Greg Sargent had an excellent post this morning arguing from the latest polling numbers that Democrats “by effectively ceding the argument over the economy to Republicans” have “ensured that this entire battle would unfold entirely on the GOP’s rhetorical turf.” He also plugs his useful notion of a “Beltway Deficit Feedback Loop.” That’s why it was helpful that the Senate Democrats began pushing a package of job creation measures today and want them included in a final deficit agreement. As I’ve argued before, I don’t see how Democrats can agree to a deal to get the debt limit extended that doesn’t also do something about the job situation now. Still, Greg is right: It’s late in the game and advocates of Keynesian approaches to stimulating the economy have a lot of work to do.
But I have also been struck at how Democratic politicians seem reluctant to take on the matter of how much inequalities of wealth and income have grown in the United States since the early 1970s. The issue of concentrated wealth has been a central question for progressives since their movement began, first with the Populist rebellion in the 1890s and then with the Progressive movement after the turn of the last century. It’s a deeply American issue. I’d like to hope that people left, right and center will be less reluctant to talk about this after they read Peter Whoriskey’s excellent report in Sunday’s Post. The article was both great journalism and a public service. (And, come to think of it, isn’t journalism of its very nature a form of public service?)
My friend Mike Tomasky has an excellent piece in the Daily Beast explaining why Whoriskey’s piece is so important. He also makes a fascinating point linking rising inequality to the problems facing the Social Security trust fund. I bet you never made that connection. I hadn’t until I read Tomasky:
Now, what does all this have to do with Social Security? This: Over the years, Social Security was structured so that the payroll taxes that fund it (13.4 percent of wages, half from the employee and half from the employer up to about $107,000 in salary, a figure that rises a bit each year) would be applied to 90 percent of total U.S. compensation. The actuaries calculated that hitting that 90 percent should keep the trust fund in pretty good shape.
Today, though, Social Security payroll taxes are collected on only about 82 to 84 percent of total compensation. The difference is immense. And why does the difference exist? Rampant inequality, and compensation arrangements at the top that give executives their pay in the form of capital gains and stock options and other income forms to which payroll taxes don’t apply. And, if middle-class incomes had grown respectably since [instead of stagnating] in the 1970s, we’d have millions more Americans making $60,000 instead $50,000 and $100,000 instead of $80,000, and the Social Security trust fund would have that much more money.
The short-term move would be to raise the Social Security payroll tax cap up to $180,000 (a hypothetical figure used by many economists), but even that wouldn’t completely solve the problem, especially as more boomers retire. But the long-term solution? Do something about inequality in this country. It’s a disgrace. Here we are, seemingly headed toward a future in which seniors of modest incomes are going to have to pay a lot more for their health care, and in which powerful forces seek to open up a discussion about Social Security that will inevitably lead to reduced benefits. God forbid we try supporting the program at the levels it ought to be supported.
God forbid also that a Democrat — the president, let’s say — make this argument and draw these connections for the American people. Those people say regularly in polls that our current inequality is indefensible. Unfortunately, it is defended, daily and with gusto, by the people and interests who like things the way they are. And almost no one in a position of power is forcefully defending the other view. Mr. President, Democrats: It would seem that now is the time.
Yes, Virginia, fiscal responsibility and a narrowing of inequalities go together.