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Closing the Gap: Desensitization to Wealth Inequality and its Costs to Average Americans

There’s a certain unfortunate cynicism to calling economic progressives and Presidents Joe Biden and Barack Obama “socialists.”

Fiscal conservatives have lodged this accusation against Democrats for decades. This line was recently used by Daniel Henninger for the Wall Street Journal. Henninger writes that Biden’s $3.5 trillion infrastructure and economic recovery plan is implicitly against “work, sav[ing], and invest[ing].” But not only is this critique against this plan just plain lazy—leaving out discussion of which programs he believes don’t deserve the money or which tax increases he finds problematic—it also demonstrates a deep disconnect with the current state of American inequality. The US is a more economically-stratified country now in terms of income than it has been in at least about fifty years when the Census Bureau began tracking this. Upper-income households (in this study, those that earn more than double the national median salary) own an astounding 79 percent of American wealth, a massive increase from 60 percent 30 years ago, when the US was confident in its status as the global bastion of capitalism following the collapse of the Soviet Union.

Plainly speaking, both parties are at fault for the wealth gap. Over the past three decades, the US has had almost 20 years of Democratic governance that has helped to oversee this massive shift of wealth to the upper class. President Trump received staunch criticism from Congressional Democrats when they heard of his plans to lower the corporate tax rate from 35 percent to 21 percent, but absent from this discussion was the fact that President Obama had proposed to cut the corporate tax rate dramatically just a few years before. There has been an unfortunate lack of political success among recent presidents to take necessary legislative steps toward reversing this trend.

This in part explains why the claim that Joe Biden is orchestrating some government takeover of American wealth is unfounded: in all of his time as a senior government official, exactly the opposite has happened. Democrats consistently campaign on “building back” a fairer economy, so why is there such a disconnect between rhetoric and policy implementation? This isn’t because potentially effective redistributive measures are unpopular. Senator Elizabeth Warren’s wealth tax proposal on fortunes above 50 million dollars seemingly has supermajority support among voters. About two-thirds of voters, when polled, supported raising marginal tax rates on the very wealthy (households with incomes above $400,000 per year, in this case). Clearly, there’s both theoretical and practical support for action against the trends of stratification that have played out in a major way across the country.

This raises interesting questions about how politicians of both parties should diffuse attacks of being anti-American, antiwork socialists, and why the politics of wealth inequality in the United States are so unrepresentative of the current public sentiment. If raising taxes on the very wealthy is so popular, why has this been such a challenging position to hold for national politicians, especially Democrats? What about our national discussion and our hopes in the American Dream make even returning to the taxes we had just a few decades ago sound like such a dangerous idea? Up to 80 percent of surveyed Americans expect their children or grandchildren to “achieve the American dream.” This is often understood to mean home ownership, access to higher education, and financial independence, among other things. It seems absolutely essential, then, for national politicians who care about intense economic separation to craft their messaging on this issue with the American perception of social mobility in mind. It has to be clear that reducing inequality is about giving every American what it takes to be successful, as opposed to punishing success. The way that inequality and taxation are discussed in the US needs to be in relation to how they affect every other issue at the top of voters’ minds. This is to say that national politicians should emphasize how a handful of people owning hundreds of billions of dollars very likely makes it harder for more Americans to achieve the “American Dream,” in whatever form that takes for them. Although this point is usually made rather subtly, President Biden seems to understand it, claiming that his proposed highest marginal tax rate increase of 2.6 percent wouldn’t even take away executives’ third homes

This charge of opposing hard work is most effectively combated by reminding Americans what the costs are of allowing the status quo to continue with regards to taxation and how many major companies can simply avoid paying corporate taxes: less investment in education, outdated infrastructure, persistently high rates of homelessness, and so on. 

However, this messaging disconnect goes further than just needing to assuage the fears of Americans worried about protecting opportunity and the potential to get ahead. As mentioned before, although there is broad support for measures to reduce inequality, there is also evidence suggesting that addressing wealth inequality is not a top political priority for most Americans. To this point, a few issues that polled higher on voters’ minds as “big problems” in American society were gun violence, the affordability of healthcare, and the federal budget deficit. Instead of sound-bite lines about third houses and private jets, President Biden and national lawmakers would do the country good by making the obvious connections between each of these issues. Raising educational standards, helping students pay for college, improving treatment for addiction, and dealing with the opioid crisis would be some of the most effective ways to lift Americans out of poverty. How some of the most pressing issues in the current national discussion are dealt with ultimately comes back to questions of funding the government and the state of inequality, and being explicit about this point is necessary for giving this issue the national attention it deserves. 

Photo: Image via Unsplash (Arno Senoner)