LETTER FROM WASHINGTON
To Democrats Abroad
28 May 2014
Executive Director Emeritus
The pervasive and growing inequality of income in the US is both increasingly recognized and increasingly debated. Yet, the public and our political parties are also increasingly divided in both their recognition and their approach to it.
Pew polling (May 28) found 65% believed our inequality gap had increased in the last decade. About 20% (Democrats and moderate Republicans) attributed that to taxation favorable to the wealthy. In January Pew found that about 90% of Democrats and 61% of moderate and liberal Republicans wanted government action to counter the trend. But, more than half of conservative Republicans opposed any government action and 70% wanted taxes lowered. Yet, half of moderate and liberal Republicans favored increased taxation of corporations and the wealthy to fund programs for the poor.
Moderate and liberal Republicans are as scarce as hen’s teeth in Congress.
It is probably safe to say that no publication of a fundamental economic theory has ever had as successful a roll-out as French economist Thomas Piketty’s 700 page English translation, Capital in the Twenty First Century. Not Malthus. Not Adam Smith. Not Ricardo. Not even Marx. Nor Keynes. Among the 100 best selling books for 71 days. Already on its third printing with over 80,000 sold. Hardly a day passes without reference to it in the press or TV.
Piketty argues, and bases his conclusions on an analysis of tax statistics in Europe, the US and in other countries with historical tax records as early as the Eighteenth century, that wealth accrues at a higher rate to those with capital (money, land, investments, equipment) than to wage earners. This means, in his analysis, that barring disasters like the two world wars and the Great Depression, there are powerful forces in industrialized countries pushing toward an extremely high level of wealth inequality. Unlike Marx, he does not think these forces are inevitable. He sees them as shaped by public policy – taxation, financial regulation, education, diffusion of knowledge.
Coming after the Occupy Wall Street movement, Romney’s assignment of 47% of the public as “takers”, Obama’s efforts to raise the national minimum wage, Elizabeth Warren’s leadership of the criticism of economic inequality, the election of Bill di Blasio as mayor of New York on a platform highlighting economic inequality and Pope Frances’s blunt criticism of capitalism, Piketty’s book provides accessible scholarly underpinning for liberal criticism of the growing gap between rich and poor. He has his critics. But, he has a chorus of Nobel Laureats endorsing his analysis.
The NY Times new feature, “Upshot”, published detailed report on how “The American middle class is no longer the world’s richest”. (April 22, 2014) While the wealthiest are outpacing their peers abroad, lower and middle income earners in other advanced countries have outpaced their American counterparts in raises over the past 3 decades. “The poor in much of Europe earn more than poor Americans.” US median per capita income has remained virtually unchanged from 2000 while it has jumped by about 20% in the UK and Canada and 14% in the Netherlands.
The NYT analysis attributes the lag in lower and middle class income to roughly the same three factors that were identified by Piketty: education, a smaller share of income from capital and less government redistribution of income.
The reality of the growing gap in wealth ( the top 1% of Americans now own assets worth more than the entire bottom 90%) is such that even some Republicans have acknowledged it – most notably Representative Paul Ryan, Chairman of the House Budget Committee. He has visited poor areas and deplored the hardship to which the poor are condemned. But, on this 50th anniversary of Lyndon Johnson’s national war on poverty, he claims that federal anti-poverty programs have contributed to our high poverty rate. He is a lead austerian.
Obama laid out the dimensions and the gravity of the problem of our declining economic mobility and increasing inequality of wealth in his December 4, 2013 speech in Washington on “Economic Mobility”. He detailed the remedial proposals that he had already laid before the Congress and the actions that his Administration had taken to reverse the trend. It would be difficult to find a more comprehensive statement of the issue and the practical public policies Democrats favor to confront it.
Obama called for specific legislative actions to strengthen education from pre-school to post-graduate, to increase taxes on upper incomes and on corporations, to increase the national minimum wage, to expand foreign trade, to strengthen trade unions to create pressure for higher wages, to strengthen Social Security, to provide near universal health insurance, to provide food stamps, long and short term unemployment insurance, to enact the Paycheck Fairness Act to help women overcome pay discrimination and the Employment Non-Discrimination Act to protect gays and lesbians from employment discrimination.
This long standing and fundamental goal of the Obama Administration embodies the conclusions of Piketty’s book: that public policy, i.e. government, is the remedy for the built-in DNA of our democratic capitalist economy to generate an ever-widening wealth and economic mobility gap between wage earners and owners of capital.
In keeping with the policies of the New Deal and the Great Society, Democrats believe that society acting through government, can and should act to assure both equal opportunity and a decent standard of living for those who work with a safety net for those unable to help themselves. That was the core of LBJ’s reforms that brought us Medicare and Medicaid, food stamps, urban renewal, Head Start, the first federal investment in elementary and high school education, college tuition assistance as well as the Voting rights Act and even the Corporation for Public Broadcasting. The steps that Obama continues to call for to increase economic mobility and less income inequality are a response to our growing economic divide with its inherent threat to a democratic society.
Republicans in the present congress have stonewalled Obama’s proposals. Now “Establishment Republicans” appear to have soundly defeated Tea Party candidates in the primary elections for Senate and House (except in Texas!) But they have done so not only by picking better candidates and running better campaigns but also by moving farther to the right to capture more Tea Party sympathizers. That means that the whole Democratic package of investments in education, infrastructure, unemployment insurance, food stamps, tax increases and expanded health care to counter income inequality will remain dead in the water for the remainder of Obama’s term.
So what’s new?
The new threat is that Republican capture of a majority in the Senate (they need to gain only 6 seats) would deny Democrats the appointment of the next justice to the Supreme Court during Obama’s term. A Republican Senate could simply block a vote or defeat an Obama nominee. While it seems probable today that Democrats will win both the White House and Senate in 2016, a vacancy of a liberal justice for the next two years (and it is a liberal seat most likely to open), would allow an even more aggressive right wing Court.
The achievements of a more democratic, humane and more equitable society flowing from the New Deal, the Great Society and Obama’s reform of our defective healthcare system would continue to be eroded by a right wing Republican Court.
That is why getting out the Democratic vote in November is so important for the well-being of our democratic society.30