Thursday, July 25, 2013

The Wealth Gap

The Wealth Gap.  We all know it's there.  We all know it's growing.  We all appear desperately afraid to talk about it.

Here's a good chart:

Here's another one:

And here's the worst one:
It would seem blatantly ignorant to deny it exists (we've seen that before), but it is even more difficult to talk about in terms of solutions.  How can you look at those charts and support supply-side ("trickle down") economics?  When is it going to trickle?  Do we need to shake it?  A few bangs to the top of the TV set?

President Obama gave a speech yesterday addressing the wealth gap, which was immediately dismissed as "populist", a term that is cynically embedded with impossibility, impracticability, and false intentions.  And right now, the American public should be skeptical.  Maybe at the President.  Maybe at Congress.  The hard numbers of middle class paychecks and bank accounts don't give much room for hope.

But here's where the conversation changes - “When middle-class families have less to spend, businesses have fewer consumers. When wealth concentrates at the very top, it can inflate unstable bubbles that threaten the economy.”-- Barack Obama, July 24, 2013.

That's significant.  Acknowledging that the middle class is key not only to electoral victory, but also economic sustainability, presents the foundation for policy.  It has been a long time since we heard anyone in Washington, D.C. say this.  The middle class does not have PAC money.  We do not have sympathetic pictures of ourselves balancing our checkbook or figuring out how to move money around to pay the next tuition bill.  All we have are basic economics.

So how do we address it?  As I noted the other day, previous efforts have tied tax breaks for the wealth to tax breaks for the middle class, causing this:
Now, what happened around 2003 to cause that jolting acceleration of the wealth gap?  Oh yes, the Jobs and Growth Tax Relief Act of 2003 (i.e., Bush Tax Cuts).

The opportunity here is to learn from the past and direct our tax policy decisions to help those who fuel our economy: the middle and lower classes.  Things are not so simple as merely making our tax system more progressive.  As Dylan Matthews with The Washington Post points out, our tax system is one of the most progressive in the world.  Where we mess things up is after the government has the money.

Maryland will have the opportunity over the next five years to target tax relief to the middle class with directed tax credits and progressive small business tax relief.  The question is whether it uses a scalpel or a scythe.

That's all for today.  Have a great Thursday doing what you love!