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“America’s Taxation Tradition”: Public Policy Should Seek To Limit Inequality For Political As Well As Economic Reasons

As inequality has become an increasingly prominent issue in American discourse, there has been furious pushback from the right. Some conservatives argue that focusing on inequality is unwise, that taxing high incomes will cripple economic growth. Some argue that it’s unfair, that people should be allowed to keep what they earn. And some argue that it’s un-American — that we’ve always celebrated those who achieve wealth, and that it violates our national tradition to suggest that some people control too large a share of the wealth.

And they’re right. No true American would say this: “The absence of effective State, and, especially, national, restraint upon unfair money-getting has tended to create a small class of enormously wealthy and economically powerful men, whose chief object is to hold and increase their power,” and follow that statement with a call for “a graduated inheritance tax on big fortunes … increasing rapidly in amount with the size of the estate.”

Who was this left-winger? Theodore Roosevelt, in his famous 1910 New Nationalism speech.

The truth is that, in the early 20th century, many leading Americans warned about the dangers of extreme wealth concentration, and urged that tax policy be used to limit the growth of great fortunes. Here’s another example: In 1919, the great economist Irving Fisher — whose theory of “debt deflation,” by the way, is essential in understanding our current economic troubles — devoted his presidential address to the American Economic Association largely to warning against the effects of “an undemocratic distribution of wealth.” And he spoke favorably of proposals to limit inherited wealth through heavy taxation of estates.

Nor was the notion of limiting the concentration of wealth, especially inherited wealth, just talk. In his landmark book, “Capital in the Twenty-First Century,” the economist Thomas Piketty points out that America, which introduced an income tax in 1913 and an inheritance tax in 1916, led the way in the rise of progressive taxation, that it was “far out in front” of Europe. Mr. Piketty goes so far as to say that “confiscatory taxation of excessive incomes” — that is, taxation whose goal was to reduce income and wealth disparities, rather than to raise money — was an “American invention.”

And this invention had deep historical roots in the Jeffersonian vision of an egalitarian society of small farmers. Back when Teddy Roosevelt gave his speech, many thoughtful Americans realized not just that extreme inequality was making nonsense of that vision, but that America was in danger of turning into a society dominated by hereditary wealth — that the New World was at risk of turning into Old Europe. And they were forthright in arguing that public policy should seek to limit inequality for political as well as economic reasons, that great wealth posed a danger to democracy.

So how did such views not only get pushed out of the mainstream, but come to be considered illegitimate?

Consider how inequality and taxes on top incomes were treated in the 2012 election. Republicans pushed the line that President Obama was hostile to the rich. “If one’s priority is to punish highly successful people, then vote for the Democrats,” said Mitt Romney. Democrats vehemently (and truthfully) denied the charge. Yet Mr. Romney was in effect accusing Mr. Obama of thinking like Teddy Roosevelt. How did that become an unforgivable political sin?

You sometimes hear the argument that concentrated wealth is no longer an important issue, because the big winners in today’s economy are self-made men who owe their position at the top of the ladder to earned income, not inheritance. But that view is a generation out of date. New work by the economists Emmanuel Saez and Gabriel Zucman finds that the share of wealth held at the very top — the richest 0.1 percent of the population — has doubled since the 1980s, and is now as high as it was when Teddy Roosevelt and Irving Fisher issued their warnings.

We don’t know how much of that wealth is inherited. But it’s interesting to look at the Forbes list of the wealthiest Americans. By my rough count, about a third of the top 50 inherited large fortunes. Another third are 65 or older, so they will probably be leaving large fortunes to their heirs. We aren’t yet a society with a hereditary aristocracy of wealth, but, if nothing changes, we’ll become that kind of society over the next couple of decades.

In short, the demonization of anyone who talks about the dangers of concentrated wealth is based on a misreading of both the past and the present. Such talk isn’t un-American; it’s very much in the American tradition. And it’s not at all irrelevant to the modern world. So who will be this generation’s Teddy Roosevelt?

 

By: Paul Krugman, Op-Ed Columnist, The New York Times, March 27, 2014

March 28, 2014 Posted by | Economic Inequality | , , , , , , , | 1 Comment

“The First Progressive Revolution”: It Did Happen And It Will Happen Again

Exactly a century ago, on February 3, 1913, the Sixteenth Amendment to the Constitution was ratified, authorizing a federal income tax. Congress turned it into a graduated tax, based on “capacity to pay.”

It was among the signal victories of the progressive movement—the first constitutional amendment in 40 years (the first 10 had been included in the Bill of Rights, the 11th and 12th in 1789 and 1804, and three others in consequence of the Civil War), reflecting a great political transformation in America.

The 1880s and 1890s had been the Gilded Age, the time of robber barons, when a small number controlled almost all the nation’s wealth as well as our democracy, when poverty had risen to record levels, and when it looked as though the country was destined to become a moneyed aristocracy.

But almost without warning, progressives reversed the tide. Teddy Roosevelt became president in 1901, pledging to break up the giant trusts and end the reign of the “malefactors of great wealth.” Laws were enacted protecting the public from impure foods and drugs, and from corrupt legislators.

By 1909 Democrats and progressive Republicans had swept many state elections, subsequently establishing the 40-hour work week and other reforms that would later be the foundation stones for the New Deal. Woodrow Wilson won the 1912 presidential election.

A progressive backlash against concentrated wealth and power occurred a century ago in America. In the 1880s and 1890s such a movement seemed improbable, if not impossible. Only idealists and dreamers thought the nation had the political will to reform itself, let alone enact a constitutional amendment of such importance—analogous, today, to an amendment reversing Citizens United v. FEC and limiting the flow of big money into politics.

But it did happen. And it will happen again.

 

By: Robert Reich, The American Prospect, February 3, 2013

February 4, 2013 Posted by | Economic Inequality, Income Gap | , , , , , , , | Leave a comment

“It’s Up To You Now”: The Gilded Age Vs. The 21st Century

The 2012 campaign began on Aug. 2, 2011, when President Obama signed the deal ending the debt-ceiling fiasco. At that moment, the president relinquished his last illusions that the current, radical version of the Republican Party could be dealt with as a governing partner. From then on, Obama was determined to fight — and to win.

It was the right choice, the only alternative to capitulation. A Republican majority both inspired and intimidated by the tea party was demanding that Obama renounce every principle dear to him about the role of government in 21st-century America. And so he set out to defeat those who threatened to bring back the economic policies of the 1890s.

Now, it’s up to the voters.

Obama took the oath of office before a vast and euphoric crowd, but as he raised his hand, he was inheriting an economy worsening by the day. And he was about to confront a Republican Party that took its setback as an imperative to radicalize.

In the wake of the failures of George W. Bush’s presidency, Republicans would ascribe their party’s problems to Bush as a big-spender, ignoring the major culprits in the country’s fiscal troubles: a downturn that began on their watch, and their own support for two tax cuts at a time of two wars. They would block, obstruct, stall and denounce all of Obama’s initiatives, and abuse the rules of the Senate to demand that every bill would need 60 votes.

And then came the tea party. It was, all at once, a rebirth of the old far right from John Birch Society days, a partisan movement seeded by right-wing billionaires, and a cry of anguish from older, middle-class Americans fearful over the speed of social change. The GOP establishment rode the tea party tiger to power in 2010, and then ended up inside. Republicans who dared to deal or compromise risked humiliation in primaries at the hands of a far right certain that the president of the United States was a subversive figure.

Nonetheless, Obama kept trying to work with them. His plans and proposals were geared not toward his progressive base but toward moderates in both parties: no public option in the health-care law, plenty of tax cuts in a stimulus whose size was held down, a very temperate reform of a dysfunctional financial system.

Obama’s aides are unanimous in saying that the breaking point came when Republicans, filled with tea party zeal, were willing to endanger the nation’s financial standing to achieve steep budget cuts during the debt-ceiling fight. When House Speaker John Boehner walked away from a deal that conservatives of another era would have hailed as a great victory, Obama realized a grand bargain would be a chimera until he could win the battle about first principles.

Everything you needed to know about Obama’s argument was laid out on Dec. 6, 2011, at a high school in Osawatomie, Kan., the place where Theodore Roosevelt had laid out the core themes of American progressivism a century earlier.

“Just as there was in Teddy Roosevelt’s time,” Obama declared, “there is a certain crowd in Washington who, for the last few decades, have said, let’s respond to this economic challenge with the same old tune. ‘The market will take care of everything,’ they tell us. If we just cut more regulations and cut more taxes — especially for the wealthy — our economy will grow stronger. . . . even if prosperity doesn’t trickle down, well, that’s the price of liberty. Now, it’s a simple theory. . . . But here’s the problem: It doesn’t work. It has never worked.”

In Mitt Romney, Obama was blessed with an opponent who embraced that theory, not only in his move far to the right to secure the Republican nomination but also in his own career as a private equity capitalist. Romney may have flipped and flopped and flipped again on issues he didn’t care about, but his view of American capitalism and American government never wavered. If Teddy Roosevelt fought against the policies of the Gilded Age, Obama is fighting a Republican Party determined to bring the Gilded Age back and undo the achievements of a century.

And so, beneath the attacks, the counterattacks, and the billions invested by small numbers of the very rich to sway the undecided, we face a choice on Tuesday that is worthy of a great democracy. My hunch is that the country will not go backward, because that’s not what Americans do.

 

By: E. J. Dionne, Jr., Opinion Writer, The Washington Post, November 4, 2012

November 5, 2012 Posted by | Election 2012 | , , , , , , , , | 2 Comments

Historic Achievement For A More Perfect Union

 

President Obama speaking on passage of Historic Health Reform Bill

“Mr. Speaker, I ask unanimous consent to revise and extend my remarks in opposition to this flawed health care bill”….We heard this canned statement over and over and over again tonight. We heard about the “Cornhusker kickback, the Louisiana Purchase, the Gator aid. We heard that this bill, if it passes, will make Americans less free. We heard that members of the military would loose their health coverage, that abortions would be paid for, that Medicare would be slashed. We heard from John Boehner that this was not the time to create bureaucracies, that there was no transparency, that there was not time to read the bill, that the people do not want this bill. His remarks continued to accent his distress over the process. If I had not been watching and only listening to his remarks over the radio, one would certainly have gotten the distinct impression that he was a very, very angry man. The tone and inflections in his voice gave one to believe that John Boehner just might be a little bit concerned that history was about to pass him by.

Health reform has been talked about and debated dating back to Theodore Roosevelt’s Bull Moose party which called for health insurance for industry. In his first term, President Roosevelt appointed a committee which was to report a program that addressed old-age and unemployment issues, medical care and health insurance. President Truman proposed a single insurance system that would cover all Americans with public subsidies to pay for the poor.

During nearly every Presidential election cycle since those days, every candidate has campaigned on the slogan of “health care for all”. At the end of that cycle, nothing gets done and the cycle continues. We immediately resort back to the status quo. The numbers of uninsured rise, the cost of insurance premiums skyrocket, rescissions continue, out of pocket expenses increase, denials for pre-existing conditions fall off the scales and even children are dropped from coverage.

Well, the time for change is long overdue. Republicans, for too long, have played politics with the lives of all Americans. At every turn, they have denied, delayed, obstructed, lied outright and instilled fear in the hearts and minds of the populace. As Speaker Pelosi said tonight, “all politics are personal”. After tonight, there will be no more politics of fear, no more politics of intimidation, no more threats of personal destruction. All of the talk about process, and all of the whining from republicans with bruised egos, don’t mean a heck of a lot now. What matters to those with no insurance, to those who are uninsured and those who have been bankrupted or lost their homes because of medical bills, simply stated, are results.

Many had given up on health reform with the Senate election results in Massachusetts earlier this year. Many have talked wildly about the upcoming November elections. The insurance companies became emboldened and Sen. Mitch McConnell and Rep. John Boehner actually began to believe their own words. Their repeated echo’s of “No” with the brazen 30-60% premium increases by Anthem and other insurers, re-awakened a cautious Democratic party. I want to personally thank Sen McConnell, Rep. Boehner and the insurance companies for their inadvertent contributions to the cause of health care reform.

In November 2008, America elected a President who said that he would get health reform done. For this President, it was not just a “slogan”. He took flack from all sides…Republicans and Democrats alike. With a determined Speaker of the House in Nancy Pelosi, President Obama and the U.S. House of Representatives delivered for the good of the American people.

When the sun rises in the east tomorrow, the earth will still be turning on it‘s axis, the American economy will not have collapsed, America will still be free, and there will be no Waterloo….the only thing that will be different tomorrow is that historic health reform for all Americans was passed tonight. History is now on the side of the American people.

March 21, 2010 Posted by | Health Reform, Obama | , , , , , , , , , , , , , , | Leave a comment

   

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