Price Point

New Deal Numerology: Working Holiday

May 3, 2012Tim Price

This week's numbers: 99.99 million; 80; 4; 147; 66

99.99 million... is a wide-ranging number. That was the difference in estimates offered by Occupy Wall Street, which pegged turnout for May Day protests between 10,000 and 100 million. Some would call that shoddy guesswork; Wall Street would just call it “accounting.” 

This week's numbers: 99.99 million; 80; 4; 147; 66

99.99 million... is a wide-ranging number. That was the difference in estimates offered by Occupy Wall Street, which pegged turnout for May Day protests between 10,000 and 100 million. Some would call that shoddy guesswork; Wall Street would just call it “accounting.” 

80... is a celebrated number. That’s how many countries recognize May 1st, or International Workers’ Day, as a national holiday. The U.S. never joined in due to fear that honoring “workers” would make us sound like socialists. Who else cares about them?

4... is a substitute number. That’s how many months separate May Day from America’s Labor Day. Making it a send-off to summer ensures a more relaxed atmosphere, so there’s less Bolshevik agitation and more focus on shoe color.

147... is an overworked number. That’s how many years ago the first American May Day protests took place as Chicagoans demanded an eight-hour workday. Many of today’s 1% carry that torch forward by maintaining a zero-hour workday.

66... is a stricken number. That’s how many years ago the last general strike took place, shutting down the city of Oakland. The May Day protests failed to break that streak, but to be fair, it’s much harder to go on strike when no one has a job.

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A Majority of Those Who Claim EITC Are on it for Less Than Two Years

May 2, 2012Mike Konczal

Here's a datapoint I was surprised to learn. From a footnote by Bob Greenstein of CBPP, there's a paper titled 

Here's a datapoint I was surprised to learn. From a footnote by Bob Greenstein of CBPP, there's a paper titled Income Mobility and the Earned Income Tax Credit: Short-Term Safety Net or Long-Term Income Support, by Tim Dowd and John B. Horowitz.

Is the safety net a hammock?  And is the system fundamentally broken if some 40 percent of American don't pay an income tax? This is the brunt of the conservative attack on the welfare state.  As Paul Ryan notes, his plan will make sure the government doesn't "turn the safety net into a hammock that lulls able-bodied people to lives of dependency and complacency, that drains them of their will and their incentive to make the most of their lives." Ryan's plan is focused on cutting spending through the tax code.  Most tax code spending benefits the top 20 percent of Americans, with one exception - the set of refundable credits including the Earned Income Tax Credit (EITC).  Those mostly go to those in the bottom 40 percent of Americans.  If you have the concerns mentioned above, the EITC is the place you'd cut.

But does the EITC represent a "hammock," a permanent class of the poor living lives of "depenency and complacency"?  For one, EITC is connected to those who work, so one would think that it would be excluded from the assault on the welfare state.  But beyond that, it appears that those claiming EITC are people going in and out of working poverty with a surprising turnover frequency.  From the Dowd/Horowitz paper (my bold):

Sixty-one percent have spells of one or 2 years. However, at the same time, we find that 20 percent of EITC recipients starting a spell, conditional on observing the taxpayer in 1989, claim the credit 5 or more years. Therefore, for some taxpayers, the EITC acts as a temporary safety net during periods of either anticipated or unanticipated income or family structure shocks. But the EITC also acts as a long-term mechanism of providing assistance to taxpayers with children who are entrenched in the lowest- income brackets.

Indivar Dutta-Gupta at CBPP has more on the study, also noting that (my bold):

The EITC goes to working people — the overwhelming majority of them families with children — with incomes up to roughly $49,000.  Earlier unpublished research from Dowd and Horowitz found that EITC users pay much more in federal income taxes over time than they receive in EITC benefits.  Taxpayers who claimed the EITC at least once during the 18-year period from 1989 through 2006 paid several hundred billion dollars in net federal income tax over this period, after subtracting the EITC and any other refunds.

Dowd and Horowitz’s new study also found that EITC use is highest when children are youngest — which is also when parents’ wages are lowest.  (Working parents’ wages rise, on average, as their children grow up.)  This finding is particularly important given the importance of income for young children’s learning and the evidence that poverty in early childhood may reduce children’s earnings as adults.

Rather than a permanent class of non-taxpayers, EITC users do, in fact, pay more in federal taxes over time than they get in EITC benefits, which represents how many of them move in and out of working poverty over the course of several years.  The study finds that mobility is lower on the whole for this group, which makes a safety net even more of a necessary thing.  But perhaps we can cut with the hammock language, and focus on the metaphor of a trampoline, providing people much needed support when there's a sudden shock to the economy or their lives that drops their ability to provide for themselves, and also a mechanism that promotes the kind of risk-taking we want in our society.  The question is how to make that stronger.

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Occupy is Right: It's the Economy, Stupid. And Don't Forget Democracy.

May 1, 2012Richard Kirsch

Fights for economic and environmental justice must also incorporate the fight against big money's hold on our political system.

Most people remember the famous sign in the Clinton campaign war room in 1992 as “It’s the economy stupid!” But what is often forgotten is the second phrase in the admonition to Clinton campaigners to keep a sharp focus on the campaign’s message: “And don’t forget health care.”

Fights for economic and environmental justice must also incorporate the fight against big money's hold on our political system.

Most people remember the famous sign in the Clinton campaign war room in 1992 as “It’s the economy stupid!” But what is often forgotten is the second phrase in the admonition to Clinton campaigners to keep a sharp focus on the campaign’s message: “And don’t forget health care.”

Today, the sign should read, “It’s the economy stupid. And don’t forget democracy.” That advice was provided recently by the pollster who worked on Clinton’s 1992 campaign, Stan Greenberg. In an opinion piece in the New York Times, Greenberg summarized the views of many Americans as, “There’s just such a control of government by the wealthy that whatever happens, it’s not working for all the people; it’s working for a few of the people… They think that the game is rigged and that the wealthy and big industries get policies that reinforce their advantage. And they do not think their voices matter.”

Unlike most advocates for economic justice or democracy who have separated the issues, the Occupiers got this right from the beginning. They clearly see economic inequality, corporate power, and the capture our democracy by big money as a unified problem. The “we are the 99%" meme embraces both gracefully: We can’t have an economy that works for the 99% until we put our democracy in the hands of the 99%.

I recently wrote a strategic paper for the Piper Fund, an arm of the Proteus Fund, on a comprehensive strategy to fight the stranglehold that big money has on our democracy. I found in dozens of interviews that Occupy gave much needed encouragement to campaign finance reformers who were reeling in the aftermath of Citizens United. But Occupy provides more than a moral boost -- it provides a way out of the dead end that both campaigners for economic justice and political reform have found themselves in.

The way forward is for champions of reforms in money and politics to become closely allied with champions of economic justice and other issues of pressing concern, particularly the environment. This must be a reciprocal alliance, a partnership, because champions of those pushing for an economy of shared prosperity or a sustainable environment will be unable to rally people to their issues unless they take on the control of our government by corporations and other well-financed interests

The good news is that many advocates for both campaign finance reform and issues of economic and environmental justice understand this. As I talked with dozens of activists and funders in all three areas of work, the strategy that was most often proposed was to intimately link specific issues to money and politics and to do so in every sphere: communications, organizing and mobilization, legislative advocacy, and electoral accountability.

As one longtime campaign finance reformer told me, “We need to build a populist movement that will have energy. We need to take what people get about corporate money and elections and turn cynicism into movement and action. We need to stop talking about campaign finance reform – it puts people to sleep – and talk about democracy in terms of jobs, economy, and environment.”

Our actions and words must point the way to broad policy solutions as well, because people need to have some basic understanding of how we can create an economy and democracy that works for all of us. Demonstrating against Wall Street must be linked with policies that create broad-based prosperity, which are achieved through democratic reforms. All of us – Occupy included – can incorporate policies that people can easily grasp without becoming deadly wonky. So we can say, “Tax Wall Street speculation to pay for Main Street job creation.” And, “Elect candidates with small contributions from the 99%, instead of mega-contributions from the 1%.”

In an age where our politics are so dominated by concentrated economic and political power, it is hard to grasp the possibility of fundamental change. We can read Justice Brandeis’s observation almost 100 years ago that “We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both” as either a warning that plutocracy will destroy our nation or a prediction that the contradictions of plutocracy will provide the pathway to a transformation. In FDR’s day, the nation made that transformation. It is up to us to make it again in the next New Deal. 

Richard Kirsch is a Senior Fellow at the Roosevelt Institute, a Senior Adviser to USAction, and the author of Fighting for Our Health. He was National Campaign Manager of Health Care for America Now during the legislative battle to pass reform.

 

http://www.shutterstock.com/Image courtesy of Shutterstock.com.

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Dorian Warren: Criminals, Conservatives, and Oligarchs Are Deepening Inequality

Apr 27, 2012

This week, Roosevelt Institute Fellow Dorian Warren joined a panel on America's growing inequality crisis hosted by The Century Foundation and featuring TCF's Greg Anrig, Daniel Alpert, and Robert Hockett along with Timothy Noah, author of The Great Divergence. In the video below, Dorian lay

This week, Roosevelt Institute Fellow Dorian Warren joined a panel on America's growing inequality crisis hosted by The Century Foundation and featuring TCF's Greg Anrig, Daniel Alpert, and Robert Hockett along with Timothy Noah, author of The Great Divergence. In the video below, Dorian lays out three points that need to be included in any discussion of what's causing inequality and how we can address it: lawless employers, race-based political polarization, and the rise of an American oligarchy.

On the first point, Dorian notes the recent Wal Mart bribery scandal and says that when you think of "the lawlessness of Wal Mart when it comes to unionization, I think that's a great example to think about the other ways in which employers have pretty flagrantly violated the law in the last 20 years or so. So when you think about minimum wage, when you think about health and safety, we're in a new environment, and activists who work on this call this 'wage theft.'" He highlights some shocking statistics from a 2009 study that shows how badly low-income workers have been ripped off by their employers and points out that there is a "basic principle of the social contract that when you work at a job you have an agreement with the employer for how much you're going to make... There is a pretty systematic violation of that contract, and that explains at least part of the wage stagnation that we've seen in the low-wage service sector specifically." While updating and modernizing labor laws is important, "monitoring and enforcement of existing wage and hour laws are really important."

Where race is concerned, Dorian argues that while it doesn't explain the rise of inequality by itself, "there is a story where race does play a role, and it's a political story." He points out that "for 80 percent of our country's history, the majority of Americans weren't classified as citizens," and that Lyndon Johnson's signing of the Civli Rights Act caused an exodus of white southerners from the Democratic Party to the GOP. He says that "there is a difference between Republican administrations and Democratic administrations, but how you get to a Republic administration has to be part of that story, and that's very much about race and the response of southern whites to greater inclusion into American democracy." This racial backlash in turn helps to shape the policies that further inequality.

Finally, Dorian says that it's difficult to find solutions to the problem of inequality, as even the best policy solutions may not be politically viable. Citing political scientist Jeffrey Winters, he asks, "How do we make sense of the fact that we live in both a democracy and an oligarchy at the same time?" Wealth has become highlighy concentrated in the U.S. while also granting the wealthy a disproportionate level of political influence and a number of methods to safeguard their wealth and prevent redistribution. He notes that "the expectation of democracies is that non-rich people would outnumber rich people and therefore demand through their vote the one thing that makes everybody equal, greater redistribution." He concludes with the toughest question of all: "From the 1960s to the present, when we've expanded our democracy, how is it the case that we've also seen more redistribution but actually less and greater inequality?"

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Dorian Warren: Criminals, Conservatives, and Oligarchs Are Deepening Inequality

Apr 27, 2012

This week, Roosevelt Institute Fellow Dorian Warren joined a panel on America's growing inequality crisis 

This week, Roosevelt Institute Fellow Dorian Warren joined a panel on America's growing inequality crisis hosted by The Century Foundation and featuring TCF's Greg Anrig, Daniel Alpert, and Robert Hockett along with Timothy Noah, author of The Great Divergence. In the video below, Dorian lays out three points that need to be included in any discussion of what's causing inequality and how we can address it: lawless employers, race-based political polarization, and the rise of an American oligarchy.

On the first point, Dorian notes the recent Wal Mart bribery scandal and says that when you think of "the lawlessness of Wal Mart when it comes to unionization, I think that's a great example to think about the other ways in which employers have pretty flagrantly violated the law in the last 20 years or so. So when you think about minimum wage, when you think about health and safety, we're in a new environment, and activists who work on this call this 'wage theft.'" He highlights some shocking statistics from a 2009 study that shows how badly low-income workers have been ripped off by their employers and points out that there is a "basic principle of the social contract that when you work at a job you have an agreement with the employer for how much you're going to make... There is a pretty systematic violation of that contract, and that explains at least part of the wage stagnation that we've seen in the low-wage service sector specifically." While updating and modernizing labor laws is important, "monitoring and enforcement of existing wage and hour laws are really important."

Where race is concerned, Dorian argues that while it doesn't explain the rise of inequality by itself, "there is a story where race does play a role, and it's a political story." He points out that "for 80 percent of our country's history, the majority of Americans weren't classified as citizens," and that Lyndon Johnson's signing of the Civli Rights Act caused an exodus of white southerners from the Democratic Party to the GOP. He says that "there is a difference between Republican administrations and Democratic administrations, but how you get to a Republic administration has to be part of that story, and that's very much about race and the response of southern whites to greater inclusion into American democracy." This racial backlash in turn helps to shape the policies that further inequality.

Finally, Dorian says that it's difficult to find solutions to the problem of inequality, as even the best policy solutions may not be politically viable. Citing political scientist Jeffrey Winters, he asks, "How do we make sense of the fact that we live in both a democracy and an oligarchy at the same time?" Wealth has become highlighy concentrated in the U.S. while also granting the wealthy a disproportionate level of political influence and a number of methods to safeguard their wealth and prevent redistribution. He notes that "the expectation of democracies is that non-rich people would outnumber rich people and therefore demand through their vote the one thing that makes everybody equal, greater redistribution." He concludes with the toughest question of all: "From the 1960s to the present, when we've expanded our democracy, how is it the case that we've also seen more redistribution but actually less and greater inequality?"

 

Image courtesy of Shutterstock.com.

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Andrew McAfee on the Quickly Encroaching (Economic) Dominance of Our Robot Overlords

Apr 26, 2012

Last week, Roosevelt Institute Senior Fellow Bo Cutter’s latest installment of the Next American Economy breakfast series featured Andrew McAfee, principal research scientist at MIT’s Center for Digital Business, discussing his book The Race Against the Machine.

Last week, Roosevelt Institute Senior Fellow Bo Cutter’s latest installment of the Next American Economy breakfast series featured Andrew McAfee, principal research scientist at MIT’s Center for Digital Business, discussing his book The Race Against the Machine. A self-proclaimed technology optimist, McAfee lays out in stark and sobering terms the workforce displacement that has already taken place and will continue as the speed of technological innovation only increases. Watch here as McAfee relates how chess, rice, and, an Indian emperor help explain why computers keep getting twice as fast every year:

While computers are able to take on increasingly complicated tasks (like becoming a Jeopardy champion), McAfee notes that there are still a few places where humans can hold their own against their soon-to-be cyber overlords, namely complex communication, advanced pattern recognition, and entrepreneurship. However, examples of “science fiction becoming reality,” like the Google Car and nearly pitch-perfect language translation software, make clear that computers “are eating away at those advantages very quickly.” Bottom line: As a result of this “unprecedented digital encroachment,” the bundle of skills that the typical American worker has to offer potential employers is dwindling.

On the upside, McAfee makes clear that technological progress will continue to make us a more productive and rich society. But with the way things are wired right now, not everyone will get to enjoy the party. McAfee points out that while GDP and even mean income is generally increasing, median income has actually declined.

So what can we do about all this? McAfee offers up three places to start. First, invest in America’s infrastructure. Second, use appropriate policy tools (read: taxes) to deal with what we know will be increasing distance between haves and have-nots. Finally, increase innovation in our education system at all levels. McAfee believes our fate is in our own hands and that “the choices that we make as a society and an economy over the next generation are really going to strongly determine whether it’s a utopian or dystopian future that we head into.” 

For more, watch the full roundtable discussion below:

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A Tale of Two Smiths: What Capitalism's Founder Would Think of Goldman's Greed

Apr 20, 2012John Paul Rollert

money-and-greed-150Adam Smith made a distinction between self-interest and selfishness -- and he knew that too much of the latter would lead a nation to ruin.

money-and-greed-150Adam Smith made a distinction between self-interest and selfishness -- and he knew that too much of the latter would lead a nation to ruin.

It has been over a month since Greg Smith’s letter of resignation sent Goldman Sachs into full PR panic mode. Since then, the firm has completed its great “muppet” sweep, Mr. Smith has secured a blockbuster book deal, and Lloyd Blankfein has found himself fighting off stories of a growing power struggle at the top of Goldman high command.

All of this makes for good copy, but it risks obscuring the enduring moral dilemma at the heart of the original letter. Namely, when it comes to doing business, can we make a meaningful distinction between self-interest and selfishness? Or, apropos of Mr. Smith, should a place like Goldman ever hold itself to a higher standard than “How much money did we make off the client?”

Another Smith certainly thought so: Adam Smith, the founding father of modern economics. He first made his name as a moral philosopher with The Theory of Moral Sentiments, a careful diagnosis of the concern we have for others, the attention we show ourselves, and how the tension between the two underwrites a common code of ethics.

One of the principal villains of Smith’s work was Bernard Mandeville, an occasional philosopher who impishly elided fine-grained distinctions. His scandalous work,The Fable of the Bees, was an allegorical poem involving a thriving beehive that bore more than passing resemblance to 18th-century England. Accounting for the affluence and ease the bees enjoyed, Mandeville made two contentions sufficient to give any high-minded economist heartburn. 

First, he claimed there was no essential difference, morally speaking, between the con man and the merchant. Both were driven by selfish instincts to get the better of their fellow man (or bee), and to that end, both trucked in deceit. Yes, the con man broke the law, but the merchant hid behind it.

Mandeville’s second claim was even more scabrous: So be it. Vice, not virtue, kept the wheels of commerce turning, with the benefits shared by all:

Thus Vice nurs’d Ingenuity,

Which join’d with Time and Industry,

Had carry’d Life’s Conveniences,

It’s real Pleasures, Comforts, Ease,

To such a Height, the very Poor

Liv’d better than the Rich before,

And nothing could be added more.

If these lines sound a little bit like "greed is good," then you get Mandeville’s point. Human beings are selfish, and thank goodness for it. Otherwise, we might end up like the bees, who are nearly wiped out after a spell of virtue saps their ambition, spoils their economy, and exposes them to outside attack.

When he stepped forward to challenge these views, Smith knew that he had to provide a compelling distinction between pursuits that are self-interested and those that are merely selfish. He granted Mandeville that there was “a certain remote affinity” between them insofar as both are motivated by a concern for personal well-being, but he appealed to common sense in saying that that we don’t view all human desires equally. My interest in having a clean shirt is not only legitimate, it's laudable, whereas my longing for a panda skin sportcoat is not only illegitimate, it’s an outrage.

Fair enough. But how exactly do we make these distinctions? Smith says we come by them naturally, by engaging others and discovering where our desires echo, overlap, and, finally, are at odds with one another. This process, iterative and ongoing, defines our moral sentiments, the felt necessities of right and wrong that shape and restrain our actions. It also defines for us what Smith called “a fair and deliberate exchange,” the very type of interaction at the heart of a commercial enterprise. 

When he turned his attention to economics, Smith did not think of himself as devising a system that was antagonistic or even alien to the one he had already developed. A free market provided individuals a space to engage each other in the pursuit of their own private interests, but that realm was not free from moral sentiments, nor should it be. Engaging in business was no less a part of human interaction than raising children or making friends, and the idea that a commercial sphere dominated by the grossest behavior would not contaminate the rest of society was not only silly, it was dangerously naive.  

This was Smith’s greatest difference with Mandeville: He did not believe that a nation in which people pursued their interests irrespective of one another would be affluent. It wouldn’t even be stable. Riven by “hostile factions,” society would seethe with conflict, for people with different interests would view each other with “contempt and derision.” In such an environment, Smith observed, “[t]ruth and fair dealing are almost totally disregarded,” for the interests of others have no moral claim on us.

Is Goldman Sachs such an environment? Greg Smith says so, but only the people who work there know whether the culture is as “toxic and destructive” as his letter claims. Yet to the degree that clients are viewed with contempt and derision, especially by leadership, Adam Smith would say that we should hardly be surprised, as the other Mr. Smith seems to be, by “how callously people talk about ripping their clients off.” This is to be expected. The line between selfishness and self-interest, in business as in all human pursuits, appears only when we feel that the interests of others occasionally require us to restrain our own. When we stop caring, that line disappears, and with it some very worthy things — personal integrity, self-respect, professional pride — that money can’t buy.

John Paul Rollert is an Adjunct Assistant Professor of Behavioral Science at the University of Chicago Booth School of Business.

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Why Full Employment is the Best Medicine for Inequality

Apr 20, 2012Mike Konczal

We face a lot of policy challenges, but making sure Americans have jobs will make them all easier.

One of the interesting ideas to come out of the recent Occupy Handbook is Paul Krugman and Robin Wells' argument that inequality has contributed to the lack of a serious and sustained response to the unemployment crisis of the Great Recession.

We face a lot of policy challenges, but making sure Americans have jobs will make them all easier.

One of the interesting ideas to come out of the recent Occupy Handbook is Paul Krugman and Robin Wells' argument that inequality has contributed to the lack of a serious and sustained response to the unemployment crisis of the Great Recession.

Daron Acemoglu and James Robinson respond at their Why Nations Fail blog.  Two points to discuss:

First, the distinction between “right” and “left” (or perhaps pro-elite and anti-elite) is not a natural one when it comes to Keynesian economics and policies. Many conservative politicians, and not just Nixon and Reagan, have embraced Keynesian economics. Both Fascist Italy and Nazi Germany were big-time Keynesians...Third, even in the current US context it is not clear why the wealthiest Americans should be opposed to Keynesian policies...

Fourth, even if Krugman and Wells’s emphasis is right, we find it hard to place lack of sufficient Keynesian stimulus as one of the most corrosive effects of soaring political inequality and political polarization in the US. What about the failure of our educational institutions; the huge incarceration rate, particularly for African-Americans; erosion of civil liberties; increasingly inefficient subsidies and tax breaks to select corporations and sectors; distortions created by implicit and explicit subsidies to the financial industry? Lack of sufficient Keynesian zeal seems a little less important.
For the first point, it's useful to distinguish between some stimulus/counter-cyclical spending and the actual policy goal of full employment. It is easy to imagine elites supporting policies that prevent system collapse -- nobody benefits from 25 percent unemployment -- but not being all that concerned with getting to full employment in two years versus 10 years (or even at all). Whether right now is a "sweet spot" of just enough aggregate demand and employment to keep the system running (and creditors paid) but not enough to give workers serious bargaining power is an ongoing topic of debate on the Internet. (Steve Waldman at interfluidity has the latest entry.) The Krugman/Wells essay brings up Kalecki in a way that I think is useful on this question; the issue of coordination and relative priorities among many eilites is also important.
 
For the second paragraph (their fourth point), it is always difficult to rank bad things. But it is very important to remember that a policy of full employment makes it significantly easier to deal with many other problems. People have much more realistic and managed expectations for what education can do for workers' wage gains in an economy where wages are actually growing. There's good data that unemployment is linked with a lack of interest in global warming, another very important issue. When there's full employment and serious wage growth people are also probably less likely to be concerned about immigration and trade's impact on their jobs. Deincarceration will be easier if there are jobs waiting for people on the other side of the walls rather than sky-high unemployment. And so on.
 
For all the policy fads of getting wages up -- Charles Murray's recent call for elites to shame the working class into higher wages being the latest, and probably not the worst -- the best way to get wages up is to have full employment. As Jared Bernstein notes, "the working man and woman really have no better friend than full employment."

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A Saez/Piketty Profile and a Syllabus

Apr 19, 2012Mike Konczal

Annie Lowrey has a must-read New York Times profile of the two French economists who have meticulously documented changes in the income share of the 1%, Emmanuel Saez and Thomas Piketty.  We've used their research extensively at this blog.  From the profile:

Annie Lowrey has a must-read New York Times profile of the two French economists who have meticulously documented changes in the income share of the 1%, Emmanuel Saez and Thomas Piketty.  We've used their research extensively at this blog.  From the profile:

Both admire, even adore, the United States, they say, for its entrepreneurial drive, innovative spirit and, not least, its academic excellence: the two met while re-searchers in Cambridge, Mass. But both also express bewilderment over the current conversation about whether the wealthy, who have taken most of America’s income gains over the last 30 years, should be paying higher taxes.
 
“The United States is getting accustomed to a completely crazy level of inequality,” Mr. Piketty said, with a degree of wonder. “People say that reducing inequality is radical. I think that tolerating the level of inequality the United States tolerates is radical.”
 
[...]
 
“In a way, the United States is becoming like Old Europe, which is very strange in historical perspective,” Mr. Piketty said. “The United States used to be very egalitarian, not just in spirit but in actuality. Inequality of wealth and income used to be much larger in France. And very high taxes on the very rich — that was invented in the United States,” he said.
 
Mr. Saez added, “Absent drastic policy changes, I doubt that income inequality will decline on its own.”

I also want to use this moment and link to the syllabus and course materials for Thomas Piketty's Paris School of Economics class on the "Economics of Inequality/Economie des inégalités."  I like reading syllabi to get a sense of where academic debates are, and these materials are going to be at the forefront of the inequality debate for some time to come.  The left-liberal space is re-examining and re-building its case on inequality in wake of the Recession and the 1% narrative, and this syllabus is a brilliant collection of the latest arguments, research and academic debate.  It's what will, in a good world, be common knowledge among all graduate students in 10 years - here you can see it argued in real time.  Check it out!

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The New Guard

The Poor Do Pay Taxes -- Too Many Taxes

Apr 17, 2012Alexander Hertel-Fernandez

tax-chalkboard-150 As we try to raise revenue, we must avoid placing a greater burden on those who have the least to give.

tax-chalkboard-150 As we try to raise revenue, we must avoid placing a greater burden on those who have the least to give.

Filing taxes is far from enjoyable for most people, but this year tax day will be especially hard on many low-income Americans. A number of states will levy increased income taxes on the working poor. According to recent research from the Center on Budget and Policy Priorities, families at the federal poverty line in seven states will pay several hundreds of dollars in state taxes. For example, a two-parent family of four with annual income at the poverty line will pay $548 in Alabama and $509 in Illinois.

Why is it important to shield the poor from state income taxes? Many of the working poor already pay other forms of taxes, including local and state sales taxes, property taxes, gas taxes, and other fees. On average, state and local taxes consume a larger share of poor households’ income relative to more well off households --- that is, these taxes are regressive. Collectively, these taxes make it harder for poor families to afford basic necessities and to invest in activities that might help them escape poverty.

What can states do to ease the income tax burden faced by working families? First, state governments can enact exemptions or deductions to offset individuals’ tax burden. Another important effort is the creation of state tax credits for low-income workers. To date, 25 states have tax credit programs that provide support to low-income working families and piggyback on the federal earned income tax credit program. My own state of Massachusetts, for example, provides a credit worth up to about $800 for a low-income, two-parent family of four. These programs are an important step in the effort to provide economic support to poor workers that more state governments should emulate.

In addition to the economic evidence that supports the expansion of these tax credits, there may be public support for such measures as well. Polling indicates that Americans are quite supportive of the earned income tax credit program that the federal government administers – about half of Americans in 2007 reported wanting to expand the generosity of the program.   

Taxes are the way our government raises revenue to invest in important public priorities like health care, education, and infrastructure that lead to economic growth and prosperity. Taxing the poor, however, is the wrong way to raise revenue and makes it harder for low-income Americans to get ahead. Tax cuts for the working poor should be the type of tax cut that both liberals and conservatives can support. 

Alexander Hertel-Fernandez is a member of the Roosevelt Institute | Pipeline's Boston chapter and a PhD student in government and social policy at Harvard University.

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