The Time for Wealth Redistribution Is Now

Robert Reich’s Blog / By Robert Reich, posted on Alternet,org,  December 6, 2013  |

The President’s speech yesterday on inequality avoided the “R” word. No politician wants to mention “redistribution” because it conjures up images of worthy “makers” forced to hand over hard-earned income to undeserving “takers.”

But as low-wage work proliferates in America, so-called takers are working as hard if not harder than anyone else, and often at more than one job.

Yet they’re still not making it because the twin forces of globalization and technological change have reduced their bargaining power and undermined their economic standing—while bestowing ever greater benefits on a comparative few with the right education and connections (and whose parents are often best able to secure these advantages for them).

Better education and training for those on the losing end is critically important, as will several of the other proposals the President listed. But they will only go so far.

The number of losers is growing so quickly, and so much of the economies’ winnings are going to a small group at the top—since the recovery began, 95 percent of the gains have gone to the richest 1 percent [2]—that some direct redistribution of the gains is necessary.

Without some redistribution, the losers are likely to react in ways that could hurt the economy. They’ll demand protection from global markets they believe are taking away good jobs, and even from certain technological advances that threaten to displace them (rather than smash the machines, as did England’s 19th-century Luddites, they’ll seek regulations that preserve the old jobs).

Without some redistribution, our ever-increasing number of low-wage workers won’t have enough money to keep the economy going. (This is one reason why the current recovery has been so anemic.)

And without some redistribution, America’s growing army of low-wage workers may fall prey to demagogues on the right or left who offer convenient scapegoats for their frustrations.

One way we already redistribute is through the Earned Income Tax Credit [3], a wage subsidy for the working poor, which, at about $60 billion a year, is the nation’s largest anti-poverty program. It’s like a reverse income tax—larger at the bottom of the wage scale (now around $3,000 for incomes around $20,000) and gradually tapering off as incomes rise (vanishing at around $35,000).

The EITC subsidy should be enlarged and extended further up the wage scale before tapering off.

How to pay for this? By cutting subsidies and special tax breaks for the oil and gas industries, big agribusiness, military contractors, hedge-fund and private-equity partners, and Wall Street banks. And by capping individual tax deductions (deductions are the economic equivalent of government subsidies) for gold-plated health care plans, lavish business junkets and interest on giant mortgages.

In other words, we can finance much of this redistribution to the working poor by ending unnecessary redistributions to the wealthy.

See more stories tagged with:

redistribution [4],

economy [5],

poverty [6],

low-wage workers [7],

Earned Income Tax Credit [8]


Source URL: http://www.alternet.org/economy/time-wealth-redistribution-now

Links:
[1] http://www.alternet.org/authors/robert-reich-0
[2] http://economix.blogs.nytimes.com/2013/09/10/the-rich-get-richer-through-the-recovery/
[3] http://economix.blogs.nytimes.com/2012/02/13/expanding-a-safety-net-program/
[4] http://www.alternet.org/tags/redistribution-0
[5] http://www.alternet.org/tags/economy-0
[6] http://www.alternet.org/tags/poverty-0
[7] http://www.alternet.org/tags/low-wage-workers
[8] http://www.alternet.org/tags/earned-income-tax-credit
[9] http://www.alternet.org/%2Bnew_src%2B

 

Redistributing wealth upward by Harold Meyerson

Washington Post, September 25, 2012

excerpt

Which is the more redis­tri­b­u­tion­ist of our two par­ties? In recent decades, as Repub­li­cans have devoted them­selves with laser-like inten­sity to redis­trib­ut­ing America’s wealth and income upward, the evi­dence sug­gests the answer is the GOP.

The most obvi­ous way that Repub­li­cans have robbed from the mid­dle to give to the rich has been the changes they wrought in the tax code — reduc­ing income taxes for the wealthy in the Rea­gan and George W. Bush tax cuts, and cut­ting the tax rate on cap­i­tal gains to less than half the rate on the top income of upper-middle-class employees.

The less widely under­stood way that Repub­li­cans have helped redis­trib­ute wealth to the already wealthy is by chang­ing the rules. Mar­kets don’t func­tion with­out rules, and the rules that Repub­li­can pol­i­cy­mak­ers have made since Ronald Rea­gan became pres­i­dent have con­sis­tently depressed the share of the nation’s income that the mid­dle class can claim….

The only time in U.S. his­tory when work­ers sub­stan­tially ben­e­fited from pro­duc­tiv­ity gains was the three decades that fol­lowed World War II, when median house­hold income and pro­duc­tiv­ity gains both increased by 102 per­cent. Not coin­ci­den­tally, that was also the only period of gen­uine union power in U.S. his­tory, and the time when the tax code was at its most pro­gres­sive. Dur­ing the past quarter-century, as pro­gres­siv­ity was less­ened and unions dimin­ished, all pro­duc­tiv­ity gains have gone to the wealth­i­est 10 per­cent, accord­ing to research pub­lished by the National Bureau of Eco­nomic Research. In 1955, at the height of union strength, the wealth­i­est 10 per­cent received 33 per­cent of the nation’s per­sonal income. In 2007, they received 50 per­cent, Eco­nomic Pol­icy Insti­tute data show. If that’s not redis­tri­b­u­tion, I don’t know what is.

Indeed, the United State­s has expe­ri­enced an upward redis­tri­b­u­tion so pro­found that it affects far more than incomes. Whole sec­tors of the econ­omy and regions of the coun­try have been dec­i­mated by these eco­nomic changes. The descent in all man­ner of social indexes is most appar­ent among poorly edu­cated whites…over the past 30 years? Many Democ­rats have been com­plicit in this calamity by their indif­fer­ence to the con­se­quences of dereg­u­la­tion and trade. But the tro­phy for pro­mot­ing the poli­cies that have redis­trib­uted wealth, fam­ily sta­bil­ity and longevity upward goes to the Repub­li­cans, whose standard-bearers are cham­pi­oning even more rad­i­cal ver­sions of these poli­cies today…

Full text

Which is the more redistributionist of our two parties? In recent decades, as Republicans have devoted themselves with laser-like intensity to redistributing America’s wealth and income upward, the evidence suggests the answer is the GOP.

The most obvious way that Republicans have robbed from the middle to give to the rich has been the changes they wrought in the tax code — reducing income taxes for the wealthy in the Reagan and George W. Bush tax cuts, and cutting the tax rate on capital gains to less than half the rate on the top income of upper-middle-class employees.

The less widely understood way that Republicans have helped redistribute wealth to the already wealthy is by changing the rules. Markets don’t function without rules, and the rules that Republican policymakers have made since Ronald Reagan became president have consistently depressed the share of the nation’s income that the middle class can claim.

Part of the intellectual sleight-of-hand that Republicans employ in discussions of redistribution is to reserve that term solely for government intervention in the market that redistributes income downward. But markets redistribute wealth continuously. In recent decades, markets have redistributed wealth from manufacturing to finance, from Main Street to Wall Street, from workers to shareholders. Rules made by “pro-market” governments (including those of “pro-market” Democrats) have enabled these epochal shifts. Free trade with China helped hollow out manufacturing; the failure to regulate finance enabled Wall Street to swell; the opposition to labor’s efforts to reestablish an even playing field during organizing campaigns has all but eliminated collective bargaining in the private sector.

The conservative counter to such liberal cavils is to assert that the market increases wealth, which will eventually descend on everyone as the gentle rains from heaven. Decrying such Keynesian notions as unions or federally established minimum wages, hedge fund guru Andy Kessler recently argued in the Wall Street Journal that “it is workers’ productivity that drives long-term wage gains, not workers’ wages that drive growth.”

But Kessler assumes — and this is the very essence of the “trickle-down” argument — that workers reap the rewards of productivity gains. Believing and asserting that requires either ignorance or willful denial of economic history. The only time in U.S. history when workers substantially benefited from productivity gains was the three decades that followed World War II, when median household income and productivity gains both increased by 102 percent. Not coincidentally, that was also the only period of genuine union power in U.S. history, and the time when the tax code was at its most progressive. During the past quarter-century, as progressivity was lessened and unions diminished, all productivity gains have gone to the wealthiest 10 percent, according to research published by the National Bureau of Economic Research. In 1955, at the height of union strength, the wealthiest 10 percent received 33 percent of the nation’s personal income. In 2007, they received 50 percent, Economic Policy Institute data show.

If that’s not redistribution, I don’t know what is.

The problem is not just that everyone but the wealthy is claiming a smaller share of the nation’s income; the absolute amount of income they’re getting is declining as well. Median household income has dropped to the levels of the mid-1990s, according to Pew analysis of census data, while the income of the 400 wealthiest Americans rose by a tidy $200 billion last year, according to data released this month by Forbes magazine.

If that’s not redistribution, I don’t know what is.

Indeed, the United Stateshas experienced an upward redistribution so profound that it affects far more than incomes. Whole sectors of the economy and regions of the country have been decimated by these economic changes. The descent in all manner of social indexes is most apparent among poorly educated whites. Conservative commentator Charles Murray has documented in his new book the decline in marriage rates and family stability within the white working class. And now, as the New York Times’ Sabrina Tavernise has reported, that decline includes longevity as well. While other Americans’ life expectancy has advanced, the life expectancy of whites without high school diplomas has declined since 1990 — by three years among men and five years among women.

The market is not just redistributing income in theUnited States, then. It is redistributing life.

So, which party can claim credit for this — the real redistribution this nation has experienced over the past 30 years? Many Democrats have been complicit in this calamity by their indifference to the consequences of deregulation and trade. But the trophy for promoting the policies that have redistributed wealth, family stability and longevity upward goes to the Republicans, whose standard-bearers are championing even more radical versions of these policies today.

A pro-life party? More like its opposite.

meyersonh@washpost.com  

http://www.washingtonpost.com/opinions/harold-meyerson-the-party-that-truly-believes-in-redistribution/2012/09/25/c5877b7a-0740-11e2-afff-d6c7f20a83bf_story.html?wpisrc=nl_headlines