The United States may be on course to becoming a "Downton Abbey"
economy. There are valid causes for concern about inequality: sharp
increases in the share of income going to the top 1% of earners, a
rising share of income going to profits, stagnant real wages and a
rising gap between productivity growth and growth in median family
incomes.
A generation ago, it could have been asserted that the economy's overall growth rate was the dominant determinant of growth in middle-class incomes and progress in reducing poverty. This is no longer a plausible claim.
Issues associated with an increasingly unequal distribution of economic rewards are likely to stay long after cyclical conditions have normalised and budget deficits have been addressed. Those who condemn President Obama's concern about inequality as "tearing down the wealthy" and un-American populism have, to put it politely, limited historical perspective. Consider some past presidential rhetoric.
Franklin Roosevelt said of the financial industry in his first inaugural address: "Practices of the unscrupulous money changers stand indicted in the court of public opinion … they know only the rules of a generation of self-seekers … and when there is no vision the people perish." In 1936, Roosevelt asserted that "we had to struggle with the old enemies of peace – business and financial monopoly, speculation, reckless banking …
They are unanimous in their hate for me, and I welcome their hatred."
Harry Truman observed: "The Wall Street reactionaries are not satisfied with being rich … They want a return of the Wall Street economic dictatorship." John Kennedy, dismayed by a steel price increase, was quoted cursing the executives. Richard Nixon announced in 1973 that he had "ordered the Internal Revenue Service to begin immediately a thoroughgoing audit of the books of companies which raised their prices more than 1.5% above the January ceiling".
Bill Clinton complained during his first presidential campaign that "America is evolving a new social order, more unequal, more divided, more impenetrable to those who seek to get ahead. Although America's rich got richer … the country did not … the stock market tripled but wages went down."
Meanwhile, the ratio of corporate tax collections to the market value of US corporations is near a record low, thanks to various loopholes. And the estate tax can be substantially avoided by those prepared to plan and seek sophisticated advice. Closing loopholes that only the wealthy can enjoy would enable targeted tax measures such as the earned-income tax credit to raise the incomes of the poor and middle class more than dollar for dollar by incentivising working and saving.
It is ironic that those who profess the most enthusiasm for market forces are least enthusiastic about curbing tax benefits for the wealthy. Sooner or later, inequality will be addressed. Much better that it be done by letting market forces operate and then working to improve the result than by seeking to thwart their operation.
Read more: Why the US needs tax reform to avoid a 'Downton Abbey' economy | Business | Guardian Weekly
A generation ago, it could have been asserted that the economy's overall growth rate was the dominant determinant of growth in middle-class incomes and progress in reducing poverty. This is no longer a plausible claim.
Issues associated with an increasingly unequal distribution of economic rewards are likely to stay long after cyclical conditions have normalised and budget deficits have been addressed. Those who condemn President Obama's concern about inequality as "tearing down the wealthy" and un-American populism have, to put it politely, limited historical perspective. Consider some past presidential rhetoric.
Franklin Roosevelt said of the financial industry in his first inaugural address: "Practices of the unscrupulous money changers stand indicted in the court of public opinion … they know only the rules of a generation of self-seekers … and when there is no vision the people perish." In 1936, Roosevelt asserted that "we had to struggle with the old enemies of peace – business and financial monopoly, speculation, reckless banking …
They are unanimous in their hate for me, and I welcome their hatred."
Harry Truman observed: "The Wall Street reactionaries are not satisfied with being rich … They want a return of the Wall Street economic dictatorship." John Kennedy, dismayed by a steel price increase, was quoted cursing the executives. Richard Nixon announced in 1973 that he had "ordered the Internal Revenue Service to begin immediately a thoroughgoing audit of the books of companies which raised their prices more than 1.5% above the January ceiling".
Bill Clinton complained during his first presidential campaign that "America is evolving a new social order, more unequal, more divided, more impenetrable to those who seek to get ahead. Although America's rich got richer … the country did not … the stock market tripled but wages went down."
Meanwhile, the ratio of corporate tax collections to the market value of US corporations is near a record low, thanks to various loopholes. And the estate tax can be substantially avoided by those prepared to plan and seek sophisticated advice. Closing loopholes that only the wealthy can enjoy would enable targeted tax measures such as the earned-income tax credit to raise the incomes of the poor and middle class more than dollar for dollar by incentivising working and saving.
It is ironic that those who profess the most enthusiasm for market forces are least enthusiastic about curbing tax benefits for the wealthy. Sooner or later, inequality will be addressed. Much better that it be done by letting market forces operate and then working to improve the result than by seeking to thwart their operation.
Read more: Why the US needs tax reform to avoid a 'Downton Abbey' economy | Business | Guardian Weekly
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