As the Occupy WallStreet movement has revealed, the United States is a country with growing disparity between an "overclass" of elite rich who have garnered most of the gains of productivity and the vast majority of the rest, who teeter on the verge of poverty if there is an illness, a death, a job loss or any of the other normal human catastrophes that beset us.
Many of those on the right--particularly economists who follow the Chicago School "unfettered markets" theory of the way capitalism works--suggest that there's nothing that can or should be done about these problems other than relying on the unfettering of the market system that created them to resolve them.
For example, take Ross Douthat's opinion piece in the New York Times on Sunday, Can the Working Class Be Saved? (Feb. 12, 2012). He starts with Charles Murray's conclusion (in a book reviewed earlier in the Times) that the working class has lost its way because it no longer values fidelity, piety, industry, thrift, and personal responsibility.
These are of course the typical right-wing approaches to explaining the problems of much of the poor, near-poor and middle class in America today. The right sees it as their fault for not being responsible (select cheaper doctors for health care, or die), not being faithful (if women would stay married to the bums that abuse them, they'd have more financial support), or not being faithful enough (turning away from church leads to teenage sex leads to pregnancies leads to abortions--and it's all bad in the eyes of the pious right that wants to impose its views on the rest of us).
But Douthat doesn't like Murray's answer--he considers it a too radical libertarian policy proposal that is "impractical" and "divorced from political reality." Murrary would scrap all the individualized programs that result in too much government intervention in daily lives, and instead provide a guaranteed minimum income to all Americans. Murray's answer has much to appeal in it--direct aid probably costs less overall, since it goes directly to the people who need it instead of to all the middlemen. Of course, the minimum is likely too low, and it probably doesn't provide enough to ensure that those in the bottom tiers of the income distribution have a fair chance at college and improving their lives. It probably won't work to remove government from the picture entirely--after all, the reason we need to work together in the form of government is that we cannot as individuals do so many of the things that we need to do as a community. For example, we need state support for public education at all levels to increase, so that there are public goods available to meet the needs of everyone.
But Douthat doesn't like the left's response to Murray's arguments about the American working class either. He says that that liberals acknowledge "the social breakdown [Murray] described may be real enough, ... , but [claim that] it’s an inevitable consequence of an economic system that Republicans have rigged to benefit the rich."
He treats the assertion of untruth of that statement as though it proves itself. But of course it doesn't. In any system, there will tend to be power elites who gradually move the system more and more to favor themselves. If they can co-opt the underclass to serving their needs and voting against interest, they will. That is pretty much what has happened in the US under reaganomics--tax cuts, deregulation, militarization, privatization--those policies have ultimately all greatly benefited the rich and sometimes helped but often hurt the not-rich. That has left us with the problem of the top 1%--called attention to by the Occupy Wall Street movement--garnering productivity gains for themselves and leaving the rest of Americans in dire straits.
In particular, the privatization/deregulation combination have permitted employers to have the upper hand in their treatment of workers and supported the gradual weakening of worker unions, which offered them their best means of combatting neo-feudal workplace policies. Once private sector worker unions were weakened, the right began its effort to decimate public sector worker bargaining rights, an effort that is accelerating today. Much of it is achieved by using a divide and conquer strategy--tell private workers that public workers are getting overpaid on their tax dollars, even when it is either untrue (most public workers are underpaid compared to private workers) or only partly true (some public workers make more than private workers, but in those cases it is the private workers who are underpaid, as their employee rights and their share of productivity gains have diminished over the last decades, while the managers' shares of productivity gains have increased like an expanding black hole).
What is Douthat's explanation for the problem?
It was globalization, not Republicans, that killed the private-sector union and reduced the returns to blue-collar work. It’s arithmetic, not plutocracy, that’s standing between the left and its dream of a much more activist government.
That, my folks, is post hoc rationalization, at best. Globalization as we have experienced it is indeed a part of the problem. But Milt Friedman's adulation of unfettered markets, the brute capitalism that the right has promoted for decades, is the driving impulse of globalization as we have experienced it. The US gave up its own environmental sovereignty in trade agreements with other countries. The US failed to protect its workers and industries--by , for example, exacting an "exit toll" when its own corporations moved jobs outside the country. The US policy approach to globalization was determined by the "unfettered market" approach of the Chicago School--what Naomi Klein referred to in her insightful book as "The Shock Doctrine" (which is a good description of what Grecians are undergoing now in order to satisfy Morgan Stanley, Goldman Sachs and the other big multinational banks who hold a good deal of Greece's debt). And the US's failure to provide adequate stimulus at the worker level--through job programs and even job guarantees--is a big part of the reason that the financialization of the economy had such drastic results for ordinary Americans. See, e.g., Pavlina Tcherneva, why the job guarantee is superior, Naked Capitalism (Feb. 12, 2012).
As to the second part of Douthat's assertion--that "it's arithmetic and not plutocracy" that is the problem? Again, that answer overlooks the way other nations have controlled health care costs with single provider systems where hospitals and Big Pharma lose their market-making power, and doctors are subject to a more rational pricing system. Health care is the primary driver of the expected increase in government benefit payouts (other than the "temporary" increase from the baby boom wave).
So a combination of governmental actions could change the numbers in Douthat's "arithmetic"--utilization of the savings from transitioning from engagement in multiple wars to a more defensive, anti-war approach; re-regulation, anti-trust actions and a narrower scope for corporate consolidations and reorgs (to prevent the need for more bailouts); beefening of our unionization rules to protect workers against the current lopsided power of employers (e.g., a card check rule and requiring employers to permit a union meeting with workers for every employer meeting that addresses unionization issues); health care reform through a public option/single payer or even single payer/single provider solution (to prevent the continuing rentier profits from health services that are exploding health care costs in the US compared to other developed nations); and adjustments to the tax system to ensure a more appropriate "ability to pay" measure than the rough brackets and systems we have now.
The tax system, in other words, cannot redress that problem in and of itself, but it can certainly be a major contributor to a remedy.
For example, we have a relatively flat bracket system, that doesn't make a distinction between $400,000 of income and $300 million of income. A finer-tuned bracket structure that responds to today's income levels rather than those of the 1950s would have more rate brackets and a higher top rate for those hedge and equity fund managers and CEOs who earn multiple millions, even hundreds of millions a year (some earning in half a day more than their average workers make in an entire year).
Furthermore, although the estate tax is our only method for a "last chance" to extract some tax from the financial assets mostly held by the very rich ( and mostly passed on, unsold, to their heirs in a windfall of unearned benefits and stepped up tax basis), the current estate tax is pitiful against the mighty estates it should be taxing based on ability to pay. The current estate rules include a too-large exemption--$10 million for a couple--that lets many large estates off the hook for any tax whatsoever. Worse, the current estate tax rules has a flat rate that is too low--those with a family farm worth $20 million pay the same rate on the amount above the exemption as those with estates worth billions (albeit with provisions for paying that amount over up to 14 years). Even worse, Congress hasn't acted to eliminate the many gimmicks that sophisticated tax advisers use to work around the pitiful estate tax provisions that are still included in our Code (e.g., the complete exclusion of life insurance proceeds rather than just the investment return, gimmicky trusts and phony partnership valuations to get around the estate exemption amounts, among others).
Douthat's prescription is the following:
- lower the payroll tax burden (by paying for Social Security in "other ways" and structuring benefits so as not to create a disincentive to work--he doesn't provide specifics, but one suspects that he means privatization of Social Security)
- build family friendly policy into planning (either through the left's favored european style family leave requirements or the right's favored method of child tax credits)
- control immigration (favor highly skilled immigrants, disfavor low-skilled immigrants)
- reduce incarceration rates (with "swift certain punishment" and "larger police forces")
Note that there's no mention of increasing taxes on the rich or of using the windfall from the end of the Iraq and Afghanistan wars to support work programs like the WPA that helped end the Great Depression. While these are topics that should be discussed, there are as many questions raised by this list as are answered. Surely we have to reduce incarceration--but swifter punishment implies loss of due process (quicker death penalty executions is a common plea from the radical right), while more police is not the answer to things like the methamphetamine criminal gangs (modernizing our drug laws to treat most drugs as legal would be a great first step, since it is the criminalization of drugs that makes the criminality of drug lords so profitable, as we learned during Prohibition). Surely we should be more aware of our immigration policies' impact on US families and workers. But immigrants actually create new jobs--the mouths have to be fed, the families have to be housed, etc. It is not so clear that shutting the door protects US jobs but may in fact close them down. Family friendly policy is a good idea--which is why legalization of same-sex marriage and repeal of DOMA needs to happen, so that all the different kinds of US families can have similar protections and similar assurances of long-term security, that will help them be steadier and more responsible workers and parents. Lowering the payroll tax burden for the poor and near-poor makes sense, but increasing it for those who are better off makes sense too.