I must say I'm absolutely astounded. I can find no fault in Mr. Douthat's thinking on the economic consequences of the current Democrat policies. At least SOMEONE at the Times has their eyes open...
http://www.nytimes.com/2009/10/05/opinion/05adouthat.htmlNot long ago, liberals were insisting that income inequality was America’s most serious economic problem.
Now there are more immediate crises: A 9.8 percent unemployment rate, a yawning budget deficit. But the inequality issue hasn’t gone away.
The latest census figures show the gap between the wealthiest Americans and everybody else widening — rather than shrinking, as some economists expected — during the crash of 2008. An August report from Bank of America/Merrill Lynch suggested that middle-income Americans, buried in real-estate debt, will have to wait much longer than the rich to see their finances rebound.
This landscape will put liberalism to the test. Since Ronald Reagan was elected nearly 30 years ago, Democratic politicians have promised that their program could reverse the steady post-1970s growth of income inequality without sacrificing America’s economic dynamism.
But having promised win-win, they may deliver lose-lose. In the short run, Barack Obama could preside over an America that’s more economically stagnant and more stratified.
There’s only so much that politicians can do about broad socioeconomic trends. The rise of a more unequal America is a vexingly complicated issue, whose roots may wind too deep for public policy to reach.
Liberals, though, have spent decades telling a more simplistic story, in which conservatives bear all the blame for stagnating middle-class wages and skyrocketing upper-class wealth. So it’s fair to say that if a period of Democratic dominance doesn’t close the gap between the rich and the rest of us, it will represent a significant policy failure for contemporary liberalism.
It’s also fair to point out some reasons failure is a likely outcome.
For one thing, the lazy liberal’s cure for income inequality — soaking the wealthy with higher tax rates and cutting taxes for everybody else — simply isn’t going to happen.
In part, this is because the Democrats have become as much the party of the rich as the Republicans, and parties rarely overtax their own contributors. (That’s why the plan to pay for health-care reform with a “surtax” on high earners found so many skeptics within the Democratic caucus.)
But it’s also because soaking the rich only makes a difference on the margins. The federal income tax is already quite progressive, and our corporate tax rate is one of the highest in the West. To really create a more egalitarian America, we have to address trends that run deeper than the tax code. But many of these are issues that the Democrats are either unwilling or ill equipped to tackle.
For instance, inequality is driven in part by low-skilled immigration: it nudges wages downward for native workers, and the immigrants themselves are taking longer to achieve upward mobility than earlier generations did.
But today’s Democrats, bent on consolidating the Hispanic vote, aren’t likely to seek a lower immigration rate, or a better-educated pool of immigrants. The kind of “comprehensive” immigration reform that liberals support would probably increase low-skilled migration to the United States.
Inequality is also driven by the collapse of the two-parent household, which disproportionately affects the poor and working class, depriving them of the social capital they need to rise.
But today’s Democratic Party increasingly represents “unmarried America” — the single, the childless, the divorced. This makes it an unlikely vehicle for policies that discriminate, whether through tax code or the welfare state, in favor of the traditional nuclear family.
Inequality is perpetuated by our failing education system — and especially by the bloated cartel responsible for educating the nation’s poorest children. (If you want to understand inequality in America, start with last spring’s Los Angeles Times series on what it takes to fire a lousy teacher in the Angeleno school system.)
But today’s Democrats, the heroic efforts of some liberals notwithstanding, remain the party of the education bureaucracy, resistant to all but the most incremental efforts to bring choice and competition to our public schools.
There is, however, one way that a Democrat majority can plausibly bring down inequality: Just let government keep growing.
This is the lesson of Western Europe, where the public sector is larger and the income distribution much more egalitarian. The European experience suggests that specific policy interventions — the shape of the tax code, the design of the education system — may matter less in the long run than the sheer size of the state. If you funnel enough of a nation’s gross domestic product through a bureaucracy, the gap between the upper class and everybody else usually compresses.
But economic growth often compresses along with it. This is already the logic of our current fiscal trajectory: ever-larger government, and ever-slower growth.
That combination could eventually create the more egalitarian America that Democrats have long promised to deliver. The question is whether Americans will thank them for it.
Bravo, Mr. Douthat, bravo.
