Today, President Obama gave a speech bashing Republicans’ Paul Ryan budget, which would balance the federal books over 20 years by deeply cutting discretionary spending and rejiggering federal entitlements to shift rising health care costs off the government. Obama called the plan “a prescription for decline,” ”thinly veiled social Darwinism” and “antithetical to our entire history as a land of opportunity and upward mobility.” Income disparity, he said, is “the defining issue of our time.” This kind of talk has been a staple of Obama’s political message for a while. But here’s a bit of new information on how it works.
Courtesy of our compatriots at Moneyland, a recent study authored by Harvard’s Michael Norton and Duke’s Dan Ariely found that almost regardless of income or political persuasion, Americans’ view of the “proper” distribution of wealth is much more progressive than the current reality:
In their survey of 5,500 Americans, Norton and Ariely started by asking respondents which of three templates of wealth equality they thought would be best: one representing perfect equality, where the bottom one-fifth of the population owns one-fifth of all wealth, as does the top fifth and every other fifth; one representing the current U.S. situation, where the top fifth controls 84% of all wealth, while the bottom fifth owns 0.1%; and one representing the distribution in Sweden, where top fifth owns 36% and bottom fifth controls 11%.
Note that the countries where the last two distributions currently exist — the U.S. and Sweden — were not revealed to the survey participants, which no doubt helps to explain why better than 90% of respondents preferred the wealth distribution in Sweden. Even more striking, this overwhelming preference for Sweden’s income distribution held among people who voted for George Bush in the 2004 election as well those who pulled the lever for John Kerry. And it varied only to a minuscule degree with the survey takers’ own incomes.
In other words, despite disagreements on the best way to achieve these ends, Obama is appealing to a wide audience when he talks about achieving a flatter income distribution. The Center on Budget and Policy Priorities estimates that nearly two-thirds of the Ryan budget’s savings, some $3.3 trillion, would come out of programs for the poor, including food stamps, Pell grants and Medicaid. That appears to be a soft target for Obama to attack.
But that only works as far as people are aware of the way American wealth is currently distributed. According to Norton and Ariely, the average American believes the top 20% of the population controls 59% of the country’s wealth — as opposed to 84% in reality — and that, if we were redesigning our economy from scratch, that top one-fifth aught to only control 32%.
“I can’t remember a time when the choice between two competing visions of our future has been so unambiguously clear,” Obama said Tuesday. “In the months ahead I will be fighting as hard as I know how for this truer vision of what the USA is all about.” Part of that fight will not just be persuading Americans how things could be, but showing them how they already are.