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An election is coming: the rich vs. everyone else

I came across economist Heather Boushey’s work first by stumbling on her article, “The coronavirus recession and economic inequality: A roadmap to recovery and long-term structural change.” I don’t bump into that many women writing about structural inequality, so I checked her out. That led me to read her 2019 book, Unbound: How Inequality Constricts Our Economy and What We Can Do About It, published by Harvard University Press.

Established economists influence our lives

Unbound is written to help ordinary people—not economists—understand three big ideas. First, unlike any of the other social sciences, economics has an elevated status when it comes to influencing public policy in the US. There is no Council of Sociologist Advisors, just the Council of Economic Advisors. The first big idea is that economists have more influence on our lives than we might imagine.

Attacks on findings that contradict embedded ideas

The second big idea is that a sea change is happening within the discipline of economics. The newcomers who use empirical data to test out theories were initially shunned—their work considered improper.

Boushey points to an example from the 1990s when David Card and Alan Krueger developed empirical methods that showed that when policy makers in New Jersey raised the minimum wage, employment in fast food restaurants did not decline relative to neighboring states.

This study, based on what actually happened, contradicted a basic tenet in the field of economics, which is that when prices rise, demand falls. In response to this unsettling challenge to established wisdom, Card reported to Boushey that he was professionally shunned. His sense of why that happened was that the American Economic Association didn’t want to get labeled as “a bunch of left-wing nuts.”

The economy is a political animal

The third big idea Boushey explains is not new, but like a good song, it’s worth hearing again. The economy is not a system unto itself, governed by natural laws separate from society. Yet that idea of a free-standing economy, acting according to its own logic, permeates popular discourse.

The economy is healthy, or flagging. The market, synonymous with the economy, is described as if it has a life or logic of its own. Boushey disabuses readers of that notion, and argues instead, backed by pages of evidence, that the economy influences and is influenced by political and social institutions.

Wealth captures political and social power

Another line from the familiar song comes when Boushey provides evidence showing how economic power translates into political and social power. This is the force driving our increasing economic inequality.

Boushey cites a Vanderbilt University political scientist whose research shows that policies supported by the rich are two and a half times more likely to be passed into law compared to policies not supported by the rich. When senators vote, they are likely to align with the rich rather than the poor.

Republicans overwhelmingly respond to policy preferences of the rich, but so too do Democrats, though to a lesser degree. Senators from both parties are similar in their unresponsiveness to low and middle income constituents.

In other words, economic inequality is behind the growing imbalance between what people want and what policymakers decide about government revenue and public investment. Less is getting done, and what does what get done aligns with the interests of the wealthy.

An election is coming

So, if economic power buys political power, and political power is used to generate policies that protect and advance the interests of the wealthy, driving us towards greater inequality, what are we to do? Pay attention to what candidates say they will do. If a politician advocates cutting taxes, don’t vote for them unless you are already very wealthy. If they advocate for massive public investments in social institutions, especially education, infrastructure, and health care, vote for them.

The enduring myth that tax cuts help everyone

Boushey explains that for the past 60 years or so, US public policies have been grounded in a series of linked propositions. By reducing taxes—a government burden—individuals will become more productive and thus will contribute to overall economic growth. That growth will benefit everyone. Therefore, reducing taxes, including those of the very wealthy, is in all of our interests. This has no basis in reality. Boushay makes clear that there is no data anywhere that shows that when the wealthy pay lower taxes, the economy grows and everyone else prospers.

Tax cuts make only the rich richer

What actually happens with tax cuts, particularly tax cuts for the wealthy as has occurred under Trump and Reagan? Revenue streams for the government shrink, and public institutions and critical support services that actually allow people to contribute to the economy are decimated. Tax cuts for the rich make the rich richer. That’s all they do. And as the rich get richer, they buy more political and social influence, and thus increase their ability to influence policies that allow them to accrue even more wealth.

Markets don’t do the work of government

What’s needed, Boushey argues, is a new set of priorities. We have to recognize that markets cannot perform the work of government. The role of government is to create mechanisms for distributing resources in order to foster economic gains more generally.

This means taxing the rich, and using that revenue to invest in education, health care, and infrastructure, like transportation. For example, Boushey documents the economic benefits of investments in early childhood education and quality child care. The evidence is clear that those investments have long term benefits for individuals who in turn contribute to economic growth. But you can’t make such investments and also cut taxes.

Get wise to the tax cut fiction

Consequently, more of us need to assert our view that the role of government is to serve people—including black and brown people and middle and low income people. Candidates who speak to the need for investing in our well-being — through education, healthcare, and infrastructure — deserve to be taken seriously. Candidates who promise to cut taxes, as if to liberate us from some mythical monster, don’t deserve the time of day.

Emily Lardner has been a teacher and administrator in Washington schools for many years.

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