Whatever President Obama proposes in tonight’s State of the Union address will go nowhere in the Republican-controlled Congress. But he will attempt to use the bully pulpit to acknowledge and, to some degree, propose a way out of the worst inequality since the Gilded Age.
Two years of free community college can’t hurt. Falling educational attainment among Americans is one reason cited by many economists for stagnant and falling wages.
A $500 tax credit for working-class families with two working spouses is OK, but the conversation needs to move away from tax cuts as a cure-call, whether for poor or rich. Our experience nationally and at the state level over more than 30 years shows this is adamantly not true. There’s no free lunch.
As for moving capital gains taxes on the very wealthy back to Reagan-era levels, most any effort to return to a more progressive tax system would be healthy. But it is not a simple issue (Syracuse University Professor Len Burman laid out the nuances in this 2012 testimony).
Handled badly, higher capital gains could destroy locally owned businesses as they pass to the next generation. But that shouldn’t be used as a bloody shirt to prevent discussion of a flawed tax system that generally favors those who make their money through investments over people who work for wages. Today’s tax system is not the one that built the great America of the last half of the 20th century, on whose fumes we still run.
It will be interesting to see the details of a proposed fee on larger financial institutions. We ought to be taxing transactions, as well as closing loopholes on carried interest for private equity players and others. These activities do little if anything to create jobs and productive enterprises — often the contrary. And we need to lead an international effort to fairly but effectively tax transnational companies, some of whom pay no federal taxes in the United States (even as they benefit from the commons).
More broadly, we need a tax system that penalizes “rent seeking” in all its forms. And one that rewards job-creating enterprises, while still ensuring they pay taxes. While we’re at it, let’s outlaw companies pitting states against each other for corporate welfare under the Interstate Commerce Clause — or a constitutional amendment.
To help avoid planetary disaster, a carbon tax would be a beginning.
But the president also needs to move beyond the green eyeshade America that has developed over the past several decades. It is a blinkered view that claims to put a price on everything — but not externalities including climate change, and especially not on the public good. The public good has many costs, many worth bearing. But be suspicious of balance-sheet religion.
If President Obama really wants to set the table for a 2016 debate that helps the middle class and upward mobility, he’ll say “infrastructure” enough times to make Speaker Boehner faint. He’ll discuss returning to a proper understanding of antitrust, so we can rebuild our local and regional economies. Subsidies for big, profitable, polluting industries, get rid of them. And he’ll back away from the bipartisan fetish with endless war — so we can rebuild this nation. End the wars.
Imaging if he proposed three frees: universal healthcare, university education and public transportation. Along with breaking rent-seeking and monopolies/cartels, it would lead to an entrepreneurial explosion among other things (people wouldn’t need to keep their jobs for the healthcare; others could easily reach employment centers, etc.).
All this will be hysterically opposed by the oligarchies that have taken control of the government and their assorted mouthpieces and fellow travelers. That in itself makes it a debate worth having.
Today’s Econ Haiku:
China’s slowing down
Just how much is hard to tell
Numbers fast and loose