Why doesn't wealth inequality get discussed by polite economists?
The New York Times, the old established voice of the liberal media elite, ran a piece on Sunday looking for answers to the nation's persistent economic crisis. Reporter David Segal interviewed prominent economists on the left and right — the likes of John H. Cochrane at the University of Chicago, James K. Galbraith at the University of Texas, even Gar Alperowitz at the University of Maryland, who's kind of (God help us) a socialist.
The right-wingers talked about the need to cut government, the left-wingers talked about community co-ops and green technology, and all sides agreed that the situation was dire and would probably get worse. But nobody even mentioned wealth inequality.
It's kind of mind-boggling. It's as if the entire subject is off the table, taboo, something that doesn't get discussed in the company of polite economists. And that's just crazy.
Look: the 400 richest Americans today have combined assets of about $1.5 trillion. Raise that number to 5,000 and you can about double the total wealth. This is a very rich country; our prospects aren't bleak at all. With a bit of enlightened public policy, we could profoundly improve the economic situation in just a few months.
I have no PhD. I barely escaped Wesleyan University with an economics degree in 1980, squeaking out a D in my last class by promising the (very conservative) professor that if he failed me, I'd be back next year. But it doesn't take econometric wizardry to add up the figures. They go like this: A one-time 20 percent wealth tax on the 5,000 richest Americans — including many people who have pledged to give away half their wealth anyway — would generate about $600 billion. Nobody would miss any meals; no families would lose their homes, or even their second or third homes, or their personal jets. Expand the pool a little and you could easily reach $1 trillion.
With that money, you could immediately create 7 million jobs (at an average of $50,000 a year) and fund them for three years. That would cut the unemployment rate in half. What would those people do? Plenty. They could rebuild the country's roads and highways and bridges, and build high-speed rail systems, and work in health care clinics, and teach art and music and writing, and clean up environmental messes ... there's loads of work in this country. And even with a modest estimate of the economic multiplier, those 7 million public sector jobs would create another 3 million private sector jobs, and all of a sudden, the country's booming again. And a lot of those people who were hired by the government could now transition to private business. (And those very rich people would do well in the boom, as they always do, and might even make most of their money back.)
Raise taxes on the top 5 percent of the nation's wage earners and corporations and you would generate enough money to keep the program going until the private economy could pick up the slack. Then eliminate the Social Security tax on the first $25,000 of income and expand it to cover all income up to $250,000 and suddenly — a huge incentive for small businesses to hire new workers and a stable retirement system for the next two generations.
It's not that hard. It's not a socialist revolution. Nobody really gets hurt, and a lot of people benefit. I mean, it seems to me that it ought to be part of the discussion. Maybe that's why I was such a lousy economics student.