Wednesday, August 17, 2011

Land of the Free, Home of the Poor

REPORT AIR DATE: Aug. 16, 2011

JUDY WOODRUFF: Now, the opening chapter of an occasional series about inequality in America. It's a subject that's getting more attention in light of the weak economy and the ongoing debate around budget cuts and raising revenues.

Billionaire businessman and philanthropist Warren Buffett, who has argued in favor of higher taxes on the wealthiest, cited the growing disparity in an interview on PBS last night with Charlie Rose.
Making Sen$e
Making Sen$e


WARREN BUFFETT, Berkshire Hathaway: It should be a land of opportunity. And people that get rich. They -- nobody is going to confiscate everything or anything of the sort.

But the distribution in this country -- market system has led to extremes. A guy that is wired like me -- I don't have any special status in this world. I'm not -- a great nurse, a great teacher may be much more valuable to society than I am. I'm wired so that I can figure out what things are worth. So...

WARREN BUFFETT: Yes. So, I get super rich.

And somebody whose adenoids are in a certain arrangement gets rich. But television makes a lot of people rich. I mean, Lou Gehrig held out for $25,000 in the late '30s. You know, they benched him. They didn't bench him, breaking his streak, but he had a long -- he had a long struggle.

Television has made the .230 hitter or the .240 hitter better than Ted Williams at .406.

So, it -- there's a lot of serendipity. We -- everybody in this country owes their good fortune in some way to the rest of the country.


DAN ARIELY: People don't understand how much wealth the top 20 percent have. They actually have 84 percent of the wealth. And they think they have much less. And more disturbingly, people don't understand how little wealth the bottom of the distribution have. The bottom 40 percent of the U.S. have about 0.3 percent of the wealth, basically zero. And people think they have much more than that.


PAUL SOLMAN: But how can that be, given the spread of McMansions and luxury brands in America's wealthy communities so easy to contrast with almost any poor neighborhood in the country?

Harvard Business School Professor David Moss:

DAVID MOSS, Harvard Business School: People look around them at their local communities. And local communities tend to be more equal than the broader society. And so, as they look around, that's essentially their judgment -- or our judgment -- I should include myself -- see the same thing.

PAUL SOLMAN: So there isn't that much inequality in Newton, Mass., where you live, for example?

DAVID MOSS: Much less, much less than -- than in the society as a whole.

PAUL SOLMAN: Maddie McWilliams, who attends high school at upscale Newton, agrees.

HIGH SCHOOL STUDENT: It's getting easier for people to ignore the inequality. They can stay far away from it.

PAUL SOLMAN: Insulate themselves?


PAUL SOLMAN: Another reason people don't realize the extent of inequality, most of it is explained by gains at the tippy-top.

Harvard economist Richard Freeman:

RICHARD FREEMAN, Harvard University: In the last 30 years or so, the share of national -- of income that has gone to the upper 0.1 percent -- not to the upper 1.0 percent -- 0.1 percent -- rose by 10 percentage points. That is one of the most astounding patterns I have ever seen in data.

PAUL SOLMAN: Point-one percent?

RICHARD FREEMAN: Point-one percent, yes.

People sometimes say, oh, the rich, it's the upper 10 percent, it's the upper 5 percent. No, no, this is the 0.1 percent. Warren Buffett has this wonderful statement where he says: Yes, there's been a class war in the United States. And my class, namely the super rich people, have won.

PAUL SOLMAN: A graphic, recent example, this New York Times online slideshow of children's playhouses, which can cost up to a quarter-of--million dollars. Meanwhile, more and more Americans, millions of them, can't afford their own homes.


RICHARD FREEMAN: We're high for a poor country, in terms of inequality, and we're a rich country. We're about the same level of inequality as China. And, of course, China, half the population are rural peasants who are not part of the modern world.

And if we were to compare us with African countries, dictators in different places, you know, taking a lot of the wealth from normal people, we would be among the top half of the African countries of inequality. So, the U.S. really has reached an extraordinary level of income inequality.

PAUL SOLMAN: The luxury goods speak for themselves. But who knew that the kids of the wealthy were flying private jets to camp this summer? OK, to some, this might be cause for indignation, but, to others, it's not that simple.



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