What Will It Take?

June 25, 2014

For some of us, it seems so abundantly clear that the high level of inequality in the US (and much of the world) is not what we want, and is not healthy for future generations.

But, there are many who are unconvinced. For some of them, they succeeded to the higher levels of income and wealth, whether through inheritance or their own talent (at least as they see it), and they don't see anything wrong with that--let others make their own way, if they have the determination--opportunity abounds in America. For some who haven't made it, there is the lure of making it, the belief that I too can be among those millionaires or billionaires, so let's not do anything to reduce incentives (e.g., raise taxes). For others of a libertarian bent, it's all about individual freedom and liberty, any any intrusion of the government into that right and privilege (including progressive taxation) is a form of taking away my liberty.  Some people believe that any diminution of incentives will seriously damage motivation, savings, investment, and/or economic growth.  There are some of the major arguments defending inequality.

The collective of resistance to doing anything is substantial. And, what with the rising power of wealth on politics and the sophistication of misleading advertising campaigns financed by conservative interests, the challenge to change is truly formidable.

Yet, studies show Americans are concerned and want something to be done about it.

If that's true, and in the meantime, nothing at all is happening, two questions must be answered:

1) How can the case best be made to persuade those in power and the public to aggressively pursue solutions? How can the wealthy be convinced?

2) And, what are the practical (considering politics) policy changes which can begin the process of at least slowing the continued increase in inequality, and, in time, arrest it and reverse it?

It seems there are two main elements which have the greatest potential, when considering possible overarching themes:  Clarification that changes will be gradual and will not take away any present wealth, just gradually reduce the amounts going to the higher levels of income and wealth in the future; and, demonstrating that such change can be in the best interest of the wealthy as well.

Some modest downward adjustment over time in inequality is in the best interest of the wealthy:

• Society becomes more enjoyable for everyone, not so divisive, fewer homeless, fewer on welfare, fewer protesting.
• While the results of actions to reduce inequality are disputed in regard to impact on growth, even conservative economists agree that if the actions are modest, the negative impact on growth is negligible.  A number of prominent economists argue that such actions will stimulate growth.
• You can choose a little more government now, or a lot more government later, when the underprivileged rise up.
• The potential of an eventual massive uprising, a revolution, chaos, redistribution, is averted.

What practical policy changes can be made? The operative word is "practical," and this makes the list short and limited. Political resistance and lack of international structures precludes a global wealth tax, as proposed by Thomas Piketty in his best seller Capitalism in the Twenty-First Century. Raising income taxes in the US can only be considered in narrow situations, and must be offset with spending cuts, due to our divided Congress. 

Important issues to focus on include measures to alleviate poverty, homelessness, affordable housing, improve health and education, and minimum wages in places where raising the minimum is justified (where the current minimum wage is well below the local median wage).  

At this time, given the gridlock in Washington, it may be more effective to work on these issues on a state and even on a county and city basis, as they come up. 

No action is simple and without it's political and financial costs. While it is regrettable that nothing major is feasible at this time, we must do whatever we can, until the pendulum swings to the left. It is very likely this will happen when things get sufficiently unpleasant, but we shouldn't complacently wait for that.

And, here is an unfortunate political reality: While many of us on the left do indeed sympathize with the pain that imposing costs on restauranteurs by raising the minimum wage and similarly on owners of apartments by rent controls--a hot issue in NYC today and always in San Francisco-- these kinds of impositions on the owner class may be one of the only ways to eventually convince the wealthy that something fairer and simpler could be done! There has to be motivation to move the pendulum to the left. It has a powerful constituency pushing it to the right.