If insanity is doing what has failed in the past and hoping this time it will work, the recent tax “reform” is a prime example. Trickle-down economics did not improve matters under Ronald Reagan or George Bush. That rising tide did not lift all boats. Why should it now?
Nobel Prize economist Joseph E. Stiglitz’s “ The Price of Inequality: How Today’s Divided Society Endangers Our Future” gives us insight into the perilous situation Americans are in and how we can really rectify things.
The recent financial crisis and recession should inform us that the American dream, if not dead on arrival, is in need of resuscitation. Income growth happens mostly for the 1 percent. The rest of us are worse off than we were even recently. The middle class is hollowing out. Inequalities are affecting quality of life issues like health and longevity. Generational upward mobility is becoming a myth.
When compared with other industrial nations, America has the most and fastest growing inequality and is doing the least to rectify things.
Tax laws were already tilted in favor of the wealthy. Capital gains, for example, are taxed at a lower rate than wages. Now we’re giving the rich and corporations tax cuts on the very faulty assumption that they’ll use this largesse to benefit society.
Recall what happened when we bailed out the “too big to fail” banks? Lots of money went into huge bonuses, including for those whose fiscal irresponsibility helped create the mess. We are also enabling banks to make risky gambles. No matter how much they screw up, we’ll bail them out.
You know what will happen now. Those geniuses who couldn’t see that cutting tax rates leads to losing tax revenue and rising debt will become obsessed with the latter. How do we keep it down? We cut expenditures. We don’t make investments in public education and infrastructure that could help workers and their children. We slash the safety nets — already far from adequate — that help our most precarious people survive.
Oops! More inequality.
Ultimately, this inequality is not even in the best interests of the wealthy. This goes beyond the reality that more money for the rest of us would stimulate the economy more because we have to spend it. Most of us are becoming increasingly unconvinced that our government is still of, by and for the people, especially since corporations somehow gained personhood.
Sometimes people lacking less drastic means of achieving fairness feel they have little or nothing to lose. You don’t have to go back to the French or Russian Revolution or our divorce from Great Britain. Think Arab Spring.
Stiglitz has seen societies with far greater inequality than the United States work to rectify the situation. He gives many suggestions for how we can do so. Just two of them are:
— We can curb the excesses at the top by curbing excessive risk taking on the part of “too big to fail” institutions, making banks more transparent, making predatory lending more difficult, cutting bonuses that reward risk taking, improving government oversight over corporations, reforming bankruptcy laws and ending corporate welfare.
— We can help people who are struggling become more productive citizens by improving access to good education, providing health care for all and strengthening social protection programs.
Stiglitz holds two visions for America in 50 years. One seems to be the logical continuation of our current trajectory: a dual economy in which the rich, in gated communities, have the best of everything and the rest of us exist in poverty and precariousness. The other would enable us to actually achieve liberty and justice for all by narrowing the gap between haves and have-nots.
I know which future I want for my children.
Jules Hathaway is a proud mother of three and a University of Maine student.
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