Where the money is

I’ve been largely on the sidelines of the debate about neoliberalism and political theory. That’s mainly because, observing the US political and economic situation, I have a very clear view on what policies could, in principle, sustain a progressive political movement, but (given my distance from the scene and the absence of anything substantial enough to force its attention on the mass media) no real idea about how such a movement might develop.

My analysis is quite simple and follows the apocryphal statement attributed to Willie Sutton. The wealth that has accrued to those in the top 1 per cent of the US income distribution is so massive that any serious policy program must begin by clawing it back.[1]

If their 25 per cent, or the great bulk of it, is off-limits, then it’s impossible to see any good resolution of the current US crisis. It’s unsurprising that lots of voters are unwilling to pay higher taxes, even to prevent the complete collapse of public sector services. Median household income has been static or declining for the past decade, household wealth has fallen by something like 50 per cent (at least for ordinary households whose wealth, if they have any, is dominated by home equity) and the easy credit that made the whole process tolerable for decades has disappeared. In these circumstances, welshing on obligations to retired teachers, police officers and firefighters looks only fair.

In both policy and political terms, nothing can be achieved under these circumstances, except at the expense of the top 1 per cent. This is a contingent, but inescapable fact about massively unequal, and economically stagnant, societies like the US in 2010. By contrast, in a society like that of the 1950s and 1960s, where most people could plausibly regard themselves as middle class and where middle class incomes were steadily rising, the big questions could be put in terms of the mix of public goods and private income that was best for the representative middle class citizen. The question of how much (more) to tax the very rich was secondary – their share of national income was already at an all time low.

The problem is that most policy analysts and commentators grew up in the world of the 1950s and 1960s, or at least in the mental world created by that era. So, we are busy fighting about tax expenditures, barber licensing and teachers unions, and the implications of these things for a hypothetical working class mobilisation. Meanwhile, most of the anger created by the collapse of middle class America is being directed not at the rich but at those who don’t look, sound or pray like Americans of the vanished golden age.

One thing the Tea Party has shown is that, in the current dire state of the US, there are few penalties for abandoning moderation. What the US needs at this point is someone willing to advocate a return to the economic institutions that made America great – 90 per cent top marginal tax rates, strong trade unions, weak banks and imprisonment for malefactors of great wealth.

It seems to me that a good place to start would be a primary challenge to Obama (Bernie Sanders suggested this, and he’d be a good candidate I think). It would be impossible for the media to ignore completely, and might get enough votes to shift the Overton window. Whether such a challenge could form the basis of a mass movement, I don’t really know, but it seems to be worth a try.

fn1. When I was at the American Economic Association meetings in January I went to a session where a group of Very Serious Economists (Holtz-Eakin, Elmendorf and others) discussed the US budget problem, which comes down to the fact that on a structural basis US public expenditure exceeds revenue by something like 7 per cent of national income. I made the comment that this gap was almost exactly equal to the increase in the share of income going to the top 1 per cent of households over the last decade or so. The Very Serious Guys declined to respond, and waited for a serious question. I wasn’t surprised, but I wasn’t impressed either.