Imagine you had complete control of the U.S. government: What one thing would you do to reduce the country's staggering economic inequality?
It's no small task: The 400 richest Americans control more wealth than the poorest 80 million households, and as the richest citizens continue to capture the lion's share of new wealth — the top 5 percent has captured 74 percent of the wealth created in this country since 1982 — the situation is only growing more extreme.
But while there's consensus that America is a wildly unequal country, there's broad disagreement on what, if anything, should be done to address that. That's certainly true in Congress, where disagreement and deadlock have consigned meaningful action on inequality to the realm of the hypothetical.
That doesn't mean we shouldn't ask what could happen. And in that spirit, we asked experts from across the ideological spectrum what they would do to address inequality if they were king (or queen) for a day.
Their ideas included a sovereign wealth fund for all Americans, new trusts for every American baby, a national infrastructure program — and even forced deportation.
Click on the link below to read the proposal that catches your eye, or scroll through to read them all:
I. Massive expansion of local housing stock (Will Wilkinson, Niskanen Center);
II. Universal access to child care, funded by a tax on capital (Heather Boushey, Washington Center for Equitable Growth);
III. Ship the 1 percent to Venezuela (David Azerrad, Heritage Foundation);
IV. A big boost to union rights, universal social wealth fund (Matt Bruenig, People's Policy Project);
V. Create a trust for every American baby (Darrick Hamilton, the New School);
VI. Pick up the antitrust stick and wield it (Marshall Steinbaum, Roosevelt Institute);
VII. Dramatically expand Social Security (Valerie Wilson, Economic Policy Institute);
VIII. Give every American a federal savings account (Ernie Tedeschi, former Treasury economist);
IX. Rein in Wall Street, crack down on white-collar crime (Stephanie Kelton, Stony Brook University);
X. A national infrastructure program, funded by the 1 percent (Robert Frank, Cornell University);
XI. Get government out of the way, repeal rules and regulations (Grover Norquist, Americans for Tax Reform);
XII. A federal tax credit for first-time home buyers (Signe-Mary McKernan, Urban Institute).
Will Wilkinson, vice president of policy at the Niskanen Center, a libertarian-leaning think tank:
The biggest budget line for poorer families is rent, and the rent is too damned high.
Wages have barely budged in decades, yet housing costs have soared in the bigger cities in which most Americans live, because restrictive municipal zoning and land-use policy have prevented housing supply from keeping up with demand. When rent takes an ever-larger chunk of workers' paychecks, savings and wealth accumulation rates go down. However, older and wealthier home-owning Americans have been greatly enriched by the same restrictions in housing supply that make it tough for everyone else to save.
Massively increasing big-city housing supply would bring down rents, making it easier for the urban working and middle classes to build nest eggs. At the same time, it would slow or reverse the rise in home values, keeping the wealthiest from pulling even further ahead.
If I were king for a day, I would dangle a huge pot of federal infrastructure money in front of states, and then condition those delicious, fat federal grants on big cities in those states hitting growth targets for housing supply. If big cities fail to add new housing stock fast enough, they and the states they are in will lose many, many, many billions in federal funds for new and upgraded infrastructure.
The political power of NIMBY-ism (“not in my back yard”) has made it nearly impossible to tackle rising housing costs, and the wealth inequality it produces, at the municipal level. But a federal lever can offset the self-seeking forces of NIMBY-ism by giving city and state governments a strong incentive to cut the red tape that keeps housing supply lagging so far behind demand. Tying strings to federal infrastructure money in this way ought to be constitutional, too, since the economic value of infrastructure in and around cities is directly related to how many people can afford to live in them.
Idea 2: Universal access to child care
Heather Boushey, executive director and chief economist at the Washington Center for Equitable Growth:
We tax capital in this country at a lower rate than we tax labor income, or the income of people who work. People living off business and investment returns pay less in taxes; that money could be easily redirected to give every American family access to early child care and education.
This would be a major investment in our nation to the benefit of everyone. The United States used to have some of the highest labor force participation rates of women in the developed world. Now we don't. Researchers have found it's about our lack of work-life policy, with a big part of that being child care. We're not making those investments.
There's also a lot of evidence U.S. kids are falling behind in terms of test scores and in school. A big part of that is lack of investments in early childhood — a national child-care program would help us catch up.
Most people have children when they're young and not making a lot of money, which means they can't invest in education for their children from birth to age 5. I'm not saying we should necessarily take elementary school back to 6 months. But what we want is to ensure every child has access to it.
In the District, for instance, we have universal pre-K in different settings and different communities, and parents have choices. But we should make it available to all families — and use higher taxes on capital to pay for it.
David Azerrad, director of the B. Kenneth Simon Center for Principles and Politics at the Heritage Foundation, a right-leaning think tank:
A few years ago, I wrote a satirical piece called “Exile the Rich.” Because do you know how you solve inequality overnight? You round up the top 10 percent of the top 1 percent and send them to whomever will take them — Venezuela or Belgium or South Korea.
Presto: inequality problem solved.
Indeed, the rising inequality in the past four decades has been driven by a spectacular rise in the earnings of the top 0.1 percent; inequality in the 99.9 percent has not changed that much. Exiling the rich would get us back to the supposedly wonderful world we inhabited in the 1970s, according to New York Times columnist Paul Krugman, Bernie Sanders and Elizabeth Warren.
Here's the thing: It wouldn't improve life for a single American. I don't deny that Americans, especially Americans with low levels of education, confront very serious problems. The problem is linking those problems to the statistical abstraction that is rising income inequality. You could solve “the inequality problem,” and it wouldn't do anything to help the millions of men who have dropped out of the labor force, or improve America's failing schools, or stem the opioid epidemic, or address any other of the challenges facing the poor and the working class.
It’s also important to keep in mind that as far as we can tell, upward mobility has not declined in America even as inequality has risen. It's no harder to move up the income ladder today than it was 30 years ago.
If I were king for a day in America, I'd abdicate because we live in a republic. But if you forced me to remain on the throne, there are much more serious problems I'd deal with than income inequality, and I hope my friends on the left would do so, too.
Matt Bruenig, founder of the People's Policy Project, a left-leaning think tank:
If the United States distributed its national income evenly, every person would receive $44,500, and every family of four would receive $178,000. Because the country does not distribute its income evenly, the United States is instead home to some of the highest levels of inequality, poverty and absolute deprivation in the developed world.
When thinking about how to trim inequality in the United States, it is helpful to divide income into three buckets: income from working, income from owning and income from social benefits. Mathematically speaking, inequality can be reduced only by evening out the distribution of income in each bucket, by moving income from disequalizing buckets to equalizing buckets, or by doing some combination of the two.
With this framework in mind, the first thing I would do is overhaul the nation’s labor law in a way that promotes mass unionization across the entire labor market. Under the new labor regime, all of the workers and employers in each sector would bargain collectively to set the terms and conditions of employment for that sector. By strengthening workers’ bargaining power and requiring wages to be set collectively, this reform would shift some income from owners to workers while also compressing the distribution of income among workers.
The second thing I would do is socialize the ownership of income-generating assets such as stocks, bonds and real estate. The government would accomplish this by creating a social wealth fund, giving every adult in the country one share of ownership in the fund, and using money from quantitative easing, sovereign debt or taxes to fill up the fund with assets purchased on the open market.
Once established, the social wealth fund would pay out its investment returns through an annual dividend to its owners, i.e., every adult in the country. By moving assets out of the hands of rich families and into the hands of a collectively owned wealth fund, this change would significantly trim down wealth inequality and flatten out the distribution of the income that comes from owning.
Darrick Hamilton, professor of economics and urban policy at the New School:
National child trust accounts, “baby bonds” program, race-based reparations. Most Americans that are middle-class (as defined by wealth) generate their assets in a passive way — they own a home that appreciates over their life; they get a college degree without being saddled with debt, which gives them access to a managerial or professional job with relatively higher wages and saving instruments for retirement; or they end up with a small business that required some capital finance in the first place.
The source of asset inequality is that some young adults have access to capital that will passively appreciate over their lifetime and give them economic security and agency, and others do not.
This has nothing to do with individual behavior, attitudes or norms. It’s simply situated in the familial position in which you are born — a birthright. So why don’t we endow every American with a trust at birth?
The amount of that trust will be based on the wealth position of the family in which they are born. The average account would be about $20,000, but if a child is born into the most wealth-poor family, they would receive a trust of $50,000 to $60,000. If they’re born among the most affluent, say the offspring of Oprah or Bill Gates, they would get a nominal endowment of about $500. The program would be inclusive, and everyone would have a stake — creating a “stakeholder society.” [You can read more about this proposal here.]
The key objective is to provide everyone with access to capital (“a stake”), so they may exercise financial agency over their lives. Baby bonds are an individual capital approach, but, similarly, tuition-free public colleges and universities could also empower young adults without the burden of debt.
The paramount indicator of racial disparity is wealth. The most parsimonious, just and direct way to address racial economic disparity would be direct reparations. But distribution of reparations does more than just redress racial economic disparity; it also acknowledges there was a harm done to people, and the acknowledgment is itself a vital agreement along with the redress to have racial healing as a nation and move on.
People ask: “Could you just write a check to achieve reparations?” You could, but black people don’t own the means of productions, and so reparations could be a stimulus that leads to greater inequality if not structured properly. But we could imagine a scenario where stocks are part of the redress — so that a certain amount of corporate ownership is reallocated to black Americans.
Marshall Steinbaum, research director and fellow at the Roosevelt Institute, a left-leaning think tank:
King is a very powerful position, but it might be enough to be assistant attorney general of the Justice Department's antitrust division.
The antitrust laws were once used to structure the economy we wanted to live in, and that was a fantastic policy success that ensured prosperity spread across the country and through all income brackets, including by eroding racial barriers to market access. We lost that in the past 40 years of antitrust jurisprudence, in which the purview of antitrust policy was narrowed significantly and corporations became very profitable, predatory and able to suck in a much larger share of economic output than they had before.
The economy in which we live now is one where lots of business models that had once been illegal are essentially immunized from antitrust liability. Among them: vertical integration (owning multiple stages of production in the supply chain, as many telecom companies do); misclassification of employees as independent contractors; the rise of the gig economy; and “alternative work arrangements” (Harvard's Lawrence F. Katz and Princeton's Alan B. Krueger found “alternative work arrangements” increased as a share of the workforce from 10.7 percent to 15.8 percent between 2005 and 2015).
As a result, corporate profits as a share of economic output have risen from less than 5 percent to more than 15 percent. They're a much larger share of national income, at the expense of both workers and traditional capital investment. If profits are high, as they are now, corporations are supposed to be expanding and investing under threat of competition. But that's not happening. They're at high profits without needing to invest, which is evidence that they don't face competition.
We need new antitrust legislation to set the policy back on track. That legislation should consist of a revision of monopolization enforcement — particularly Section 2 of the Sherman Act — since we have not seen a meaningful case brought by the government since it took action against Microsoft in the early 2000s.
Companies should face legal liability for how they exercise their market power — not just in the product markets but also through antitrust action in the labor market when they exert “monopsony” power. (See more about monopsony power here.)
The goal is to change how corporations work, to reduce their profitability and to create space for other players to compete, creating an economy that works for a wider set of stakeholders than the corporate CEOs and their shareholders. It would help reverse the decline of entrepreneurship and small-business growth and ensure the economy works for everyone.
Valerie Wilson, director of the program on race, ethnicity, and the economy at the Economic Policy Institute:
We should strengthen Social Security. When Social Security started in the 1930s, it was really a family insurance program focused on improving the economic security of children, adults in their working years and retirees. In its current form, it continues to serve that purpose by providing survivor benefits for young people when an eligible parent has died; disability benefits for those who become disabled in their working years; and retirement benefits for those who exit the labor force in old age.
In this way, Social Security serves a similar purpose as wealth by providing some cushion against a loss of earnings resulting from any one of these life events. By improving Social Security, we at least help to lessen some of the consequences of the wealth gap.
The Commission to Modernize Social Security developed a plan for improving benefits that I think helps to address the wealth gap in at least three important ways. First, by increasing the Special Minimum Benefit — which goes to low earners — we can improve benefits for those who have spent their adult lives working low-wage jobs and are unlikely to have private pensions or other savings. This would include a disproportionate share of African American workers, women and those in low-paying, but more physically demanding, jobs who are unable to delay retirement until an older age.
Second, reinstating the student benefit to support students attending college or vocational school would serve to reduce the amount of debt taken on by families who don’t have adequate savings or income to cover the out-of-pocket costs of attending college. Third, providing a dependent-care benefit would help those who take time out of the workforce to serve as unpaid caregivers for children or parents but currently get no credit for those years. This is a reality that is most common for women, affecting their economic security in old age.
The fact that there is a racial wealth gap means that as people of color grow as a share of the population, there will be an increasing number of people who are more likely to be vulnerable to the economic instability that can result from a loss of regular earnings. This is in addition to the accumulated costs of racial and gender wage disparities, even among those who maintain employment. We can and should change that.
Ernie Tedeschi, policy economist who served in President Barack Obama's Treasury Department:
The bottom quarter of families hold only 0.4 percent of America’s financial assets. The top 10 percent of families hold 76.6 percent of them.
One driver of this gap is that the rich are more likely to have jobs that offer them tax-advantaged savings vehicles, such as 401(k)s. Because the tax savings from these plans rise with income, they are also more likely to benefit from them.
Near its end, the Obama administration created a new savings vehicle called myRA that attempted to bring more of these types of savings advantages to lower-income families. But enrollment fell below expectations, and the Trump administration ended the program.
A more effective solution would be to give everyone access to the retirement savings benefits that the rich enjoy. We could do that by opening the government’s program for federal employees to all Americans, regardless of employer. The Thrift Savings Plan (TSP), while technically not a 401(k), is designed to closely mimic the structure of such plans, with employees getting tax benefits with the opportunity to select from a menu of investment funds.
Under the TSP, an employee receives an automatic contribution equal to 1 percent of her pay, even if she doesn’t contribute anything herself. Then a schedule of matching contributions kicks in. An employee contributing 5 percent of her pay gets a match of an additional 5 percent from the federal government, doubling her return instantly, regardless of tax bracket. If the TSP were open to all, the accounts would follow the employee, regardless of whether she switched jobs or even lost her job.
We could pay for TSP-for-all by curtailing the mortgage interest deduction, a tax benefit that also encourages wealth creation but whose benefit skews toward the rich. Tackling wealth inequality will mean democratizing many of the financial benefits currently enjoyed by people at the top.
Stephanie Kelton, former adviser to Sen. Bernie Sanders (I-Vt.) and professor of public policy and economics at Stony Brook University:
Everyone talks about the need to get the rich to pay their fair share. But we should also prevent the rich from getting so obscenely rich in the first place and putting the rest of us at risk. To do that, we should crack down on white-collar crime and restore big banks to their rightful place in the American economy.
Since the early 1970s, as the economy has become more and more financialized, banks have moved away from their core purpose of serving the public interest. Loans to customers used to be made to people about whom the banks knew something — they had an interest in making good loans. Now, banks make loans they don’t intend to hold beyond 30 days before they securitize and sell them off. It’s purely for short-term gain.
We should mandate that banks are allowed to lend directly to borrowers only. If they make a loan, they should have to keep it on their balance sheet — there’s no public purpose in allowing them to sell it off for their profit. They should not be allowed to engage in propriety trading or profit-making beyond basic lending. That would help us avoid the kinds of crises that have robbed so many people of wealth and savings during financial catastrophes.
We should also be prosecuting — and putting in jail — white-collar criminals. There are a number of studies about broad inequality in America and what the average worker gets, and how that's linked to the spectacular rise of the financial sector in particular. Putting people in jail — actually showing perp walks — will do a lot to change behavior, whether it's in big pharma or on Wall Street. Executives have to understand that breaking the law results in more than a slap on the wrist and a fine that gets wrapped into the cost of doing business. You have to prosecute.
Robert Frank, economist at Cornell University and author of several books on American income inequality:
Two of the biggest problems now confronting the nation are runaway growth in income inequality and crumbling infrastructure. That the best ways to address these problems are mutually reinforcing should therefore come as welcome news.
The American Society of Civil Engineers estimates that it would cost more than $4.5 trillion to bring our existing stock of infrastructure into serviceable condition by 2025. Given the incentives that engineers face, this may be an overstatement. But no one doubts that the task would be enormously expensive. Raising taxes on the nation’s top earners is the only feasible way to pay for it. That step alone would reduce the skewness of the nation’s post-tax income distribution.
But it would also reduce inequality by boosting the incomes of those further down the income ladder. As previous expansions of infrastructure investment — such as the Works Progress Administration during the Great Depression and the Interstate Highway System initiative of the 1950s — have taught us, many useful tasks can be done by properly supervised unskilled workers. Infrastructure projects couldn’t employ all unskilled workers, but increased demand for such workers in some sectors invariably creates labor shortages and more rapid wage growth in others.
Top earners have historically resisted tax hikes, in the apparent belief that higher rates would make it harder to buy things they want. But that view is a garden variety cognitive error. Top earners, who already have everything they might reasonably be said to need, are like others in their desire to buy additional things that seem special. But “special” is a relative concept. A nice house is one that is nicer than most other houses. A high-performance car is one that performs better than most other cars, and so on. To get such things, we must outbid others who also want them. Successful bidding depends almost entirely on relative purchasing power. And because tax increases don’t affect relative purchasing power, they have no effect on our ability to buy special things.
Consider the following thought-experiment: Rich car enthusiasts in World A, which has low taxes, can afford to buy $300,000 Ferraris but must drive them on roads riddled with foot-deep potholes. Their counterparts in World B, which has higher taxes, can afford only $150,000 Porsches, which they drive on roads maintained to a high standard. In which of these worlds would rich motorists be happier?
Grover Norquist, president of Americans for Tax Reform, a right-leaning advocacy organization:
How do you reduce inequality?
First make a list of those things government does to staple people to the bottom of the economic ladder. And then stop doing them.
Occupational licensing: Today, 25 to 30 percent of jobs require some sort of government license — in the 1950s it was 5 percent. Different states require licenses to braid hair, arrange flowers, or be a barber or an interior decorator. Licensing creates a deliberate bottleneck limiting the number of Americans who can do a particular job. Uber and Lyft ignored the stupid taxi monopoly laws, and now 1 million people — who for decades were kept from such work by government laws — are working as independent contractors on ride-sharing platforms. All states should follow the lead of Gov. Doug Ducey (R) of Arizona, who signed legislation telling the occupational licensing boards: If you cannot prove that any particular licensing requirement protects health or safety (in reality), anyone in the state can challenge that regulation in court and kill the job barrier.
Mobility, mobility, mobility: A low-income person’s ability to get a job starts with their ability to get to where jobs are. Let’s remove restrictions on people getting around using flexible systems such as Uber, Lyft, car, van, jitney or bus instead of sinking billions of dollars into light rail or subways — inflexible concrete monuments designed by politicians decades ago to travel to yesteryear’s favorite destinations. Politicians and “city planners” should be given small train sets to play with. Not the lives of millions.
Savings programs instead of traditional Social Security: The income gap is dwarfed by the wealth gap. And like income disparity, the wealth gap is often created by stupid government laws and “programs.”
Higher-income people save for the future through IRAs and 401(k)s. Lower-income people are told that Social Security is saving for them. It is not.
Every American should be free to say: “I don’t want to send my check to Mr. FICA: I want to write it to Mr. IRA.” Other nations allow lower-income people this opportunity.
Signe-Mary McKernan, co-director of the Opportunity and Ownership initiative at the Urban Institute, a think tank:
The cards are stacked against low- and middle-income families, because federal wealth building subsidies leave them out.
The federal government spends $400 billion every year to build assets through programs like the mortgage interest deduction (which offers a deduction for homeowners), and through preferential tax treatment of retirement savings. But because these subsidies go through the tax code, they primarily benefit high-income families, leaving out lower- and middle-income families, as well as young Americans, African Americans and Hispanics.
About two-thirds of federal home-ownership and retirement subsidies go to the top 20 percent of taxpayers, while the bottom 20 percent low-income taxpayers receive less than 1 percent of these subsidies.
There are two big changes we could make to start to even the playing field. One is reforming the mortgage interest tax deduction, replacing it with a “first-time home buyers” tax credit. This would provide home buyers with a refundable credit when buying a home. As proposed by Amanda Eng, Benjamin H. Harris and C. Eugene Steuerle, most purchasers would be eligible for a maximum credit equal to $12,000 for single taxpayers and $18,000 for married taxpayers. I would take the current huge subsidies benefiting wealthy people — and mostly shown to be effective only at getting people to buy bigger homes — and instead give everyone a tax credit on their first home purchase, which would be more effective at increasing equity and wealth.
A second idea is to provide access to accounts that can be used for emergency savings, with incentives for saving in them. A common misconception is that poor or even low-income people cannot save. Evidence from savings programs and research shows they can.
And even small savings amounts can help. Families with a savings cushion as little as $250 to $750 are less likely to receive public benefits, or miss a housing or utility payment after a job loss, health issue or large drop in income. They can also help save for home-ownership and retirement saving.