Inequality and Democrats
Author, Professor
American politicians have an ingenious way to avoid discussing uncomfortable or controversial subjects: they declare that we need to have a discussion! When all sides agree that “we need a discussion about race,” for example, they are actually agreeing not to do anything anytime soon about racial injustice. That’s where we are now with inequality of income and wealth. Democrats are running against inequality without being very specific, and even some Republican political candidates find our current levels of inequality troubling and worthy of attention, but neither side has yet offered specific practical proposals to reverse our still increasing levels of inequality. And everybody eschews the “r” word – redistribution.
To adequately address our massive levels of economic inequality is a long-term project involving an array of structural economic and political changes. But with a new presidential campaign beginning, Democrats are in a position to achieve a long-lasting dominant majority if they champion a handful of redistributive tax and economic growth policies developed in detail by progressive think tanks. Dems can lock Republicans into a box of their own making, one that could take them a generation to get out of and that could, therefore, open up possibilities for more thorough-going reforms.
Here’s the box: Because Republicans rigidly oppose any new taxes that would increase government revenues while at the same time being rhetorically obsessed with balanced budgets, they can find no money to increase spending on things that almost everybody agrees are sorely needed – like massive improvements in infrastructure and education. If Dems advocate very large tax increases falling largely on Wall Street, corporations, and top-earning individuals in order to create millions of jobs by funding those needed improvements in infrastructure and education, Republicans will herd themselves right into their well-worn and now discredited “trickle-down” box of balanced budgets, deregulation, and tax cuts for the rich.
But in order to be credible, Dems must go big on both taxes and jobs, and they must put forward well-thought-out specific plans for where the money will come from and where it will go. “Big” would be in the neighborhood of $500 billion in new taxes and spending (with no new deficit-spending), creating at least 4 million new jobs on top of the 2.5 million the economy is currently producing annually.
This is not pie in the sky. First, taxes. Citizens for Tax Justice (CTJ) has a menu of progressive tax increases that amounts to $333 billion a year, and it does not include the kind of financial transactions taxes introduced in the House by Rep. Chris Van Hollen and Rep. Keith Ellison or a reform of inheritance taxes as advocated by the Center for American Progress. Those would generate at least another $164 billion. Taken together these tax increases would stop income inequality from increasing, but they would not likely reduce it by much. For example, taxing unearned income (capital gains and dividends) at the same marginal rates as earned income (wages and salaries) is a signature measure on CTJ’s menu; it would produce a lot of revenue, $134 billion, most of it from the top 1%, but it would decrease their average household incomes of $1,651,000 by only $34,000. The next highest 4% would have their average incomes of nearly $300,000 clipped by about $2,000. In other words, the rich would still be rich. Dems could call it “The Preservation of Rich People Act.”
But the federal government could do a lot of good with an additional $500 billion. It could expand the Earned Income Tax Credit and other tax breaks for low- and middle-income folks. It could reduce the deficit (though that would be neither necessary nor desirable, in my view). It could fund national educational reforms like those advocated by the Chicago Teachers Union, built around equitable funding, “wrap-around services” for all children, and smaller class sizes, particularly in the early grades. It could pay for early childhood education and free community college.
But strictly for winning a long-term dominant majority, the Democrats would be wise to advocate spending the other half of that $500 billion on an infrastructure program that would not only repair and maintain our crumbling highways and bridges, water treatment and sewage systems, mass transit and other transportation (traditional infrastructure), but also include a large dollop of green investments combining the construction of a national “smart grid” with building new green capacity for utilities and making new and existing buildings more energy efficient. As costed out by the Economic Policy Institute, such a decade-long program of $250 billion a year, as recommended by the American Society of Civil Engineers, would produce 2.3 million jobs.
Most would be decent-paying jobs (about 2/3rds are middle-income and up) for people without college degrees (nearly 80%, including more than 1 million jobs for people with no education beyond high school). Mostly in construction and manufacturing, the jobs would disproportionately benefit white men, a demographic that has voted 2 to 1 for Republicans since 1976. But such a large infrastructure program would completely absorb the half-million currently unemployed construction workers without filling all the jobs that would be created — and this would provide leverage for the federal government to enforce long-standing affirmative action hiring and training requirements in the building trades. Symbolically, a massive infrastructure program like this (especially if it went by its old-fashioned name of “public works”) would allow Democrats to embrace the idea that you don’t have to go to college to be a worthwhile human being and that you can have a decent income by making and building things – not just writing code or manipulating other kinds of symbols.
What’s more, $500 billion taken from our oligarchy of wealth and invested in direct income transfers through the tax code, in broadening and deepening funding for public education, and in renewing and greening our physical infrastructure would give a huge boost to our anemic economic growth, tightening labor markets and thereby increasing wages at every level of income. Combined with Democrats’ advocacy of a healthy increase in the federal minimum wage (now proposed as $12 an hour), which Republicans oppose but huge majorities support in public opinion polls, this is a “populist economic program” that can make a real difference in people’s lives. And for that reason, if explained in detail, it would be a winning program for Democrats.
Hillary Clinton has put inequality at the center of her presidential campaign so far, declaring that “we can’t stand by while inequality increases, wages stagnate, and the promise of America dims.” That’s hopeful, but without specifics it could be said by any of the Republican candidates. Clinton also promised to “rewrite the tax code so it rewards hard work and investments here at home, not quick trades or stashing profits overseas.” We should know soon how much of this is real and how much is merely a fine statement of principles the electorate will read as the kind of empty rhetoric politicians always espouse in election campaigns. Keep your eye on dollar amounts – are they big enough to make a difference? Don’t expect Clinton or other Democrats to use the “r” word, but do check out where the money is coming from and where it’s going. If they want to win governing majorities, Democrats will lay out detailed plans to take a large chunk of idle money from the rich and use it to create jobs and increase wages.
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This has been reposted from Working-Class Perspectives.
