Magazine article The American Prospect

Paying for It

Magazine article The American Prospect

Paying for It

Article excerpt

OVER A DECADE AGO WHEN, AS SECRETARY OF LABOR, I hollered about Americas widening inequality, I'd get phone calls from Democratic officials who politely asked me to shut up. After all, I was part of the administration, and my complaints made it seem as if the administration wasn't doing nearly enough.

It wasn't. An expanded Earned Income Tax Credit helped the poorest, but the old working class was going nowhere. At Alan Greenspan's insistence, Bill Clinton jettisoned most of his agenda in order to cut the budget deficit. In return, Greenspan lowered interest rates and created a booming economy that helped Clinton get re-elected. The boom also created enough demand to lift blue-collar wages and temporarily halt widening inequality.

But the underlying trend hasn't changed. Recent data from the IRS show that the wealthiest 1 percent of Americans are earning more than 21 percent of all income--a post-World War II record. The bottom 50 percent of all Americans combined are earning just 12.8 percent. The consequence of fiscal austerity and unwillingness to raise taxes on the rich is that America doesn't have the means to lift the bottom half. So what are leading Democrats prescribing? More of the same.

There are only two economic philosophies in America--trickle-down and bottom-up. Trickle-down means the rich get richer and pay less in taxes. Supposedly they use their extra income to invest in America, which makes all of us more productive. But in a global economy, investments don't trickle down; they trickle out to wherever on the planet the rich can get the highest return. If trickle down worked as advertised, inequality wouldn't be widening so fast.

Bottom-up means giving all Americans what they need to be productive--universal and affordable health coverage, good schools, a chance to attend college, job retraining, and affordable child care, for starters. So the question is how the nation can afford all this--and also give the soon-to-retire baby boomers the Social Security and Medicare they expect, pay for homeland security and national defense, invest in non-fossil fuel-based technologies, and repair the nation's decrepit infra structure. I haven't even mentioned the trillion dollars necessary to shield the middle class from the Alternative Minimum Tax. Even if we cut corporate welfare, eliminated subsidies to agribusiness, and banned all earmarks, we wouldn't have nearly enough. …

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