Not to be outflanked, presidential candidate Sen. Elizabeth Warren (Mass.) — who months before had already weighed in with a proposal requiring big corporations to set aside 40 percent of their board seats for workers — unveiled her plan for a 3 percent wealth tax on billionaires, or 2 percent on households with assets above $50 billion.
The chattering class was still chewing Warren’s wealth tax when Sen. Kamala D. Harris (Calif.) announced her presidential ambitions by relaunching a proposal for a $3,000 per person refundable tax credit for working households at or below the median income.
Feeling left behind, the socialist senator from Vermont, Bernie Sanders, quickly weighed in with his plan to restore the inheritance tax to where it was in the 1970s: 45 percent for estates valued at $3.5 million and rising to 77 percent for billionaires.
Meanwhile, liberal backbenchers, flush from the Democratic takeover of the House, were busy dusting off ideas like debt-free college, Medicare-for-all and something called a Green New Deal, although nobody was quite sure yet exactly what that meant.
Centrists who dared to step forward to criticize these proposals were immediately shouted down as morally compromised sellouts — all the more so if they happened to be baby boomer billionaires with presidential ambitions. The campaign to dismiss and disqualify these discordant voices was reminiscent of a similar effort four years ago against anyone who dared to question the wisdom or the inevitability of Hillary Clinton’s presidency.
The outbreak of bold, fresh thinking and moral fervor on the Democratic left is certainly something to be celebrated. In the liberal mixture of outrage and idealism can be heard the echoes of Robert Kennedy’s presidential campaign of 50 years ago, when he memorably declared, “Some men see things as they are and ask why. I dream of things that never were, and ask why not.”
Today, Kennedy’s grandson, Rep. Joe Kennedy (Mass.), speaks eloquently of a new, more moral version of American capitalism, one that is “judged not by how much it produces but how widely it shares it, and how much good it does for how many.”
While we can applaud those who have launched this much needed public conversation about economic justice, however, that doesn’t excuse their bullying efforts to banish thoughtful criticism or competing ideas.
The more socialist countries of northern Europe abandoned tax rates above 70 percent because they spawned countless schemes for tax avoidance. More significantly, they sapped their economies of their vibrancy and their entrepreneurial spirit. The lesson to take from this failed experiment in confiscatory tax rates is not to punish the rich or unwind the injustices of the marketplace. Rather, the primary purpose of taxation must be to fund necessary government activities and worthwhile programs in a manner that least distorts economic behavior and impinges on economic growth.
Yes, up to a point, a tax and transfer system that modestly redistributes income to those who most need it can be consistent with good public finance. But if those modest efforts fail to achieve a level of income inequality that we find morally acceptable, then the right way to deal with that is to change the rules and norms of the marketplace that generate such uneven outcomes — adjusting labor, antitrust and patent laws and the rules of corporation governance. It is possible to achieve both a fairer and an equally dynamic economy without having to resort to tax rates above 50 percent.
We can also learn from experience with the wealth tax, which many European countries abandoned because of the difficulties in calculating the tax and the ease with which it is avoided. Nearly the same amount of money could be raised from the same people by modestly increasing the income tax on investment profits and applying to unrealized gains at death. And rather than imposing a steep tax on estates, it would be simpler and politically more palatable to tax individuals on their inheritances, just as we do lottery winners.
No less flawed is Warren’s demand for worker representation on corporate boards. That may work well in Germany, where there is national wage setting, unions in every company and a culture of labor-management cooperation. But it would be folly to do here.
The fundamental problem with American corporate governance is not the makeup of boards but the imperative imposed on them by Wall Street to “maximize” profits and share price. Reining in the power of investors and giving companies the freedom to come up with their statements of corporate purpose — these would be more effective ways to get American companies to strike a better balance among the interest of all their stakeholders.
I am sympathetic with Harris’s plan for what amounts to a negative income tax that would put an income floor under all Americans — I recently proposed something similar myself. But to make such an idea affordable and attract conservative supporters of universal basic income would also require cutting back on existing support programs, particularly those that involve large bureaucracies and high compliance costs and demean low-income recipients. Unwilling to challenge liberal interest groups, Harris rejected that approach out of hand.
I will be the first to acknowledge that ideas like the wealth tax or putting workers on boards are easier to understand and more apt to energize the political base than changing the tax treatment for unrealized capital gains or adjusting the fiduciary duties of corporate directors. But the reason our government has become as dysfunctional as it has is because the process of running for office has become totally divorced from the process of governing — think Donald Trump and the border wall that he has insisted Mexico is going to pay for.
These days, what animates the fringes of both parties is the fantasy that they can win elections by throwing out bold, ideologically divisive proposals and then, once in office, using the stick of party discipline to run over the opposition and foist these policies on a still skeptical and badly divided public. In an era of winner-take-all tribalism, building broad public consensus, accepting half a loaf, taking things one step at a time — these are dismissed out of hand.
Such the problem with making Medicare-for-all. Yes, if we were starting from scratch, of course we’d opt for a government-funded national health system, just like every other advanced country. But the reality is that for most Americans, our system of private doctors, private hospitals and private insurance is working pretty well. Despite the best efforts of Republicans to sabotage it, Obamacare has demonstrated that universal coverage can be achieved, and medical costs brought under control, which in the end is what we care about. Why take the very real political and policy risks of blowing everything up and starting again?
The problem with the progressive wing of the Democratic Party is not that its ideas are too bold or too radical — it is that it is too wedded to specific, highly symbolic policy prescriptions, too apt to confuse compromise for capitulation, too ready to demonize those who disagree and turn off those who are undecided.
Wouldn’t it be more effective, for example, to talk about every American being able to buy decent health insurance at a cost they can afford, irrespective of income or health condition? Or promise that, within a decade, no working family would be living in poverty? Without specifying tax rates, why not just declare that those with annual incomes above a quarter of a million dollars shoulder a bigger share of the tax burden so that the government could make urgently needed public investments in infrastructure, education and child care? Or that every company share some of its profits with its front-line employees? Why not simply declare that increasing inequality, declining opportunity and great concentrations of wealth and power are the greatest threat to our democracy — and that government urgently needs to do something about it?
By framing the economic debate in terms of these widely supported aspirations, rather than a flawed set of policy litmus tests, Democrats could energize their base, unify their party and put Republicans on the defensive. Indeed, there is even model for such an approach: the 2008 Obama presidential campaign.
The problem with our political debates is that they have become too much about means and not enough about ends, too much about economic values and too little about moral ones, too much about individual rights and not enough about collective responsibility.
Rally Americans around a worthy national goal and they will find a practical way to achieve it.
But try to cram down their throats a hard-edge, anger-driven, now-it’s-our-turn policy and they will instinctively reject it.
Trump and the tea party Republicans have learned this lesson the hard way. It would be folly for Democrats to blow this golden opportunity by repeating their mistakes.