Trickle Down or Bottom Up
Over a decade ago when, as Secretary of Labor, I hollered about the scandal of widening inequality in America, 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. We hadn’t delivered on Bill Clinton’s 1992 election promises. An expanded Earned Income Tax Credit helped the poorest but the old working class was going nowhere. At Alan Greenspan’s insistence (Greenspan’s memoirs make this crystal clear), Clinton jettisoned most of his agenda to cut the budget deficit. In return, Greenspan lowered interest rates and created a booming economy that helped Clinton get reelected. The boom also created enough demand to lift blue-collar wages in the late 1990s and temporarily halt widening inequality.
But controlling for the business cycle, the underlying trend hasn’t changed. As I noted a few blogs ago, recent data from the IRS show that the wealthiest 1 percent of Americans are earning more than 21 percent of all income – a postwar record. The bottom fifty percent of all Americans combined are earning just 12.8 percent. (Right-wingers have attacked these data by arguing that the IRS improperly counts adjusted gross income, but however you try to bend the numbers the trend is unmistakable.)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 taxes. Supposedly they use their extra income to invest in America, which makes all of us more productive. But it doesn’t work that way. In a global economy, investments don’t trickle down; they trickles 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, affordable child care, and good public transportation to and from the job, for starters. But as we learned a decade ago, this requires money – even more, now. So the question is how the nation can afford it 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 based fuel technologies, and repair the nation’s decrepit infrastructure (recall the pipe that blew out in New York last July and the bridge that collapsed in Minneapolis). 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.
The only way is to stop obsessing about balancing the budget and start pushing for a serious tax hike on the rich. Yet all Democratic presidential candidates are styling themselves “fiscal conservatives” and none has suggested raising the marginal tax rate on the richest beyond the 38 percent rate it was under Bill Clinton. They may talk bottom-up economics but they’re still wedded to trickle down.