Monday, July 4, 2022
July 4, 2022

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Jayne: Government can save capitalism

By , Columbian Opinion Page Editor

It is a good question, a question that deserves an answer. “What are your solutions?” a reader asked last week, following a column under the headline “Inequity real risk to capitalism.”

The gist of the column was that young adults are not being well-served by American capitalism, and their growing enmity is a threat to a system that has worked pretty well for two-plus centuries: “ ‘Socialism’ long has been used as an excuse for opposing policies that actually help people, and the strategy long has been effective. But if politicians desire to preserve capitalism, they should work for the benefit of young people rather than the super-rich.”

The impetus was a report from ProPublica detailing that many of the wealthiest Americans have paid little or nothing in personal income taxes in recent years. When Jeff Bezos can pay no income taxes in 2007 and 2011 while accumulating a fortune that as of Friday was worth $202.3 billion, according to Forbes, something is wrong with the system.

The point is not that wealthy people are cheating the system; the point is that the system is working exactly as designed. And that is not beneficial for the majority of us. As a society, we could make different choices; or we could ignore growing inequality until it reaches the point where it makes American capitalism untenable — the inevitable result of 40 years of policies designed to help the rich.

Some solutions are obvious, such as increasing individual and corporate tax rates. In the mid-1950s, the highest marginal federal tax rate in the United States was 92 percent. That’s marginal — the tax on income above a certain amount. Now the highest rate is 37 percent. That decline has been driven by the most absurd canard ever foisted on the American people — that tax cuts pay for themselves. Hint: They don’t.

Meanwhile, Republicans in Congress are balking at any increase to the corporate tax rate, which was slashed from as much as 35 percent to 21 percent with the Trump tax cuts. To preserve those cuts, Republicans are employing a little prestidigitation: “Look over there! Antifa! Critical Race Theory! Socialism! Don’t worry about tax policy, which impacts your daily life! Worry about these scary things!”

Corporate tax increases, under President Joe Biden’s infrastructure proposal, would help pay for roads, bridges, airports, internet access, cleaner water, cleaner air, hospitals, child care access, etc. You know, things that would improve the daily lives of Americans — and things that would help American business compete globally. At least that’s the idea; we should not be so naïve to believe that government ideas always go according to plan.

But there is more to making capitalism work than simply increasing taxes on the wealthy. There also is strengthening the Consumer Financial Protection Bureau, which was created in the wake of the Great Recession. The Trump administration did its best to undermine the bureau, clinging to the strategy of making government fail so critics could say, “See, government doesn’t work.”

Congressional whittling of the Glass-Steagall Act precipitated the Great Recession. Congressional whittling of the Dodd-Frank Act has set the stage for another economic calamity. And policies driven by the fantasy of trickle-down economics have undermined the middle class.

As the Pew Research Center reported this year: “The growth in income in recent decades has tilted to upper-income households. At the same time, the U.S. middle class, which once comprised the clear majority of Americans, is shrinking. Thus, a greater share of the nation’s aggregate income is now going to upper-income households and the share going to middle- and lower-income households is falling.”

Which might or might not matter to you. But when faced with the question of what can be done about it, the answers are not that difficult. Government policies have created a situation in which capitalism is failing too many people; government policies can reverse it.

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