Why Obama's Right About Inequality
Our political system adjusts badly when the familiar landmarks erected during controversies of the past are swept away and prepackaged arguments become obsolete.
Starting with this week's congressional budget hearings, it will be imperative to recognize the extent to which President Obama's fiscal plan and the direction he set in his foreign policy speech on Friday have transformed the terms of the nation's debate.
The central issue in American politics now is whether the country should reverse a three-decade-long trend of rising inequality in incomes and wealth.
Politicians will say lots of things in the coming weeks, but they should be pushed relentlessly to address the bottom-line question: Do they believe that a fairer distribution of capitalism's bounty is essential to repairing a sick economy? Everything else is a subsidiary issue.
Some critics on the right have tried to change the subject by criticizing Obama for refusing to play the role of "war president." In fact, Obama has made clear that he wants to be a president who winds wars down, much as Dwight Eisenhower did with Korea after taking office in 1953.
Eisenhower did not pretend that the struggle with communism was at an end, and Obama doesn't think our battle against terrorism is over. But both presidents recognized that hot wars with no end in sight are not in the country's interest.
The Eisenhower metaphor is appropriate in another way: Obama is being decidedly cautious about foreign policy. He is not moving out of Iraq as quickly as the war's foes had hoped because he wants to minimize the risk that a messy aftermath would disrupt a season of domestic reform.
Obama cleared the way for a big debate on inequality by getting rid of many budget gimmicks from the past eight years. He doesn't pretend that the wars in Iraq and Afghanistan are side deals independent of the overall spending picture. He projects the budget outlook 10 years down the road, getting away from the Bush administration's habit of cutting off our line of vision at five years. And to avoid any negative impact now, he postpones his substantial tax increases until 2011.
As a result, Obama does not predict that he will eliminate the deficit anytime soon, and he also admits that the federal government will grow, modestly, as a share of the total economy even beyond the current emergency. After this moment's big spike -- necessary to get the economy moving -- federal spending will account for 22.8 percent of U.S. gross domestic product between 2010 and 2014, up from 21 percent in 2008.
It will be important for both sides in the debate to be honest about those numbers. Supporters of where Obama is heading need to acknowledge that action on health care makes government's growth inevitable. Obama's opponents need to admit that increasing government's share of the economy by less than two percentage points is hardly a form of wild-eyed state socialism.
To put all these numbers in perspective, health care as a whole already consumes 16 percent of the economy and, at the current rate of growth, will hit nearly 20 percent by 2017. We'll pay for health care somehow, either out of our pockets or in our tax bills.
Obama has taken another issue off the table by promising tax cuts that begin to kick in for families earning less than about $200,000 a year. He is doing so partly to offset the indirect tax on carbon he is proposing. That's what his cap-and-trade plan amounts to, and there should be no effort to hide this, either.
But his overall approach to taxes is frankly redistributionist: Even as much of the middle class gets a tax cut or no increase, the well-off will pay more. And before the howling on the right gets too loud, consider that we have just gone through a long era involving a far less frank form of redistribution -- upward.
"Over the past two or three decades, the top 1 percent of Americans have experienced a dramatic increase from 10 percent to more than 20 percent in the share of national income that's accruing to them," said Peter Orszag, Obama's budget director. Now, he said, was their time "to pitch in a bit more."
Do we want to be a moderately more equal country or not? This is the question Obama has put before the nation. Let's debate it without the distracting rhetorical sideshows designed to obscure the stakes in the coming battle.