At Rolling Stone, Jeff Goodell talks to Bill Gates about, well a variety of things—Silicon Valley, climate change, his foundation—but the part I’m particularly interested in is Gates’s views on poverty and income inequality:
Let’s talk about income inequality, which economist Paul Krugman and others have written a lot about. As a person who’s at the very top of the one percent, do you see this as one of the great issues of our time?
Well, now you’re getting into sort of complicated issues. In general, on taxation-type things, you’d think of me as a Democrat. That is, when tax rates are below, say, 50 percent, I believe there often is room for additional taxation. And I’ve been very upfront on the need to increase estate taxes. Particularly given the medical obligations that the state is taking on and the costs that those have over time. You can’t have a rigid view that all new taxes are evil. Yes, they have negative effects, but I’m like Krugman in that if you expect the state to do these things, they are going to cost money.
Should the state be playing a greater role in helping people at the lowest end of the income scale? Poverty today looks very different than poverty in the past. The real thing you want to look at is consumption and use that as a metric and say, “Have you been worried about having enough to eat? Do you have enough warmth, shelter? Do you think of yourself as having a place to go?” The poor are better off than they were before, even though they’re still in the bottom group in terms of income.
The way we help the poor out today [is also a problem]. You have Section 8 housing, food stamps, fuel programs, very complex medical programs. It’s all high-overhead, capricious, not well-designed. Its ability to distinguish between somebody who has family that could take care of them versus someone who’s really out on their own is not very good, either. It’s a totally gameable system – not everybody games it, but lots of people do. Why aren’t the technocrats taking the poverty programs, looking at them as a whole, and then redesigning them? Well, they are afraid that if they do, their funding is going to be cut back, so they defend the thing that is absolutely horrific. Just look at low-cost housing and the various forms, the wait lists, things like that.
When we get things right, it benefits the entire world. The world’s governments don’t copy everything we do. They see some things we do – like the way we run our postal service, or Puerto Rico – are just wrong. But they look to us for so many things. And we can do better.
Gates also talks about how difficult it is to make specific changes to improve things because of the current political climate where there is little consensus on what should be done. “If I could wave a wand and fix one thing, it’d be political deadlock, the education system or health care costs,” Gates says. “One of those three, I don’t know which.”
Photo: Domain Bonyard
Income inequality in New York, in 3D! Use the slidey things to shift between the green towers of wealth and city scape. Fun for hours. (Minutes.) The best part was when Manhattan was flipped in my mind and I thought, briefly … all the real money in NYC is actually in the Bronx? Was a happy little moment. Recommend.
It is simply the case that in financial policy, particularly, we seldom think through the consequences of our actions. Very clever men have a capacity for very great mistakes which often elude simpler souls. Western money printing is slowly burning the bridges between rich and poor. Whatever the economic benefit (and I am dubious there), it is worth considering that there is a significant social cost.
In The Telegraph, Thomas Pascoe argues that quantitative easing is widening the gap between the rich and poor because it mostly benefits people who have assets and are rewarded when the stock market booms.
Quantitative easing! What a boring term! What it essentially means is that the Fed uses the central banks to invent money out of thin air, which is then pumped into big banks like Bank of America and J.P. Morgan Chase, which is then supposed to take that money and lend it to regular people to buy houses and cars and start their businesses (Planet Money has a good primer on quantitative easing here).
But the banks aren’t lending the money to consumers—not like they used to, anyway, because of the fallout during the financial crisis. So all that money ends up in trading accounts. The Dow hit an all-time high yesterday, and the poor, the people who don’t have assets or money in investment accounts aren’t going to benefit from the market surge. Some may argue that that rich will take whatever money they’re making from the markets and use it to create jobs. Some of that may happen, but the data out there shows that inequality has been expanding during the recovery, not contracting.