It's not easy to address question of ‘bifurcated economy’
President Obama is dead right.
He’s right to say that under his watch there is “almost no economic metric by which you couldn’t say that the U.S. economy is better,” he told the Economist in a lengthy interview last week.
He’s equally correct, responding to the trope that he’s no friend of business: “If you look at what’s happened over the last four or five years, the folks who don’t have a right to complain are the folks at the top.”
Now, the confession. He hasn’t done much about the “broader trend of an increasingly bifurcated economy where those at the top are getting a larger and larger share.” But, it will “continue to be my obsession until I leave office, and afterwards.”
That wealth inequality has become an ever bigger issue is undeniable. Fifty-four percent in a Wall Street Journal/NBC poll last week say it’s “undermining the idea that every American has the opportunity to move up to a better standard of living."
Standard & Poor’s “sees extreme income inequality as a drag on long-run economic growth.” The head of the International Monetary Fund, Christine Lagarde, said in a lecture that the gap — which is not confined to the United States — is creating “an economy of exclusion” that threatens “the precious fabric that holds our society together.” Mark Carney, governor of the Bank of England, warned that the financial industry’s “heads-I
win-tails-you-lose” modus operandi is putting the capitalist system itself in danger. Goldman Sachs CEO Lloyd Blankfein, a ranking member of the 0.01 percent class (estimated net worth $450 million), called income inequality “very destabilizing” in a TV appearance.
So if, as Obama said in December, income inequality is indeed the “defining challenge of our time,” what’s being done?
So far nothing, for all the president’s good intentions.
Attempts at leveling even a piece of the playing field — closing egregious tax loopholes like carried interest, which allows hedge fund, private equity and venture capitalist moguls, under certain circumstances, to pay income tax at a rate far lower than the average Joe — have gone for naught. The insistence on all-or-nothing “comprehensive tax reform” has so far resulted in nothing,
Attempts at
leveling even a piece of the playing field — closing egregious tax loopholes — have gone for naught.
leaving intact the corporate tax-slashing schemes like incorporating in the Cayman Islands, stashing mountains of cash overseas, or renouncing U.S. citizenship with what is known as a tax inversion.
Obama has tried, most recently with tax inversions, but so far politics-as-usual has stopped him cold. A U.S. president is far from being all-powerful, especially when faced with a large contingent of permanently hostile members of Congress.
What can be done is a perhaps an even tougher question. Thomas Piketty, author of “Capital in the 21st Century,” suggests a global wealth tax, recognizing that financial and technological flows are beyond the control of any one country. He also noted that earlier huge wealth gaps have been closed only during and in the immediate aftermath of world wars and the Great Depression.
How about people power? Some 200,000 Americans signing petitions contributed to Walgreens’ decision not to move to Switzerland. Nobel Prize economist Paul Krugman wrote that Piketty’s book is “a call to arms.” Former Labor Secretary Robert Reich has likened the protest movement on behalf of low-wage Walmart workers to the Mississippi Freedom Summer of 1964.
Stirring sentiments, but will the people answer the call? Especially if the economy gets better for more Americans? According to the Wall Street Journal/NBC News poll, those affected most by the recession were far more likely than the better off to believe that the wealth gap is “undermining the idea that every American has the opportunity to move up to a better standard of living.”
Look, it’s complicated.