From Your Salisbury Gathering Minister: Macroeconomic Update!
Well Folks, I promised that I would not preach on macroeconomics again until 2019, but I did not promise that I wouldn’t write anything about it. There has been a big update to the first Macroeconomics sermon from way back in 2014 that I wanted to make sure to share with you all. (You can read the original sermon here.) Three years ago I talked about the research done by an economist named Thomas Piketty in his book Capital in the Twenty-first Century. The book itself is 700 pages long, so there is a lot to digest. The revelation that undergirds the text is that while income inequality lessened toward the middle of the twentieth century, a variety of factors beginning around the start of the 1980s have led to rising inequality in our country that exceeds the inequality experienced in our country in the 1920s. In terms of income, we may be the most unequal society of all time.
After Piketty published his book, folks with a more conservative economic viewpoint criticized his work by calling into question the growing share of money that goes into transfer payments from the government to the the poor and middle class. Anything that puts money from the government in the pockets of lower and middle income people in our country either in cash or as a tax credit is considered a transfer payment. Critics of Piketty’s work suggest that programs such as Food Stamps, the Earned Income Tax Credit, Social Security Disability payments, etc. make up for the fact that the share of income earned in this country by the bottom 90% of its earners is being reduced year by year in favor of higher wages for the ultra-rich. In a paper that was recently published, Piketty attempts to answer this criticism. The paper is fascinating, and delves into many other issues. You can view it here if you want a deeper dive.
The paper concludes that even after taking into account all government transfer payments, two things are true. First, transfer payments have only a fractional effect on income inequality. The money currently given out in welfare and assistance of different kinds pales in comparison to the massive gap in income between the top 10% of earners and the bottom 90%. This would lead one to believe that if it is the purpose of our tax system and our social welfare systems to raise the fortunes of those in need in our society, then it would need to give out far more money to even come close to accomplishing that goal. Second, Piketty shows that most transfer payment funds go to middle class earners, rather than to lower class earners. More money is transferred to the middle class through programs like the Mortgage Interest Deduction, the Childcare Tax Credit, tax exempt health insurance, etc. than money is ever transferred to our poorest people and families through the food stamp and welfare programs that focus on the poor. In other words, what little money is redistributed by our government is unequally redistributed to impact the middle class over the lower class.
Our current levels of economic inequality, while often hard to fully understand, are nothing less than sinful and should be treated as the evil they are. Much like learning about the structures of white supremacy raises our ability to question these structures, learning about how income inequality works will strengthen our ability to question its growth. Injustice appears in many ways, and this is some of the most insidious.
–Rev. Justin Martin