Elections in America: It is also about rising equality by Nora Lustig

In a recent Washington Post article, President Obama was quoted saying “When we see people, global elites, wealthy corporations seemingly living by a different set of rules, avoiding taxes, manipulating loopholes … this feeds a profound sense of injustice.”[2]

So, why did so many of the victims of such injustice vote for one of the members of this global elite who lives by different rules such as Trump? Could it be that what aggravates the majority of Trump voters is not that the top 1 percent in the US has been able to reap most of the economic gains in the past decades but, paradoxically, a rise in equality?[3] More equality in three dimensions may be feeding a greater sense of unfairness, indignation, and impotence than the increase in income and wealth inequality: the rise of an African-American elite, the empowerment of women, and the legitimation of the gay community’s right to be treated as equals by the law. This is my hypothesis.[4]

First, some facts:

  • In the years from 2005-2013, “the income bracket with the largest increase for Black households occurred in the number of households earning over $200,000, with an increase of 138 percent, compared to an increase of 74 percent for the total population.”[5] Of course, inequality among blacks is extreme. A Pew Research Study shows that 35 percent of black households have negative or no net worth. However, at the same time, the number of estimated black millionaires went from 25 in the 1960s to 35,000 today. The African-American elite not only has many more millionaires, it also produced a two-term president.[6]
  • Women now make up almost half of American workers (49.9% in October). They run some of the world’s best companies, such as PepsiCo, Archer Daniels Midland and W.L. Gore. They earn almost 60% of university degrees in America. Women make up the majority of professional workers.[7]
  • After the US Supreme Court ruled that state-level bans on same-sex marriage are unconstitutional on June 26, 2015, same-sex marriage became legal in all states. The court ruled that the denial of marriage licenses to same-sex couples and the refusal to recognize those marriages performed in other jurisdictions violates the Due Process and the Equal Protection clauses of the Fourteenth Amendment of the United States Constitution.[8]

These three phenomena reflect a decline in what social scientists call horizontal inequality: systematic disadvantages across gender, racial, ethnic, religious, and sexual orientation lines. The dawn of the XXIst century showed that blacks can be increasingly elite, women increasingly powerful, and the gay community increasingly socially acceptable and accepted.

There are signs that rising horizontal equality is feeding unhappiness and despair in those left behind by economic transformation, and in those who see their identity and core values unbearably threatened by uncontrollable shifts in mores and norms.[9] Here are two startling examples. The discovery that the rise in mortality of high school and below educated white middle-aged men and women between 1999 and 2013 was driven by drug and alcohol poisoning, suicide, chronic liver diseases, and cirrhosis.[10] The finding that poor black and latinos optimism is juxtaposed against poor white desperation. Poor blacks were found to be three times more likely of being in a higher level of optimism than poor whites.[11]

There is also evidence that people who felt threatened by rising horizontal equality were more likely to vote Republican and, especially, for Trump.

  • Supporters of Trump were found more likely to describe African Americans as “criminal,” “unintelligent,” “lazy” and “violent” than voters who backed some Republican rivals in the primaries or who supported Democratic contender Hillary Clinton.[12]
  • The more hostile voters were toward women, the more likely they were to support Trump.[13]
  • Two thirds of Republicans are said to oppose same-sex marriage. But also one-third of Democrats do. [14] Trump is a consistent opponent of marriage equality.[15]

Just a thought. If proven true, those of us who think that rising horizontal equality is desirable must find ways to make further progress, if not embraced, at least tolerated by those who feel and think that this kind of progress must be stopped, or—worse—reversed. If I had to choose one policy, it would be this: make college affordable to all. In poll after poll, in study after study, the more educated people are, the more they embrace horizontal equality in the US.

[1]Samuel Z. Stone Professor of Latin American Economics and Director of the Commitment to Equity Institute, Tulane University.

[2] Washington Post, November 16, 2016.

[3] The disproportional reaping by the top 1% in the United States has been eloquently described by University of California, Berkeley economist Emmanuel Saez in “Striking it Richer: The Evolution of Top Incomes in the United States,” June 30, 2016. Saez finds that, for example, “Bottom 99% incomes grew by 3.9% from 2014 to 2015, the best annual growth rate since 1999. Top 1% incomes grew even faster by 7.7% from 2014 to 2015.”

[4]Tyler Cowen, the author of the blog “Marginal Revolution,” expressed a similar conjecture in reference to attitudes towards women. http://marginalrevolution.com/marginalrevolution/2016/05/what-in-the-hell-is-going-on.html

[5] “Increasingly Affluent, Educated and Diverse,” Nielsen, 2015.

[6] http://www.ethnifacts.com/african-american-consumer-untold-story-sept-2015.pdf

[7] http://www.economist.com/node/15174418

[8] https://en.wikipedia.org/wiki/Same-sex_marriage_in_the_United_States

[9] One-third of Americans feel that there is a lot of conflict between their religious beliefs and homosexuality. In this group, opposition to same-sex marriage outweighs support by more than two-to-one. http://www.people-press.org/2015/06/08/support-for-same-sex-marriage-at-record-high-but-key-segments-remain-opposed/

[10] Case, Anne and Angus Deaton (2015). “Rising Morbidity and Mortality in Midlife among White Non-Hispanic Americans in the 21st Century.” Proceedings of the National Academy of Sciences Vol. 112 (49); 15078-83.

[11] Graham, Carol. Happiness for All? Unequal Hopes and Lives in Pursuit of the American Dream (Princeton University Press, forthcoming). https://www.brookings.edu/research/unhappiness-in-america-desperation-in-white-towns-resilience-and-diversity-in-the-cities/

[12] http://www.reuters.com/article/us-usa-election-race-idUSKCN0ZE2SW

[13] https://www.washingtonpost.com/news/monkey-cage/wp/2016/10/23/how-sexism-drives-support-for-donald-trump/

[14] http://www.people-press.org/2015/06/08/support-for-same-sex-marriage-at-record-high-but-key-segments-remain-opposed/

[15] http://www.hrc.org/2016RepublicanFacts/donald-trump-opposes-nationwide-marriage-equality

A missing target in the SDGs: Tax systems should not reduce the income of the poor

A new blog post on the International Growth Center‘s website outlines why the Sustainable Development Goals needs to take what the net effect of all governments taxing and spending has on the poor. In many cases, the poor are left worse off by tax and transfer programs. “As it stands, the SDGs list of targets would not alert us of such a perverse outcome. Under Goal One on poverty reduction, there should be a Target 1.6: “By 2020 to ensure that the tax system does not reduce the income of the poor.”

Read the full post here

Nora Lustig to serve on the World Bank’s Commission on Global Poverty

Nora Lustig will serve on the World Bank’s Commission on Global Poverty announced today. The Commission’s mandate is to report on the best ways to measure and monitor poverty and deprivation around the world.

The new Commission, made up of 24 leading international economists, will be chaired by Sir Anthony Atkinson, a leading authority on the measurement of poverty and inequality, the Centennial Professor at London School of Economics, and a Fellow of Nuffield College, Oxford University.

Announcing the new advisory body, the World Bank’s Chief Economist, Kaushik Basu, said he expects the Commission to also provide advice on how to adjust the measurement of extreme poverty as and when new Purchasing Power Parity (PPP) and other price and exchange rate data become available.

PPP calculations allow economists to compare different global exchange rates to assess household consumption and real income in US dollars, since nominal exchange rates do not accurately capture differences in costs of living across countries.

“We want to hold the yardstick constant for measuring extreme poverty till 2030, our target year for bringing extreme and chronic poverty to an end, “ says Basu who will travel to Europe this week for the Commission’s inaugural meeting.

“Furthermore, poverty has many other dimensions and it is unacceptable in today’s prosperous world that so many people suffer such deprivations. The Global Commission will advise us on other dimensions of poverty that the Bank should collect data on, track, analyze and make available to policymakers for evidence-based decisions.”

In 2014, World Bank Group President Jim Yong Kim announced the Bank’s commitment to two goals that would direct its development work worldwide. The first was the eradication of chronic extreme poverty, defined as those extremely poor people living on less than $1.25 PPP-adjusted dollars a day, to less than 3% of the world population by 2030. The second is the boosting of shared prosperity, defined as promoting the growth of per capita real income of the poorest 40% of the population in each country.

This year, UN member nations are expected to agree in New York to a set of post-2015 Sustainable Development Goals (SDGs), the first and foremost of which is the eradication of extreme poverty everywhere, in all its forms.

The final report will be ready by end April 2016.

“We expect the Commission report to be influential not only for our own work on poverty but also in shaping global research and policymaking on this most important challenge of our times,” said Chief Economist Basu.

Core Group of Advisors- click here


IDS blog post: The Sustainable Development Goals – Reject Tax Targeting

The Co-Facilitators of the Third International Financing for Development Conference that will be held in Addis Ababa this coming July, are proposing “tax targeting” as a mechanism to promote equity in developing countries. Mick Moore, Nora Lustig, Richard Bird, Nancy Birdsall, Odd-Helge Fjeldstad, Richard Manning and Wilson Prichard demonstrate that this tactic would in fact be detrimental to poverty alleviation. See why targeted taxes won’t work here.

Center for Global Development Publishes CEQ Working Paper

Fiscal Policy, Inequality, and the Ethnic Divide in Guatemala – Working Paper 397

by Maynor Cabrera, Nora Lustig and Hilcías Moran


Guatemala is one of the most unequal countries in Latin America and has the highest incidence of poverty. The indigenous population is more than twice as likely to be poor than the nonindigenous group. Fiscal incidence analysis based on the 2009-2010 National Survey of Family Income and Expenditures shows that taxes and transfers do almost nothing to reduce inequality and poverty overall or along ethnic and rural-urban lines. Persistently low tax revenues are the main limiting factor. Tax revenues are not only low but also regressive. Consumption taxes are regressive enough to offset the benefits of cash transfers: poverty after taxes and cash transfers is higher than market income poverty.

Two New CEQ Working Papers Now Available

Commitment to Equity is pleased to announce the availability of two new working papers published this past January. Click the title below to view:

No. 22: Fiscal Policy and Ethno-Racial Inequality in Bolivia, Brazil, Guatemala and Uruguay. By Nora Lustig

No. 27: Public Transfer and Poverty Reduction: An Evaluation of Program Contribution to the Exit Rate from Poverty of Children and the Elderly. By Marisa Bucheli

Pro-poor spending reduces poverty in Ethiopia

The World Bank has released the Ethiopia Poverty Assessment, a country with one of the highest poverty rates in the world in 2000. Today, the country has seen a 33% reduction in poverty (down from 44% in 2000) thanks to agricultural growth and pro-poor spending. Additionally, Ethiopia is one of the most equal countries in Africa, and has been able to maintain low levels of inequality in conjunction with economic growth and development.

Guatemala CEQ Policy Assessment Now Available

Commitment to Equity, in conjunction with Tulane University and the Inter-American Dialogue are pleased to announce the availability of the CEQ Policy Assessment on Guatemala (by Maynor Cabrera, Nora Lustig, and Hilcías E. Morán).

Abstract: In 2010, according to the CEQ analysis for Guatemala, fiscal policy did almost nothing to change inequality and poverty. Recent developments on fiscal policy make things worse. A reduction in social spending, particularly in the flagship CCT program “Mi Bono Seguro” will negatively impact poverty and inequality. A reform of the personal income tax will result in lower fiscal revenues. The combined effects of these changes will likely result in an increase of poverty and inequality and reinforce the chronic status quo of poverty and inequality in Guatemala.

“Making Discovery and Change Possible” Article in Tulane School of Liberal Arts Newsletter

Tulane’s School of Liberal Arts featured a piece on Prof. Lustig and the Gates Foundation funding of the Commitment to Equity initiative: “Through the Gates grant, I can support my graduate students and expand the reach of the CEQ project to new limits. I can travel and learn about new places such as Ghana and Tanzania, the two countries the Gates grant is funding,” says Lustig. “I can involve other scholars and benefit from their expertise. I can potentially have much more impact as the grant makes the project better known.” Read the entire article here

The National Treasury of South Africa / World Bank Workshop: “Fiscal Policy and Redistribution in an Unequal Society”

All presentations from the workshop on the relationship between fiscal sustainability, redistribution, and social spending are now available online at the National Treasury’s website. The workshop opened by the Minister of Finance and held in Pretoria, South Africa on November 5th, sought to inform discussion about South Africa’s fiscal choices as it implements the National Development Plan (NDP). The five presentations, including the one given by Professor Lustig, can be viewed and downloaded here.

In Focus: World Economic Forum

The World Economic Forum is an institution that provides a unique environment for politicians, business leaders, academics and others to exchange ideas to improve the state of the world. This week, Olli Rehn, VP of the European Parliament, posted an article addressing three key questions for public finance:

– What kind of policy mix of monetary policy, fiscal policy and structural reforms can support stronger and more sustainable growth?

– How do we protect budget lines that support growth in the medium-to-long-term, such as public investment to modern infrastructure and competitive innovation, while maintaining a decent level of social protection?

– How to ensure the adequacy and sustainability of social protection systems while making them more supportive to growth?

Read the article here

Announcing Publication of CEQ Guatemala Paper

Commitment to Equity’s 20th Working Paper “Fiscal Policy, Inequality, and the Ethnic Divide in Guatemala” is now available to download on commitmentoequity.org. Written by Maynor Cabrera (Fedes), Nora Lustig (Tulane University), and Hilcías E. Morán (Bank of Guatemala), the paper uses fiscal incidence analysis to show that takes and transfers do almost nothing to reduce inequality and poverty in Guatemala, one of the most unequal countries in Latin America.

Presentation at the Universidad Nacional Autónoma de México

This past Tuesday, September 2nd, Prof. Nora Lustig gave a presentation on the Impact of Fiscal Policy on Inequality and Poverty in Developing Countries. This presentation was part of an ongoing Seminar series at UNAM that focuses on “la cuestión Social”, the theme this week was “Política fiscal, equidad y transparencia”. Prof. Lustig presented recent finding of the Commitment to Equity initiative, with a particular focus on Latin American countries. Click here for a pdf (in spanish) of the presentation.

CEQ partners with the Center for Global Development

We are pleased to announce a new Commitment to Equity (CEQ)partnership with the Center for Global Development (CGD). CGD works to reduce global poverty and inequality through rigorous research and active engagement with the policy community to make the world a more prosperous, just, and safe place for us all. CGD’s role as a partner of CEQ will be to share the global reach of their communications platform. Through a new Commitment to Equity sub-topic within their inequality topic, they will post links to CEQ studies as they become available, the CEQ papers that are jointly published with CGD, and occasional blog posts. We look forward to working with CGD and are honored to have it as a CEQ partner.

New CGD Partnership: Commitment to Equity Assessments of Impact of Fiscal Policy

Announcing a new CGD partnership with CGD non-resident fellow Nora Lustig’s brainchild called the Commitment to Equity (CEQ) project. Launched as a joint initiative of the Inter-American Dialogue and Tulane University in 2008, the CEQ consists of a network of economists who are undertaking detailed, data-rich analyses of the impact of taxation and social spending on inequality and poverty in more than 20 countries around the world, including Brazil, China, India, Indonesia, Mexico, South Africa and the United States. CEQ analyses provide the information that governments, multilateral institutions, and civil society need to quantify the fiscal impact of tax and transfers systems on different income groups in the population—crucialinformation in their efforts to build more equitable societies.

Studies by Nora and her CEQ colleagues show that analyzing taxes and transfers jointly is necessary to understand who pays and who benefits from different tax and transfer systems. One startling finding: in many countries it is not just the middle class and the rich who pay more in taxes than they receive in cash, pension and other social insurance transfers; a group that can be legitimately called the ”new poor” or strugglers are also net contributorsgovernment finances.

The CEQ works in partnership with research institutions and the Inter-American Development Bank, the World Bank, and the International Fund for Agricultural Development, and is currently undertaking studies in Ghana and Tanzania with the support of the Gates Foundation. CGD’s role as a partner will be to share the global reach of its communications platform.

Publication of CEQ Working Paper #16: Comparing the Incidence of Taxes and Social Spending in Brazil and the United States

Announcing the publication of the 16th working paper of the Commitment to Equity Project, by Sean Higgins, Nora Lustig, Whitney Ruble and Timothy Smeeding. Click here to view!


We perform the first comprehensive fiscal incidence analyses in Brazil and the US, including direct cash and food transfers, targeted housing and heating subsidies, public spending on education and health, and personal income, payroll, corporate income, property, and expenditure taxes. In both countries, primary spending is close to 40 percent of GDP. The US achieves higher redistribution through direct taxes and transfers, primarily due to underutilization of the personal income tax in Brazil and the fact that Brazil’s highly progressive cash and food transfer programs are small while larger transfer programs are less progressive. However, when health and non-tertiary education spending are added to income using the government cost approach, the two countries achieve similar levels of redistribution. This result may be a reflection of better-off households in Brazil opting out of public services due to quality concerns rather than a result of government effort to make spending more equitable.