Soaking the rich
Matt Yglesias says
Many on the right and center indicate that in order to restore the economy, President Obama needs to do more to cater to the whims of rich businessmen. Many on the left feel that this is exactly wrong and that in order to restore the economy, President Obama needs to do more to stick it to the rich and dispossess them. History suggests that both are wrong.
He goes on to give plenty of evidence for the wrongness of the first proposition, and none at all for the second.
As has been pointed out many times, the Great Compression in income distribution during the 1950s and 1960s, driven in part by policies designed quite explicitly to “stick it to the rich”, was also a time of full employment and steadily growing economic growth. And, while the success of those policies made it sensible to focus on other issues, such as civil rights, rather than seeking to push economic redistribution even further, the situation is exactly the opposite today.
When the top 1 per cent have 25 per cent of all income and this share is steadily growing, a government that doesn’t soak the rich can’t do much more than spread the pain a bit more evenly, whether this means cutting services to balance the budget without higher taxes on the bottom 99 per cent, or squeezing out a bit of extra revenue to preserve essential parts of the welfare state.
There doesn’t seem to be much in the way of substantive disagreement here. In this recent post, Yglesias (if I read him correctly) endorses a top marginal tax rate of 80 per cent, close enough to the 90 per cent rate I advocated not long ago (this was really a rhetorical flourish, not an actual policy proposal).
So the problem seems to be one of strategy, but I’m not sure what it is. I admit that I can’t see a promising way forward at present (the revolts in Wisconsin and Ohio are the best signs), but I can see that reversing the flow of income to the top 1 per cent is a crucial precondition. I also can’t work out whether Yglesias is proposing to shelve the issue of income distribution and try to make progress on other fronts (a strategy I regard as doomed to failure) or has something else in mind.
fn1. In this context, let me point out the absurdity of the inevitable claim that the benefits of the Great Compression were only for white males. It was, of course true that, in 1950, Jim Crow ruled and women were subject to all kinds of economic and other discrimination, but these things were products of the highly unequal society in which they emerged. Racial and gender inequality reinforced, and was supported by, economic inequality. During the Great Compression, Jim Crow was swept away, the Voting Rights Act was passed, women gained the right to equal pay and protection against various kinds of discrimination. The Congress even passed the Equal Rights Amendment, which would have been another big step forward if the ratification effort had not been caught up in the rightwing reaction of the 1970s. The fact is that the Great Contraction produced more progress in civil rights, in the US, Australia and elsewhere, than any comparable period before or since.