September 20, 2013
Two years ago, Occupy Wall Street grabbed headlines with street corner protests and sit-ins against wealth and income inequality. Even if their strategies were wrong, they got some stuff right.
Every American should be greatly disturbed that income and wealth gaps are the largest since the Roaring Twenties. It's time for Washington policymakers to focus on solutions instead of partisan polemics. Smart regulation, better tax policies, education, functioning free markets and access to economic opportunity are the answers, not Robin Hood policies of income redistribution.
Society is never going to be economically homogenous, nor should it be. After all, the American Dream is built on aspirations. The problem is not that the wealthy are extremely wealthy, but that middle-class Americans are drifting further back in the pack and lower-income citizens are falling behind even faster.
Consider this: Among the top 1 percent of earners, incomes grew 31.4 percent between 2009 and 2012, the years immediately after the financial crisis. For the rest of America, incomes grew less than half a percentage point in that time.
The nation's economic competitiveness depends on a financially secure middle class that is able to make and consume products. Without the large market that comes from a stable middle class, companies wouldn't have buyers for their products. Without a skilled labor force, employers wouldn't have much incentive to innovate. Today's wide disparity breeds a level of cynicism that erodes democracy's social fabric.
While there is no magic bullet, several reforms could spur broadly based economic growth and help narrow the gap.
First of all, Congress must do more to encourage job growth in the so-called real economy and to discourage high-stakes financial speculation backed by the prospect of taxpayer dollars bailing out their bad bets. Concentration of financial assets in relatively few big banks deemed too big to fail threatens the global economy and is a reason many small businesses can't get much-needed commercial loans. As long as profits can be made in derivatives and other complicated financial transactions, there's little incentive to fund job-creating ventures on Main Street.
Second, Congress must reform the tax code, specifically lowering corporate tax rates, flattening the code for all taxpayers and removing the perverse incentives in the tax code that discourage small business creation and encourage economy-rattling financial bubbles. We need to face a reality: The tax code unfairly skews against small-business creation.
Third, the world is changing and this nation must increase investments in education, the most sustainable way to lift standards of living. This is an especially important route to middle-class status for minorities, young workers, women and even older workers who have not found decent-paying jobs to replace the ones they lost during the recession. Education simply must be better and more affordable.
A society of the very rich and the very poor, with a shrinking middle class struggling in between, is not the American Dream.