For all the disastrousness of the current recession in the developed world, examined more broadly the early twenty-first century has been one of the greatest times to be alive in the history of mankind. The cause is the enormous improvement in living standards of the people in China, India, Brazil and other large developing nations. On the moral balance sheet, this betterment of some of the globe’s poorest people more than outweighs the continued stagnation of middle-class wages in the United States.
But the fact remains that here, in what’s still the wealthiest large nation on earth, things have not been improving in a nearly commensurate manner. And yet it’s not as if global economic growth has passed the country by. Instead, a wildly disproportionate share of the material gains of recent technological progress and economic globalization has been captured by a tiny, already rich slice of the population. The causes of this are complicated and controversial, and the solutions can be complicated if we want; but they can also be simple—the government can and should deploy its tax authority to capture a larger share of this wealth and spend it on useful services for the broad public.
Higher taxes to finance more and better public services is not the only conceivable method of curbing inequality, but it is the best one because it directly tackles the most objectionable aspect of high inequality in the economy—its tendency to perpetuate itself in the form of unequal access to basic social goods and unequal access to opportunities in the next generation.
The goal should be a country where every neighborhood features safe, well-paved streets, excellent schools, functioning mass transit and a healthy environment. Families should have equal access to medical treatment if they fall ill, to preschool and to decent nutrition for their children, and to a secure retirement after a few decades in the workforce. Those with skills that are more highly valued in the marketplace would still have fancier cars, larger televisions, more upscale clothing. But the main conditions for human flourishing would be available across the board, and no family would need to worry that broadening America’s circle of social and economic opportunity by allowing foreigners to move here or sell goods across national borders imperils their fundamental interests.
To get from here to there is going to be a difficult task in a country where the public is averse to any increase in taxation on the nonrich and where elites are equally hostile to the hiking of taxes on the wealthiest. Ultimately, doing some of both will be essential. That’s because it’s important to conceive of future expansion in public services in terms similar to those of our existing and highly successful insurance programs for retirees, Social Security and Medicare. These programs are redistributive in their impact, guaranteeing for all things that the rich could afford on their own, but they’re not narrow antipoverty efforts, nor are they targeted giveaways. Instead, the idea is that everyone pays a share and everyone gets to participate in the benefits. This invests middle-class and even wealthy people in the notion of ensuring the quality of services and shifts the conversation away from the concept of "handouts."
Programs of this kind probably can’t be funded exclusively through taxes on high earners. But the $250,000-and-over crowd would be a good place to start. Conventional wisdom sometimes holds that the public opposes even taxes on the richest, but the polling data don’t support that conclusion. The problem is that politicians have shied away from raising taxes. There’s also a strong case for increasing the number of tax brackets so the system can become more progressive at the higher end, and prosperous professionals earning "only" $500,000 a year would not be treated the same as multimillionaires. Another promising source of revenue is an excise tax on undesirable behavior. Greenhouse gas pollution should be taxed; the declining real value of federal alcohol taxes should be reversed; taxes on public health hazards like sugary drinks and junk food should be considered.
For the moment, however, fighting the recession must be the top priority, so tax increases should be deferred. The main thing now is to defend existing services against the apostles of austerity and, where possible, make the case that expansion of services can boost the economy and lay the groundwork for future prosperity.
One particularly promising set of opportunities lies in early childhood education and general well-being. Americans understand that a temporary economic downturn is not a good reason to permanently scar a generation of kids. As recession makes more children than ever dependent on food assistance, it’s a good time to highlight the reality that subsidized school lunches suddenly become unavailable during summer vacation, although children need to eat whether or not school is open. More broadly, a family security agenda centered on assuring the availability of paid family leave and high-quality preschool has the potential to appeal to the streak of cultural conservatism that runs deep in working-class America. It would certainly connect the inequality agenda to the everyday concerns of American families.
What’s more, a focus on family policy and early childhood has the virtue of working on two sides of the problem simultaneously. In other words, not only do expenditures in this realm directly mitigate the inequities of the market distribution of income; they serve to reduce inequality of opportunity and thus the tendency of unequal outcomes to reinscribe themselves on the next generation. On its own, that’s inadequate to the full scope of the inequality challenge, but it’s an excellent place to start.
Also in This Forum
Robert Reich, "Unjust Spoils"
Dean Baker, "The Right Prescription for an Ailing Economy"
Katherine Newman and David Pedulla, "An Unequal-Opportunity Recession"
Orlando Patterson, "For African-Americans, A Virtual Depression—Why?"
Jeff Madrick, "American Incomes: Soaring or Static"