What’s at stake for the U.S. as Americans struggle to climb the economic ladder?

December 27, 2013 at 12:00 AM EST
Despite a stubborn unemployment rate, benefits will soon end for the 1.3 million who have been jobless for more than six months. A political battle over those benefits reflects a broader conversation about U.S. inequality. Hari Sreenivasan talks to Scott Winship of the Manhattan Institute and former Labor Secretary Robert Reich.
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JUDY WOODRUFF: Let’s turn our attention now to economic issues and a pressing deadline: the expiration of unemployment benefits for some Americans this weekend. It comes in a year when there have been mounting concerns over inequality and lack of opportunity.

Hari is back with that.

HARI SREENIVASAN: More than four years after the recession hit, the unemployment rate remains stubbornly high at 7 percent. But after Saturday, unemployment benefits will end for an estimated 1.3 million individuals who have been out of work for more than six months.

Typically, states and the federal government provide unemployment insurance for up to 26 weeks. In the wake of the recession, emergency aid was provided for a longer period, up to 99 weeks total at one point, and the program was repeatedly renewed.

But when Congress went home this month, it didn’t extend the benefits again after Democrats like Senator Richard Durbin of Illinois urged his colleagues to do so.

SEN. RICHARD DURBIN, D-Ill.: If we really care about working families and those who are on their way back to work, we have got to extend these unemployment benefits.

HARI SREENIVASAN: Some Republicans argue extending benefits is the wrong prescription as the recovery takes a more firm hold.

Senator Rand Paul of Kentucky made that case on FOX News.

SEN. RAND PAUL, R-Ky.: When you allow people to be on unemployment insurance for 99 weeks, you’re causing them to become part of this perpetual unemployed group in our economy. And it really — while it seems good, it actually does a disservice to the people you’re trying to help.

HARI SREENIVASAN: The battle is the latest this year over broader concerns about inequality and a growing divide, issues that first caught fire during the Occupy movement.

PROTESTERS: Hold the burgers. Hold the fries. We can’t survive on $7.25.

HARI SREENIVASAN: This year, fast food workers and other low-wage employees held strikes around the country, calling for a living wage of $15 an hour. Five states raised their minimum wage, as did several counties and cities, like Washington, D.C.

Anxiety over inequality and mobility, the ability to move up the economic ladder, were a critical part of the debate. New York City mayor-elect Bill de Blasio won after campaigning on a tale of two cities. And in a speech earlier this month, President Obama called the issues the defining challenge of our time.

PRESIDENT BARACK OBAMA: The combined trends of increased inequality and decreasing mobility pose a fundamental threat to the American dream, our way of life, and what we stand for around the globe.

HARI SREENIVASAN: But some conservative economists say the trends are not that clear-cut, and there’s no political consensus yet on how to address it.

Late this afternoon, the president said Congress — he would ask — press Congress to pass a three-month extension of unemployment benefits when members return from the holiday.

Some perspective on all this and an assessment of the scope of these bigger problems.

Robert Reich is a former labor secretary during the Clinton administration and now a professor of public policy at University of California, Berkeley. His documentary “Inequality For All” explores the topic. And Scott Winship is a senior fellow at the Manhattan Institute whose work includes economic mobility and inequality.

Robert Reich, I want to start with you on the news of the day here. Your thoughts on the expiration of the long-term unemployment benefits?

ROBERT REICH, former U.S. Labor Secretary: Well, Hari, those are just not just bad for those families, but also bad for the economy overall, because, remember, those unemployment benefits going to the unemployed will be or have been turned around by the unemployed in terms of their purchases of goods and services.

If they’re not getting that money any longer, they will not be able to turn around and buy goods and services. And that means that the economy will be that much less robust.

HARI SREENIVASAN: Scott Winship, should they be extended?

SCOTT WINSHIP, Manhattan Institute: You know, I don’t think it is a terrible idea.

I do think that we’re talking about a pretty small fraction of the labor force, probably about 3 percent of next year’s workers. So it’s easy to overstate, I think, the cost and the benefits of extending them. But the unemployment rate remains high, and I don’t think it’s a bad idea to extend them for a bit longer.

HARI SREENIVASAN: OK.

Robert Reich, let’s talk a little bit about economic inequality. Is it increasing for most of us, or is the inequality just increasing between the top 1 percent and the rest of us?

ROBERT REICH: Most of the inequality we are seeing and we have experienced in this country for the last 25 to 30 years has been between the very top, that is , the top one-tenth of 1 percent or 1 percent, or maybe 3 percent to 5 percent, depending upon how you measure it, and everybody else.

The median household income continues to stagnate, by some measures actually dropping, adjusted for inflation, while the people at the very top, they have got 95 percent of all of the economic gains since the recovery began.

And so there’s no question that inequality is widening. But it’s widening primarily between the top and everybody else.

HARI SREENIVASAN: Scott Winship, should we be concerned about this?

SCOTT WINSHIP: I don’t think there’s much reason to be concerned about it.

When you look at the literature, the claims about how inequality’s rise has hurt the middle class and poor have been really overstated. The middle class has not stagnated. The Congressional Budget Office puts out income figures every year. And they show that, since 1979, the middle class is something like 40 to 50 percent better off than they were, and the poor actually are quite a bit better off than they were as well.

So I think there’s even a little bit of question about whether the extent to which the top has pulled away from everyone else that hinges on how you measure the income that folks at the top get from their investment income, but, at any rate, the dots have yet to be connected, I think, pointing to where this increase has hurt other folks.

HARI SREENIVASAN: Robert Reich, one of those dots that people like to connect is the income inequality along with economic mobility. Is there a strong connection between the two?

ROBERT REICH: There is a strong connection between the two, Hari, for the simple reason that, as the income ladder lengthens, because people at the top are that much further away from the middle people at the middle, and the people at the middle are far away from people at the bottom, as that ladder elongates, it’s harder and harder to get anywhere on the ladder if you start climbing.

Even if you climb that ladder at the same rate of upward mobility that we had in this country 30 or 40 years ago, which we don’t have, it would still be harder to get anywhere. Plus, we have a lot of middle rungs of that ladder now disappearing, because all those manufacturing jobs that used to be unionized and paid pretty good wages, even though a lot of education wasn’t needed, those rungs of the ladder are now gone.

HARI SREENIVASAN: So, Scott Winship, is there enough data to support that, or how about the idea of economic opportunity? Someone who is born in a poor family or poor household today, do they have the same shot of climbing out of that poverty?

SCOTT WINSHIP: Well, again, I think you can be concerned about whether there is enough equality of opportunity and whether folks at the bottom have enough of a chance to get ahead.

But for folks who study the topic, the research couldn’t be clearer that there is no consensus that mobility has actually declined in the United States. Most of the studies out there actually show there has been very little change since the mid-20th century.

So you can believe that we’re not — we don’t have enough opportunity, which I do. But the idea that it has declined, there is very little to support that.

HARI SREENIVASAN: Robert Reich, your response?

ROBERT REICH: Well, we must be looking at different studies.

With due respect, everything I have seen, the Pew studies, other studies show that actually it is harder for a poor kid to make his way or her way up, not only because geographic poverty is more concentrated, but also because those — that geographic poverty also correlates with poorer schools, with poorer public health, fewer public parks, often environments that simply are unsafe or are not conducive to upward mobility, fewer models of people who are actually making it around you.

If I can also go back to something else your other guest offered before, that was that it is not a problem for the economy that we have widening inequality, let me just suggest that one of the reasons we are seeing such a slow, anemic recovery is because the vast middle class doesn’t have the purchasing power to keep the economy going.

With so much money, over 20 percent of total income, going to the top 1 percent, the vast middle class and the poor just — they’re — they don’t have enough money to buy enough to keep the economy — and to get the economy back on track.

HARI SREENIVASAN: So, Scott Winship, what about that idea that the economic — the trickle-down effect isn’t happening? If the 1 percent are getting wealthier, they’re not spending it and creating the same type of demand that the middle class would?

SCOTT WINSHIP: It is a theory that makes intuitive sense, I think, but, again, when you look at the literature on whether rising inequality, whether more inequality results in slower growth, a number of studies, as many as show that it hurts growth, actually show that more inequality increases growth.

Now, I don’t think that that means we ought to be rooting for more inequality in the United States. But if you are really looking for a smoking gun that more inequality has hurt economic growth of the middle class or the poor, it’s just not there.

HARI SREENIVASAN: Robert Reich, what about the consequences of whatever rate of inequality that two of you might ever agree on, but what are some of those consequences?

ROBERT REICH: Well, besides slower economic growth — and I do think the studies predominantly do show that — and, intuitively, it’s obvious — beyond that, you have a kind of corruption and eroding of our democracy.

When more and more money accumulates at the very top, so does, inevitably, political power. As the great American jurist Louis Brandeis once said, we can have a great deal of money in the hands of a few people, or we can have a democracy, but we can’t have both, because money inevitably of that degree, as in the late 19th century, now, does corrupt and undermine with lobbying and campaign contributions our democracy.

HARI SREENIVASAN: Scott Winship, quick last word?

SCOTT WINSHIP: Well, you know, we have a Democratic president who just won a second term. We had a huge expansion of entitlements in the Affordable Care Act.

We’re talking about raising the minimum wage. I just think the evidence isn’t there that somehow inequality has produced politics that has been less kind to the middle class and poor.

HARI SREENIVASAN: All right, Scott Winship, Robert Reich, thanks so much for your time.

ROBERT REICH: Thanks, Hari.

SCOTT WINSHIP: Thank you.