Wednesday, August 27, 2008

Steven Pearlstein Wants to be Shown the Money

(Source: Center on Budget and Policy Priorities, "Average Income in 2006 Up $60,000 for Top 1 Percent of Households, Just $430 for Bottom 90 Percent")

After a discussion about federal tax policy and income inequality, Steven Pearlstein strikes the right chord on where the discussion on inequality should be focused. As much as the distributional consequences of the tax code matter, there's still the nagging problem of pre-tax income inequality. Despite major advances in worker productivity over the past 40 years, workers have seen only a sliver of that economic gain.

The reality is that the market's tilt toward unequal outcomes is now so strong that you can't just rely on a progressive tax code to counteract its effects. To do that, it may be necessary to forgo some of those additional tax cuts for the middle and professional classes to pay for increased spending on early childhood education, state colleges and universities, and expanded public health programs. It may be necessary to "tinker" with the markets just a bit by indexing the minimum wage to overall income growth, using the antitrust laws to bust up oligopolies like those on Wall Street and making it possible once again for workers to unionize without fear of losing their jobs. It may even be necessary to slow the pace of further globalization.

There's a good debate to be had on all of these ideas -- every one involves economic risks and trade-offs. But there is no debating that markets are doing a lousy job of distributing the benefits of economic growth and that another decade of stagnant wages and runaway inequality is unacceptable.

No larger point here, I just wanted to flag this for interested readers.