuition for a child born today is estimated to be $150,000 a public college and $300,000 at a private one. Again, this is technically "disposable income" to an economist but, as these same economists will surely tell you, spending the money on anything else will likely doom your child to a life among the working poor. In Europe, higher education is tuition-free because it's funded through taxes.
And then there's child care. For my book, The Trap: Selling Out to Stay Afloat in Winner-Take-All America, I interviewed a 33-year-old Danish woman who married an American and moved to Washington, DC. She makes $35,000 a year as a policy analyst at a non-profit and is considering having children. She estimated that if she had two kids, the only rational decision would be to quit her job and stay home with them. "All of our friends [with] children...find it extremely cheap if they're paying twelve hundred dollars a month in child care. And that's illegal-immigrant child care. That's the cheapest you get, and I ask everybody." Her sister, by contrast, is a lawyer in Denmark and a mother or four. "She pays less for four children than I would pay for one child," my source told me. In European countries, government-guaranteed, -subsidized, and -regulated childcare is assured. In America, we pay out-of-pocket with our so-called "disposable income."
So maybe that's why economists call it "disposable income." It's the income you need to "dispose" of to pay for all the necessities of life.
And maybe what we really should dispose of is the system that has us paying out-of-pocket for all these necessities.