It’s time to reverse the extreme upward redistribution of the last 40 years.
Imagine for a moment that a presidential candidate made this speech:
My fellow Americans, I’m here today to tell you about my economic plan. Each year, I will require every middle-class family across this great country to write a check. We will then pool the money and distribute it to the richest Americans among us — the top 1 percent of earners, who, because of their talent, virtue and success, deserve even more money.
The exact size of the checks will depend on a family’s income, but a typical middle-class household will hand over $15,000 each year. This plan, I promise all of you, will create the greatest version of America that has ever existed.
You would consider that proposal pretty radical, wouldn’t you? Politically crazy. Destructive, even. Well, I’ve just described the actual changes in the American economy since the 1970s.
Economic output — known as G.D.P. — per person has almost doubled over this period. But the bulk of the bounty has flowed to the very rich. The middle class has received relative crumbs.
If middle-class pay had increased as fast as the economic growth, the average middle-class family would today earn about $15,000 a year more than it does, after taxes and benefits. Instead, that middle-class family effectively forfeits the money to the rich, year after year after year. (Larry Summers, the former Treasury secretary, first got me thinking about calculations like these.)
The extreme redistribution of income — upward — has multiple causes. Some of them, like technological change, stem mostly from private-sector forces. But government policy plays a crucial role. Tax rates on the wealthy have fallen sharply. Labor unions have been undermined. Big companies have been allowed to grow even bigger and more powerful. The United States has lost its lead as the most educated country in the world.
More often than not over the past 40 years, our government has helped the rich at the expense of everyone else. As a result, economic inequality has reached Gilded Age levels.
In the face of these trends, the radical response is to do nothing — or to make inequality even worse, as President Trump’s policies have. It’s radical because soaring inequality is starting to threaten the basic fabric of American life. Many people have grown frustrated and cynical. Average life expectancy, amazingly, has fallen over the past few years.
Over the sweep of history, the main reason that societies have declined, as the scholars Daron Acemoglu and James Robinson have written, is domination “by a narrow elite that have organized society for their own benefit at the expense of the vast mass of people.” The name of Acemoglu’s and Robinson’s book on this phenomenon is, “Why Nations Fail.”
It’s worth keeping all of this in mind when you hear critics (or journalists) describe the economic proposals of the Democratic presidential candidates as “radical.” They’re not radical, for the most part. The proposals are instead efforts to undo some of the extreme economic changes of recent decades and to ensure that most Americans workers — not just a narrow elite — fully benefit from economic growth.
The proposals also happen to be popular, broadly speaking. On social issues, like abortion and immigration, the country is deeply divided. But clear majorities support higher taxes on the wealthy, higher taxes on corporations, more education funding and expanded government health insurance. No wonder: Americans don’t resent success, but they do resent not receiving their fair share of economic growth.
The coming primary campaign will be a good time for the candidates to hash out which specific ideas make sense and which don’t. So far, the agenda looks pretty good. Elizabeth Warren has a plan to increase workers’ power within companies — and help them get larger pre-tax raises. Cory Booker and Kamala Harris want to lift the after-tax pay of the middle class and poor. Kirsten Gillibrand and others support reducing major living costs, like child care and education.
Perhaps most important, some Democrats have begun pushing for a wealth tax — to reverse the upward redistribution of the past 40 years. Warren has proposed an annual 2 or 3 percent tax on large fortunes. Bernie Sandershas proposed a big increase in the inheritance tax.
These wealth taxes are a classic example of policies that are less radical than their opponents claim. Do you know who already pays a wealth tax? Middle-class Americans. It’s called the property tax, as Noah Smith of Bloomberg Opinion has noted. Every year, homeowners pay a percentage of their house value in tax. A house, of course, is the biggest asset that most families own. If middle-class families can pay an annual tax on their main source of wealth, wealthy families can, too.
The United States as we have known it — optimistic, future-oriented and more powerful than any other nation — cannot survive the stagnation of mass living standards over many decades. I’m glad to see that some political leaders understand this and are trying to recapture a core feature of American life.
Maybe we should start describing those leaders as conservatives.
