AEI Hosts Talk on Inequality, Poverty and Policy

The American Enterprise Institute (AEI) Club, along with the Economics and Political Science Departments hosted Scott Winship to speak this past Thursday, March 3 in McCardell Bicentennial Hall. Winship, the Walter B. Wriston Fellow at the Manhattan Institute, presented a talk titled, “Inequality, Poverty, and Policy.”

Phil Hoxie ’17.5, President of the AEI Club, asked Winship to present after hearing him speak over the summer. Hoxie said, “I chose Winship because I think he has a really nuanced and important view to hear. For so many people, when they talk about inequality and poverty, it is either plan A or plan B. And if you noticed from the talk, he’s really in between the two. It’s a false dichotomy almost.”

Winship’s research interests include standards and economic mobility, inequality and insecurity. He has previously been a fellow at the Brookings Institution and the Manager of the Economic Mobility Project of the Pew Charitable Trust. He has also served as a Senior Policy Advisor at Third Way.

“I thought that he would be a really good pick for Middlebury if you look at what motivates different kinds of people. Liberals are motivated a lot by empathy and conservatives are motivated a lot by a wide range of different things,” Hoxie said. “I thought that because he spent so much time at Brookings, he could talk about an issue that is very touchy in a way that really connected with people’s values, and I think he did just that.”

Winship began by reviewing several studies regarding the trajectory of inequality over the course of the last century before delving into how poverty has progressed over the same period. He ended by sharing some of his own research into the inequality of opportunity between different races and genders before addressing several policy proposals.

He argued that the apparent rises in inequality are somewhat exaggerated. After rising a great deal in the 1970s and 1980s, inequality has not risen much since. Winship said, “If you care about whether the middle class is pulling away from the poor, there is certainly a lot of inequality between those two groups, but it hasn’t gotten worse since the 1980s. What has changed a lot is the top that pulled away.”

Associate Professor of Political Science and Department Chair Bertram Johnson found this to be some of the most interesting data. “At least since the publication of Thomas Piketty’s 2014 book Capital in the Twenty-First Century, academics have been aware of the dramatic contrast in wealth and income between the top one percent and everyone else,” said Johnson.

“The pattern in the data below the very top is not as dramatic. Reasonable people could react differently to this – either interpreting it as a reason to worry less about inequality, or interpreting it as a further indication of the distinctiveness of the super-wealthy. Either way, it was interesting.”

Winship cited changes in tax laws affecting when people realize assets such as capital gains as a plausible reason for an over-exaggeration of income inequality. Another part of this, he argued, is that that changing tax rates altered what people declared as individual income as opposed to corporate tax income.

“A big part of the rise in inequality was because of the changes in tax laws, some of which produced real inequality increases. So as tax rates go down, people are going to work longer, they’re going to retire later, they’re going to take more risks and try to innovate more,” Winship said. “So that’s a real increase in inequality, but some of it is just an artifact.”

In terms of poverty trends, he argued that conservatives are apt to say we have lost the war on poverty because the figures are just as high as those from the 1960s. However, Winship explained that the official measure doesn’t take into account four of the five biggest anti-poverty programs in the country. Accounting for these programs, including SNAP and Medicaid, actually show that the poverty rate has almost been cut in half, according to Winship, although evidence suggests intergenerational mobility hasn’t really improved over time.

His new research consists of studies comparing income mobility across racial and gender lines.

“It was nice to have essentially a low key, balanced presentation on a subject that is important and can give rise to confrontation,” Charles A. Dana Professor of Political Science Murray Dry said. “I suppose if you combine income inequality and race, that’s when you’re likely to get confrontation.”

In terms of potential policy measures, Winship proposed the expansion of the earned income tax credit as well as a housing voucher program to support people who want to move to neighborhoods with more opportunity. He also raised the issue of expanding child tax credits for married couples. This is not to say that this should cut it for un-married couples, but it would be an incentive to reduce out-of-wedlock births. He further emphasized the need to experiment with local initiatives through funding small-scale programs to see what models have potential. Johnson said, “I found the transparent way in which he used data to be refreshing. It allowed us as an audience to ask intelligent questions, at the same time as it challenged some of our assumptions. I didn’t agree with every policy proposal that he offered, but one could tell what aspects of the analysis each was based on – an aspect of the presentation that allowed us to draw our own conclusions. Winship’s is a perspective on inequality that we do not usually see, and although it doesn’t address every angle on the subject, it was informative and interesting.”

For their next sponsored talk, Hoxie said the the AEI Club is bringing in former White House Counsel to President Ronald Reagan, Peter J. Wallison, to present on April 14.