Economic Justice for All - Why and How

We live at a time where there is no greater challenge for America (yes, even greater than the terrorist threat) than forging a nation of greater economic justice and income equality.  The existence of a large portion of the population struggling to keep their financial heads above water - who 40 years ago were solidly middle class and prospering - and another large segment who are poor and without opportunity -  as they have always been - creates a drag on our economy, a drag on the social fabric that holds us together as a nation, and a drag on the democratic strength of America.

The Declaration of Independence famously says that all men are created equal and that they are all endowed with the inalienable rights to life, liberty, and the pursuit of happiness.  Less well known is the fact that it further states that it is government’s purpose to secure those rights.

Thus whether from a sense of America’s founding values, a general sense of social justice, or a practical desire to strengthen America economically, we must find ways to reverse the trend of the past 40 years, recreate a robust middle class, and for the first time provide real opportunity for the poor to rise up from poverty.

Some will say that these are lofty goals and beyond our current means, that we are a country in financial stress with a huge debt.  To answer that I would say that we are a very rich country and there is in fact no shortage of available funds to meet these goals without further increasing the debt.  It is a question of priorities.  It is a question of how much revenue is raised and how that revenue is spent.  It will no doubt mean having to increase our revenue as well as shift current government spending patterns.  So be it.

Given the importance of the proposed actions to the health of our nation, such changes are not just warranted they are necessary.  If we want America to be strong as a nation and for its people to be strong in body and soul, then we must act.

What are the practical ways in which such a policy commitment to the American people would be carried out?  The people deserve to know.

1.  Through renegotiating international trade deals and changing the tax code, we will both shift many lost jobs back to the United States as well as encourage the creation of new manufacturing middle-class jobs here.  Our current free trade agreements and tax code have worked to increase the wealth of corporations while destroying much of our middle class by shipping their jobs overseas and either leaving them unemployed or underemployed in low-paying service industry jobs.

2.  We will embark on a massive infrastructure replacement program which is desperately needed to ensure a strong America.  Virtually anywhere you look, our infrastructure is both outdated and in dangerously bad repair.  By replacing this failing infrastructure with technologically advanced systems we will strengthen America, we will create new business for a multitude of American companies, and we will create jobs for millions of American workers.

3.  Through increased investment in education in areas of our cities and country which have historically suffered from a lower rate of investment and quality than those areas of greater affluence,  we will create the first generation of American children who truly will be able to experience equal education opportunity.  No child deserves to be left behind.

4.  No American, regardless of color, should be discriminated against.  It is anti-American, based on both the Declaration of Independence and our Constitution.  The laws already on the books against discrimination and ensuring equal opportunity must be more vigorously enforced.  Employers and institutions should be required to have plans in place that strongly discourage discrimination.  (This is already required by some states; it should be Federal law and thus uniform.)

In limited areas however, such as education, where Blacks and other poor people have not had access to equal education opportunity, we need to continue affirmative action to help bring the country into balance.  But once the education initiatives outlined above have been put in place and a generation of children have benefited from them, there would be no further justification for affirmative action.  Each person should be judged on their merit.

5.  To pay for these programs, in addition to shifting current budget patterns, additional revenue will need to be raised, as noted above.  A large portion of that increased revenue should come from higher income and other taxes (such as luxury) on the very rich.  

Let me be clear … it is no sin to be rich and the ability to become rich is a strong motivator in our society to perform well and succeed, which in turn benefits society in many ways.  However, there comes a point where a person has acquired so much wealth where not only does one have more money than one knows what to do with but where, from a social contract standpoint, it becomes obscene.  Such income should be taxed at a high rate.  Citizens who have profited to such an extent from the opportunities afforded by our economic/political system have a social obligation, as citizens, to pay back to the system to ensure that it stays strong and that more people come to have such opportunities.

Besides being what I think the country needs at this point in time, if Hillary Clinton and the Democratic Party adopted such a slogan and program as a key element of the 2016 campaign (yes, many of my points are already included in the 2016 Platform, but a platform is cumbersome), it would go a long way … assuming it was presented enthusiastically, vigorously … to blunting Trump’s claim to be the savior of the forgotten.  It would maximize her chances of not just winning, but winning big and Democrats’ regaining the Senate and perhaps even the House.

Back to the Future, But Not Too Far!

We are a country that is obsessed with the future, with facilitating the next phase of our “progress.”  In the process, we have lost our collective, our societal mooring to what has made the United States a great social and political experiment.  

As I’ve noted in previous posts, our society is dysfunctional in many respects.  But there are two central problems.  One is that virtually all political power is now in the hands of major corporations and the rich; they call the shots in Washington, not the people.  The other is that these same actors, as well as many average citizens, seem to have no concern for the welfare of their fellow citizens, and in the case of corporations, their workers.

One can place a band-aid here, and another there.  But that will not change any of the basic problems that we are facing and which are pulling the United States down from its great potential.

I have therefore argued for a revolutionary change in attitude and perspective on the part of our political parties and citizens.  This revolutionary change is not to something “new,” some utopia, but rather back to ideals and standards that served this country well and made it strong during the 20th century.  

In the first 125 years of our country’s history, things were pretty much a frontier-style free-for-all.  Each person for himself.  People who needed help generally weren’t helped, and those who were on the make pretty much got away with anything they tried.

But at the turn of the 20th century, the country took a progressive turn in its politics under Republican President Theodore Roosevelt.  The government and people saw that things had gotten out of hand and that there was massive inequality in power and wealth in the country.  Because such inequality did not square with our founding ideals, there was a realization that government needed to become a more active player to insure that the average citizen wasn’t exploited, and that power was more evenly distributed.

Thus, during the first 20 years of the new century, the progressive income tax was introduced, the robber barons were regulated, massive holding companies like Standard Oil were broken up, and workers were given the right to unionize.  And women were finally given the right to vote.  

As I state in my book, We Still Hold These Truths, a social contract developed that gave practical shape to Lincoln’s famous, “government of the people, by the people, and for the people.”  There was an increasing emphasis on a balance between rights and obligations, between business interests and the public good, with each person contributing to support the government’s efforts to level the playing field, each according to his ability.

Following the 1929 stock market crash and the resulting Depression, government saw the need to increase its role both in providing a hand to those in need (for example, the enactment of Social Security) as well as regulating the excesses of big business (for example, the Glass-Steagal Act).  In the mid 1960s, Medicare was enacted together with a host of measures to further improve the balance and fairness of our society. 

Congress also passed major civil rights legislation in the 1960s, although it must be said that while these laws resulted in certain improvements in their lives, the basic standing of most black Americans in our society and the conditions in which they lived and were educated were left virtually unchanged.  And they were still frequently subject to various forms of both institutional and private discrimination.  (See my posts, “The Mirage of Civil Rights,” and “Our Failed Economic/Social/Political System.”)

But I don’t want to overstate my case.  Needless to say, throughout these progressive periods, there were plenty of people, both in Congress and in the populace, primarily Republicans, who were against both measures to regulate business and efforts to increase government spending or other efforts to help those in need.  Even during the Depression and its immediate aftermath, there were people, and not just the rich, who literally hated FDR!  In 1932, the height of the Depression, Roosevelt only got 58% of the popular vote when he ran against Hoover, although he swept the electoral vote.

In this regard, it should be noted that regardless of the huge changes shown in the electoral vote map, indicating landslide years, the popular vote has never been a landslide.  For example, in 1972 when Nixon got 96% of the electoral vote, he received only 61% of the popular vote.  Likewise, when FDR got 98% of the electoral vote in 1936, he got only 62% of the popular vote.  The country has historically been quite divided.  

Then along came Ronald Reagan, the same man who had campaigned vigorously against the enactment of Medicare, who as President famously said that, “Government is not the solution to the problem.  Government is the problem.”  Reagan didn’t invent a new movement.  He just gave voice and a popular face to deep feelings that have always been held by a large percentage of the voting population, legitimizing those perspective.

The fervency and bitterness of these feelings grew and deepened over the following years, culminating in the Tea Party movement and the current crop of Republican radicals (they should not be referred to as “conservatives”) in Congress.  What they, led by the billionaire Koch brothers and others who back them, want is nothing less than a return of this country to its 19th century ethos, when it was each man for himself, without any interference from or help by the government, of course with the exception of Social Security and Medicare from which most of them directly benefit.  Unfortunately, they don’t see the irony in this.

What I am calling for is a return to the 20th century ethos (Reagan excepted) of balance and social responsibility plus a changed attitude towards black Americans.  

This is not a soak the rich movement or class struggle.  It is a movement that seeks a return to the ethos where we are all part of a society, that recognizes that many people are born into situations that place huge obstacles in their attempts at pursuing the American dream of happiness and equality, and that those who have made it, who have benefited from the system, have a responsibility as citizens to help the government in its efforts to assure that all have true equal opportunity.  

In this regard it should be noted that for most of the income tax’ existence, the highest tax bracket ranged from 60 - 94%, dropping down to 50% during the Reagan years.  So the current top rate of 39.6%, and even the various suggested increases, are historically low.  It should also be noted that regardless of the tax rate, the rich have always remained rich.

Nor is this an anti-business movement.  The health of our economy and of the businesses that make it prosper are of critical importance to the well-being of all Americans.  Business interests must always have a significant place at the table.  But we have learned all too often that it is nevertheless not true that what is good for corporate America is good for all Americans.  Thus there must be a balance between the needs of business and the greater public good.  Maximizing profit cannot be the sole goal of a responsible corporation in a democracy.  

For example, the New York Times just reported that corporate lobbyists working with their friends in Congress (on both sides of the aisle) inserted a provision in the omnibus spending bill that just passed that continues a tax loophole that benefits casino and hotel owners as well as major Wall Street investors to the tune of $1 billion.  That is to say that our tax revenues will continue to be reduced by that amount from what they otherwise would be.  That is unconscionable.

Nor is this a big government movement.  I for one feel strongly that government should be as small as it can be while executing the functions that are its responsibility.  There should be no holy cows.  Every aspect of government must be justified by the purpose it serves and its effectiveness.

What I seek is simply government of the people, by the people, and for the people … all the people.  Not government of the people  (they do still elect), but by corporations, and for corporations.  Which sadly, is what our government has to a large extent become.

The citizens of this country deserve better.

America’s Regressive Progressive Tax System

Most people think that under our tax system the wealthy pay a higher percentage of their income in taxes than those with less income, with those with the lowest income paying the lowest rate.   This is called a progressive tax system.  

The reasoning behind a progressive system is twofold: one philosophical, one practical.  

Philosophically, under our social contract, all citizens have a responsibility to support the work of the government in providing for the greater good and its helping insure that those in need still have a chance at “life, liberty, and the pursuit of happiness” as promised in the Declaration of Independence.  Those citizens with more wealth, who have benefited more from the system, have a moral responsibility to give back and support their fellow citizens by contributing a greater share of their income through taxes to support the government.

Practically, the wealthier you are, the higher the percentage of your income you can afford to pay in taxes because despite that higher tax rate so much is still left over for your personal use.  On the other hand, if you have only a very modest income, you can hardly afford to pay any taxes and still have a livable standard of living.

Our federal income tax is based on this theory, although it is far less progressive today than it has been in the past.  For example, in the 1950s during the Eisenhower years, the wealthiest American’s payed a marginal tax rate of 90%.  During the Johnson and Nixon years, that rate dropped to 70%.  Under Reagan the rate dropped to 50%.  And under Bush II, the rate dropped to 35%.

Did these higher federal income tax rates hurt the wealthy or the country during this period?  No.  The wealthy were still quite wealthy.  And the country was strong economically, with of course the usual dips of the economic cycle.

So what have we gotten in exchange for these reduced taxes on the wealthy?  Nothing but ever increasing deficits (despite a reversal in the last years of the Clinton presidency), reduced government ability to pay for infrastructure projects, education, and provide a safety net for those in need, and increased income inequality.  The economy and nation have not grown stronger; the rich have just gotten richer.

But the story doesn’t end with the federal income tax.  It gets much worse when factoring in state and local taxes, especially sales taxes, which fall disproportionately on those with less income and are thus regressive.  This is especially severe in those states that currently have no income tax and so rely totally on regressive taxes.  For example, the state of Washington has the most regressive tax system in the country.  There the poorest 20% of residents pay seven times as much of their income in state and local taxes as the top 1%.

Each year, Citizens for Tax Justice issues a report, “Who Pays Taxes in America.”  The most recent CTJ report shows that combined local, state and federal taxes produce a system that more resembles a flat tax than a progressive tax: In 2015: 

The top 1% - those with incomes averaging $1.7 million - will pay 32.6% of their income        in taxes.  

The same is roughly true for the next 9% - those averaging more than $176,000. 

The next 50% - those averaging between $49,000 and 125,000 will pay an average of 29%.  

The next 20%, those with an average of $30,000, will pay 23%.  

The bottom 20%, averaging $15,000, most of whom live in poverty as defined by the government, will pay 19% of their income in total taxes.

The unfairness of this system is manifest.  It’s unfair even that those who earn $200,000 a year pay the same tax rate as those earning many millions.  It is outrageous that the middle class pays virtually the same rate … 29% as opposed to 32%.  It is beyond belief that the poorest 20% of Americans pay 19% of their incomes in taxes … yes, they typically pay little or no federal income tax, but state and local sales taxes take a substantial cut out of their pockets when they are barely scraping by.

This describes a tax system that should put the United States to shame.  And it should put the wealthiest Americans to shame, although I think the evidence shows that that emotion is almost impossible to call forth from them, the example of Warren Buffet to the contrary notwithstanding.

The solution is that the federal income tax should be put back on a much more progressive scale, as it was for most of its history.  And state and local governments should be required to use a progressive income tax for their tax revenue rather than a sales tax or other regressive tax system.  

This not only makes moral sense, it makes economic sense.  The result would be a substantial boost in real income for most Americans with a resulting boost in spending and thus to our consumer economy.  If the net changes were not tax revenue neutral … that is if the changes resulted in higher tax revenues … that would provide much-needed funds to begin repairing our country’s neglected infrastructure and for other important but underfunded government tasks.

Our current tax system should be unconstitutional, but there is no measure in the constitution that requires fairness in the legislative process.  But if legislators and the general population cannot see, when presented with these facts … and they are facts, that our tax system is unfair, not to the rich as they frequently complain but to the rest of the populace, and that it hinders a large portion of the population in the exercise of their right to “life, liberty, and the pursuit of happiness,”  then our nation is at a very sad point.