There is a good editorial in the New York Times today.
Over the next four years, tax reform, done right, could be a cure for much of what ails the economy. Higher taxes, raised progressively, could encourage growth by helping to pay for long-neglected public investment in education, infrastructure and basic research. More revenue would also reduce budget deficits, helping to put the nation’s finances on a stable path. Greater progressivity would reduce rising income inequality, and with it, inequality of opportunity that is both an economic and social scourge.emphasis added
It's a good start, but it addresses only one side of the problem. There's another which needs to be addressed as well. More below the Orange Omnilepticon.
Along with tax reform we need something else that no one talks about: economic reform.
The last 30 years has seen nearly all of the growth in the economy, all the gains from productivity, siphoned off and pocketed by the investor class. It has not trickled down to the shop floor, the people restocking shelves in the Big Box stores, or anywhere else people measure their incomes by hours worked. (And we're not talking about billable hours.)
People can no longer expect to have a career that could potentially last a life time; instead they are expected to have to reinvent themselves every few years - even if that means going back to the foot of the ladder in a new job that probably pays less than the old one. Navigating a career through the 'new' economy is like trying to cross a swiftly moving river by jumping from ice floe to ice floe. Good luck if you fall in, because you're on your own.
Conservatives talk about freedom by workers to market their skills in the work place, unshackled by union contracts - but gloss over the loss of benefits, pensions, and full time employment in a market where there are multiple applicants for every job, and employers hold all the cards.
'Education' is supposed to be life long now - but there's no such thing as public schooling for adults, and tuition keeps going up. Companies demand the latest in skills - but no longer invest in training their own work force. Why should they, when there's no union to force them to look past the next quarterly numbers and shareholder dividends?
This atomization of the labor force into individual worker drones strips away the respect that used to come from age and experience in a company, and the strength in numbers that unions used to use to strike a fairer balance against employers.
The other day Paul Krugman blogged about how the economy has shifted the way the Gross Domestic Product is divided up. The portion that used to derive from wages and benefits has shrunk, while the share from capital has expanded. There's still plenty of money out there, but the way it is portioned out is creating problems that addressing taxes alone won't fix.
...a substantial part of our social insurance system — Social Security and the hospital insurance portion of Medicare — is funded through dedicated payroll taxes. If payrolls lag behind overall national income, this will tend to leave those programs underfunded given the way the laws are currently written.emphasis added
But America as a whole won’t have gotten poorer: the money is still there to support the programs, it’s just coming in the form of capital rather than labor income. There would be no problem, at least in economic terms, in continuing the programs by adding revenue from general taxation, maybe even from dedicated taxes on capital income.
And consider the alternative, in which we slash Social Security and Medicare not because the nation can’t afford those programs, but merely because workers are taking a smaller share of national income. What we would be doing in that case is doubling down on the damage to workers — they’re already hurting because income is shifting away from labor, and we’re going to hurt them even more by cutting the benefits they depend upon.
The progressive tax reforms the Times is calling for could do a great deal to address this - but ignoring the income inequalities that are contributing to the problem means we're ignoring the elephant in the room. Occupy Wall Street got this; the rest of the political establishment is still trying to change the subject. By keeping the conversation focused on government taxation and spending, conservatives are drawing attention away from wages and benefits, and their success in the war on working people on behalf of the ownership class.
Make no mistake. The tax reforms the Times is calling for are a vital piece of the puzzle, but they're not the whole answer. They'll be fought tooth and nail by conservatives who've made an industry out of demonizing government. But, we also need to address other parts of the puzzle as well. There's been a huge shift to capital based income because of other policies.
One of the bigger distortions of the economy has been the way antitrust law has been turned on its head. The original idea was that letting any company get so big that it could drive smaller competitors out of business and raise prices in the absence of competition was a bad thing. The late Robert Bork rejected that idea. In typical conservative mental gymnastics, bringing antitrust action against a company for getting too big was A) punishing success, and B) had been corrupted into a tool by which smaller companies substituted legal action for competitiveness. The Borkian principle became, that as long as no rise in costs to consumers could be demonstrated from monopoly status and/or overwhelming dominance in a given field, there was no justification for pursuing antitrust action.
In practice, this has been a disaster in many ways. It's not just about the prices consumers pay. There's more to consumer considerations than price. Lack of competition means lack of innovation, lack of service, lack of accountability, lack of choice. And, there are a lot of other ways monopoly power can be abused. A giant company can threaten its suppliers to keep costs down, or they'll buy elsewhere - and there can be other demands too. This depresses wages among other things, and has driven a number of small companies into bankruptcy.
Giant corporations have the same power over their employees. When they dominate a field and have pretty much eliminated smaller competitors, they can pretty much set wages and benefits to their liking, not their workers. The destruction of organized labor as a counterforce has only strengthened their hand - this is one of the reasons why middle class incomes have stagnated for the last 30 years.
Another problem is that mega corporations have immense political power. They can afford to buy politicians, write their own laws and regulations, (yes, we're talking about you ALEC), and blackmail communities and regions into giving them tax breaks and other special treatment or risk losing jobs and tax revenue. Again, the destruction of unions means that there is little countervailing force against their agenda in the political arena. (And thank you too, Supreme Court, for Citizen's United.)
Then there's the larger consequences. When large companies dominate the economy, the economy is inherently less stable. One bad management team, one incompetent or criminal CEO can devastate thousands of lives, hundreds of communities. Consolidations and mergers become more lucrative than running a business; top management becomes more about placating shareholders and bankers than actually giving a damn about how good their product line is, or what the company will be doing in five years - or 50. Good corporate 'citizenship' is a joke when there's no allegiance to any one country. Wall Street should have shown everyone the dangers of "Too big to fail" - but "is our politicians learning?"
I could go on and on here. Climate change and energy policies, education, the environment - those are all areas that need attention too. But, if we don't have an economy that serves all of the citizens of this country, getting anything done is going to be even more difficult.
So, while fighting for real tax reform and government spending that actually addresses our real problems is vital, let's not lose sight of the larger picture. Our economy has been subverted into a wealth concentration machine for the benefit of the few. We can address some of that with tax policy (capital gains taxation is WAY too low right now for one thing) and spending (a stronger safety net, better healthcare, will help a lot) - but we're also going to have to find ways to reshape the economy so it once more works for the benefit of everyone, not just the 1% and the ownership class.
We can start by rejecting what got us here: the dominance of conservative thought and policies that have been imposed on the country for the last 30+ years. It's time to throw off the cold dead hand of Reaganism and its rejection of government. It has failed to deliver on its promises; it has been tried repeatedly and it does not work. Unfortunately it's still the default setting for too much of what passes for conventional wisdom. We have a whole generation and more that's grown up thinking there's no alternative. That has to change. Conservatism is not the solution to our problems: conservatism IS the problem.
7:45 PM PT: On the
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