“Envy economics” — that’s how Paul Ryan (Wis.), the Republican chairman of the House Ways and Means Committee, characterized the budget that President Obama submitted to Congress on Monday.
I suppose he has a point.
Who among us, for instance, doesn’t envy the ability of our most profitable corporations, such as Apple, to cut their taxes by shifting profits to low-tax Ireland, even though, in Apple’s case, the company doesn’t really do much business in Ireland? Obama’s budget would exploit this envy by requiring U.S. corporations to pay a 14 percent tax on the money they’ve stashed overseas to avoid paying the taxes that U.S. workers — willing but unable to pretend they’re Irish — are compelled to pay.
Then there’s the envy that most working mothers must feel toward those affluent moms who have no trouble paying for decent child care. Obama panders to their jealousy by pushing to create a tax credit of up to $3,000 to help these whiners pay for the care and feeding of their kids.
Another form of envy that the president’s budget exploits is that shown by young people, saddled with student debt, toward their parents, who attended school in the days when public universities and colleges were largely funded by taxpayers. Taking shameless advantage of this intergenerational resentment, which often takes the form of students’ sullen postgraduate reoccupation of their parents’ spare bedrooms, Obama’s budget proposes to make community colleges tuition-free.
And in the ultimate display of the politics of envy, Obama proposes that these and kindred programs be paid for by increasing the tax rates on our long-suffering rich. The sliver of Americans who make a great deal of money through investments would see the tax rate on their capital gains raised to the level they had to endure when Ronald Reagan was president — though, to be sure, it would still be a lower rate than that paid by many people whose income derives from their work (the saps).
Such seeds of envy are scattered everywhere, just waiting for some populist pol to command them to sprout. Consider: In the 1960s, when mass prosperity was the order of the day, corporate chief executives made, on average, 20 times what their average employee did. Today, they make 300 times that. Consider: Fully 70 percent of all the increase in income that Americans reaped between 1935 and 1980, according to an analysis of IRS returns by University of California economics professor Emmanuel Saez, went to the bottom 90 percent of households, while 7 percent went to the wealthiest 1 percent. Since 1997, the wealthiest 1 percent has claimed 72 percent of the increase in income, while the bottom 90 percent has gotten precisely none of it.
A cause for envy? More like a cause for righteous rage — at the offshoring and downgrading of middle-class jobs, at the gutting of unions, at the rise of a deregulated financial sector that claims a steadily greater share of the nation’s income for its top executives without delivering a service even remotely commensurate to its pay, at corporate CEOs who funnel profits into share buybacks that increase their own paychecks rather than into research and development or employee raises.
The response of corporate leaders to Obama’s budget doesn’t inspire much confidence that those who question their commitment to this nation will have their doubts assuaged. For years, CEOs have complained of their companies’ putatively high tax rates. The president now proposes to lower them from 35 percent to 28 percent, but in return he wants them to pay the 14 percent fee on the money they’ve kept abroad. His budget directs the funds from the overseas tax to the repair of America’s dilapidated roads, rails and airports, but the Gulfstream crowd hasn’t expressed much enthusiasm at the prospect of funding commoners’ commutes, much less with funds they’ve so painstakingly offshored. “Companies in the past have not expressed a great deal of interest to go down this path,” Marty Regalia, the chief economist for the U.S. Chamber of Commerce, told the Wall Street Journal.
For those who want to rebuild the American middle class, Obama’s budget offers a strong starting point — but only that. Any corporate tax reform that meets the challenge of rebuilding broadly shared prosperity must reward companies that balance (say, through the composition of their boards) the interests of shareholders with those of their workers and the public, and penalize those that don’t. In an age of globalization, that’s the only way to synchronize companies’ interests with the nation’s.
Ryan may call that envy economics. I call it patriotism.