A Modest Proposal

Well, I promised more than just photos of my puppy. Today I was struck by a commentary by Robert Reich (part of which is excerpted below). This fueled my desire to make some comments about what we should really be debating with respect to the economy. The distribution of income and wealth has become so skewed in this country that one would think it would be front and center in the political debate. But that isn't so. Instead we waste time and words on less important issues like subprime mortgages. [This is an issue that really burns me. Bush's new proposal (rumored to be announced today) will actually reward all the greedos or criminals who lied about their incomes and took out mortgages that they couldn't afford. Sensible people who didn't place themselves in economic jeopardy will not be rewarded and may actually be punished in the long run by this piece of political expediency.]

Anyway, back to the point. Here is Reich's commentary(with some emphasis added):

It's the Economy, Stupid -- But Not Just the Current Slowdown.
Most Americans are still not prospering in the global economy -- addressing this means thinking bigger than tax cuts or spending increases.
Robert B. Reich | December 5, 2007 | web only

According to new polls, the economy is the number 1 issue for American voters. But that's not just because the economy is slowing and mortgages are harder to come by. The real reason is middle-class families have exhausted the coping mechanisms they've used for over three decades to get by on median wages that are barely higher than they were in 1970, adjusted for inflation. Male wages today are actually lower than they were then; the income of a young man in his 30s is now 12 percent below that of a man his age three decades ago.

The first coping mechanism was moving more women into paid work. The percent of working mothers with school-age children has almost doubled since 1970 -- from 38 percent to about 70 percent. Some parents are now even doing 24-hour shifts, one on child duty while the other works. I call these families DINS - double income, no sex.

When families couldn't paddle any harder, we started paddling longer. The typical American now works two weeks more each year than 30 years ago. Compared to any other advanced nation we're veritable workaholics, putting in 350 more hours a year than the average European, more even than the notoriously industrious Japanese.

As the tide of economic necessity continued to rise, we turned to the third coping mechanism. We began taking equity out of our homes, big time. But now that home prices are sinking for the first time in decades, this final coping mechanism no longer keeps us afloat. As Moody's reported last week, defaults on home equity loans have surged to the highest level this decade.

In short, it's the economy, stupid. But not just the current slowdown. The underlying problem began around 1970. And any presidential candidate seeking to address it will have to think bigger than stimulating the economy with tax cuts or spending increases. The fact is, most Americans are still not prospering in the high-tech, global economy that emerged three decades ago. Almost all the benefits of economic growth since then have gone to a relatively small number of people at the very top. The candidate who acknowledges this and comes up with ways to truly spread prosperity will have a good chance of winning over America's large and largely-anxious middle class.

This column is adapted from Reich's weekly commentary on American Public Radio's Marketplace.

This brings me to my "modest proposal" (and we aren't going to serve up any immigrant children for dinner). When people like Warren Buffet and Bill Gates begin to notice that they aren't paying enough in taxes (and say so in front of Congress), it's probably time to listen. When hedge fund managers and financial engineers who create situations like the alleged "subprime crisis" make thousands of times what a kindergarten teacher makes, it's probably time to take action. We are willing to bail out stupid greedy people who assume mortgages they never should have qualified for in the first place and banks that lose billions investing in questionable (not any more!) securities, but are we willing to pay a living wage and find a decent place to live for a kindergarten teacher?

The first step would be to have a rational tax code that reflects our country's commitment to egalitarianism (and this is only a first step--it's a long way from solving the problems that Reich discusses in his commentary).

Craig's tax proposal: Find the median salary for public school teachers in the ten largest US cities. All income earned by any person below that figure would be exempt from taxes. Above that level, there would be two marginal rates: 20 percent and 50 percent. There would be no deductions for anything and any kind of income--wages, interest, capital gains--would be taxed. The levels at which the marginal rates apply would be set (for now at least) at points that would yield the same level of income to the government as it receives in 2007, except that all income over five million dollars would be taxed at the higher rate. There would be no corporate income tax, but there would be limits on the wealth a corporation could hoard--they would either have to reinvest it in the business or pay it out in dividends.

There are a lot of other things that need to be fixed, too--health care, Social Security, Medicare, etc., but the tax system would be the easiest if we only had the will.