The debate over the extent and causes of rising inequality of American incomes and wages has now raged for at least two decades. In this paper, we will make four arguments. First, the increase in the incomes and wages of the top 1 percent over the last three decades should be interpreted as driven largely by the creation and/or redistribution of economic rents, and not simply as the outcome of well-functioning competitive markets rewarding skills or productivity based on marginal differences. This rise in rents accruing to the top 1 percent could be the result of increased opportunities for rentshifting, increased incentives for rent-shifting, or a combination of both. Second, this rise in incomes at the very top has been the primary impediment to having growth in living standards for low- and moderate-income households approach the growth rate of economy-wide productivity. Third, because this rise in top incomes is largely driven by rents, there is the potential for checking (or even reversing) this rise through policy measures with little to no adverse impact on overall economic growth. Lastly, this analysis suggests two complementary approaches for policymakers wishing to reverse the rise in the top 1 percent's share of income: dismantling the institutional sources of their increased ability to channel rents their way and/or reducing the return to this rent-seeking by significantly increasing marginal rates of taxation on high incomes.
In the summer of 2004, the American Federation of Teachers (AFT) published data from the National Assessment of Educational Progress (NAEP) showing that average fourth-grade achievement is higher in regular public schools than in charter schools, both for students overall and for low-income students. For black students, a group that many charter schools are designed to serve, the analysis showed that average achievement is no better in charter schools than in regular public schools. These conclusions were reported in a front-page article in the New York Times. Their accuracy has not subsequently been challenged. 1 Some charter school supporters claimed that the NAEP data provided only misleading information about the quality of charter schools because: (1) NAEP only assessed a single year (2003) of fourth-grade scores and so could not detect whether charter school scores were low because their students had even lower scores in earlier grades. If so, charter school students could have made more progress even if they still had not caught up to regular public school students by the fourth grade; (2) black and low-income students in charter schools are more disadvantaged than black and low-income students in
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