What Would We Do if We Wanted to Attack Inequality Instead of Deficits?

January 28th, 2013 at 5:06 am

Jim Tankersley has a piece in the WaPo suggesting that President Obama’s actual policy agenda doesn’t meet his aspirations when it comes to reducing inequality and poverty.  I raised a similar concern here, though my focus was more on the budget constraints than the specific policies.

Tankersley suggests that the President’s current econ team is more interested in policies that reduce deficits, like tax reform, than those that strike at market-driven inequalities. But what’s missing from his piece, at least IMHO, is a discussion of what such measures would look like.  Frankly, it’s harder to craft a set of policies to attack inequality, poverty, middle-class income stagnation than to attack the deficit.  The latter calls for spending cuts or tax increases.  The former…well, outside of Keynesian fiscal policy in recession and monetary policy (which, if you’re an administration economist is the Fed’s purview, not yours) there’s not a lot that economists’ agree on (ok…more education…but everybody’s for that).

I’m crunched for time so I’ll just tick some things off the top of my head, but every one of these ideas deserves a lot more ink not to mention more attention from those who would flap gums about a stronger middle class.

–Full employment, and if markets won’t provide jobs, there’s tons of work for folks to do fixing our public infrastructure (e.g., FAST!)
–Manufacturing policy, both offence (forward looking investments in areas where markets will be short) and defense (fight back against non-tariff barriers like currency manipulation)
–Better access to pre-K and college (attendance and completion) for economically disadvantaged
–Unions (e.g., a level playing field to organize)
–Minimum wage, labor standards (overtime rules, correct worker classification, paid sick leave)
–Work supports (e.g., EITC, child care subsidies)
–Guaranteed health insurance coverage
–Better financial oversight, tax on financial transactions (the goal here must be to reduce the economic “rents” claimed by this over-sized sector)
–Amply funded gov’t sector to accomplish much of the above.

More to come…on plane and battery’s dying.

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13 comments in reply to "What Would We Do if We Wanted to Attack Inequality Instead of Deficits?"

  1. ir_kill says:

    Access to pre-K and college for economically disadvantaged will be a failure for you system. In former USSR we did so and that was an awful mistake. Now we have crowds of unemployed lawyers and financial consultants, but there are no any skilled carpenters or mechanics!

  2. foosion says:

    There’s the Dean Baker set, including lower the dollar (reduces competition against lower paid workers), decrease intellectual property (decreases prices for pharama and entertainment), lower professional licensing barriers (increases competition against doctors and lawyers) and end too big to fail (reduces power and pay of large financial institutions).

    These would go a long way to decreasing inequality and making the economy more efficient.

  3. Tyler Healey says:

    Step 1. Abolish the debt limit

    Republicans hold the debt limit hostage and say they won’t raise it unless government spending is cut. For this reason alone – the fact that it enables austerity – the debt limit has got to go.

    Step 2. Close our infrastructure deficit

    Our infrastructure is in dire need of repair and over ten million Americans are in dire need of work. Government spending to both make safe our dangerous infrastructure and reduce poverty is the height of fiscal responsibility.

    Step 3. Abolish the Federal Insurance Contributions Act (FICA) tax

    As James Galbraith has written, “Social Security and Medicare are government programs; they cannot go bankrupt, and they cannot fail to meet their obligations unless Congress decides … to cut the benefits they provide.”

  4. save_the_rustbelt says:

    In the face of severe unemployment and massive underemployment, our next apparent move is to grant de facto amnesty to 11 million illegals.


  5. D. C. Sessions says:

    there’s not a lot that economists’ agree on (ok…more education…but everybody’s for that).

    Only as long as it doesn’t cost anything. Got to keep spending down so we don’t bankrupt our grandchildren — the illiterate can’t afford to pay our bills, after all.

    • Kevin Rica says:

      If there are not enough jobs for the uneducated — then why doesn’t our immigration policy reflect that?

  6. Nick Batzdorf says:

    I think these people have the right idea: greatly expanded stock ownership, paid for out of future earnings.


    There are ways in which I part company with them, for example they think Keynes only understands “money” rather than the underlying problem (actually his concepts are empirical, and he’s just dealing in a different realm). But for example the idea that stimulus money should come with the requirement that employees are given ownership stake in the companies that receive it makes a lot of sense to me.

  7. Auros says:

    As Matt Yglesias likes to say, you can do a lot to reduce poverty by giving people money.

    If you pay for it with highly progressive taxes, that also doubles as reducing inequality. And given that there’s reason to think that the combination of globalization, which lets capital move but not labor, and capital-biased technological growth, as Krugman has discussed in recent months, are driving inequality, there’s every reason to repeal all tax preferences for capital income, and redistribute that money to labor, through, say, a large expansion of EITC, or a long-term reduction of the employee share of FICA. Presto, post-taxes-and-transfers income inequality reduced.

  8. perplexed says:

    -“Tankersley suggests that the President’s current econ team is more interested in policies that reduce deficits, like tax reform, than those that strike at market-driven inequalities.”

    Does the “science” of economics even have a definition for what constitutes a “market” or does the term just include “anything that happens when the government doesn’t alter the current situation”? What definition of market would allow 15% of the wheat produced to rot in the field like our so-called “labor markets” do? Are monopoly profits a “market-driven” phenomenon? What about tax expenditures, how do we get the “market data” on those?

    Krugman suggests we lack clear evidence that inequality slows growth. Is the same thing true for taxes? How do monopoly profits and other rents impact growth any less than taxes do?

    Is anyone even trying to measure the total amount of rents and evaluate the degree to which they drive inequality and slow growth? If we know we should be taxing rents as Brad DeLong points out, why is there so little effort expended at measuring them and communicating to the electorate what the magnitude of this “sector” of the economy is?

  9. Smith says:

    More education is definitely not the answer and everybody is not for it.

    Page 303, The State of Working America 12th Edition http://stateofworkingamerica.org http://stateofworkingamerica.org/subjects/wages/?reader

    “Real wages of college graduates fell for every key occupational group from 2003 to 2011, except for computer and mathematical science. From 2002 to 2011 there were four occupational categories with positive real wage growth for college graduates; however, even the occupation with the best real wage growth – computer and mathematical science – had growth of 3.2 percent over those nine years, an increase of about a third of 1 percent a year. It is fair to say that there was no occupation providing college graduates on average with good real wage growth after 2002 or 2003.”

    If you look at projections of future job growth, there is no shortage of high skill workers, even STEM.

  10. Kevin Rica says:

    The Dems need to get their story straight.

    If they don’t like income inequality then they have to insist that employers pay a middle class income and full health benefits if they want to hire any immigrants.

    Why are farmers entitled to poor people to pick crops? Where does it say in the Constitution (excluding Article I section 9 allowing the importation of slaves for 20 years) that employers have a right to poor people to work for low wages?

    Immigrants are not bad people. They are desperate people willing to take any work at any wage.

    Liars are bad people. Editorial boards of major newspapers who claim that immigration doesn’t drive down wages are liars. A press pass is not a pass on lying. Same goes for politicians and the Chamber of Commerce.

  11. Tyler Healey says:

    We could expand unemployment insurance (UI) to a humane level.

    It should be federal law for UI to pay a minimum of $400 per week. This would force employers to pay their employees at least $20k per year.

  12. Kathleen Wright says:

    Love FAST proposal, always have. And it only grows in importance once schools come to terms with their pension problems. If schools are going to be saddled with unfunded benefits on their balance sheets for the long haul, we should be working on school facility improvements as soon as possible. Better as a Federal stimulus package now…and there will be no money in school district budgets later under any economic conditions.