I continue to wonder what degree of failure it would take to discredit the notion that if the federal government were larger and taxes were higher all of our problems would be solved. After all it worked so well in the Soviet Union and Mao’s China. Today Robert Reich writes a jeremiad bemoaning the small scope and meager taxes of our present system:
For three decades, an increasing share of the benefits of economic growth has gone to the top 1 percent. Thirty years ago, the top 1 percent got 9 percent of total income before taxes. Now they take in almost a quarter. Meanwhile, the earnings of the typical worker have barely budged, adjusted for inflation.
As a result, America’s vast middle class no longer has the purchasing power to keep the economy going. (The rich spend a much lower portion of their incomes.) The crisis was averted before now only because middle-class families found ways to keep their spending up even though their wages flattened – by women going into paid work, by working longer hours and finally by using their homes as collateral to borrow. But when the housing bubble burst, the game was up.
The solution is to reorganize the economy so the benefits of economic growth are more widely shared.
As I’ve written before I’m skeptical about Mr. Reich’s proposed solution to the problems of income inequality, which concerns me, too. Will raising the marginal tax rate for those earning $1 million or more in income to 70% actually increase revenues? Would whatever revenue is derived actually reduce income inequality? Or would it just re-distribute from the ultra-rich to tax lawyers and tax accountants, probably reasonably characterized as the rich (those making more than $250,000 but less than $1 million per year)?
I’m equally skeptical about his proposed plan for increasing employment: a new WPA.
The old WPA funded a wide range of projects, everything from roads, dams, and public buildings to the WPA Writers’ Project (I’ve got a dozen or so of the guides to the states that the project produced). From its beginnings in 1936 until 1943 the project spent a little over half of the money it spent on what are now referred to as infrastructure projects. However, at that time most American workers were farmers or factory workers and a road was built by collecting gangs of unskilled or semi-skilled men armed with shovels and other hand tools. Nowadays roads are built by qualified companies who employ smaller teams that use power equipment.
Relatively few people are involved in direct production than there used to be. We don’t have nearly as many farmers, laborers, and factory workers. Most people are employed in retail sales or indirect production with jobs named things like administrative assistant, accounts payable clerk, and customer service representative.
What would a WPA for administrative assistants look like and should we be funding such a thing?
Let me a propose a radically different direction for increasing employment: more new companies. Most new hiring isn’t done by old companies or by small companies it’s done by new companies whether large or small. And IMO what new companies need most is less support for old, established companies.