You want to replace the pay working-class Americans have lost?

Posted: 14 December 2016 in Uncategorized
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falling

Neil Irwin is right: “Poor and working-class Americans have fallen behind over the last generation, receiving few of the gains of an expanding economy.” So, he wants to devise a tax plan to change that.

The problem is, Irwin only looks at raising the income of the bottom 20 percent of families to where they would be if they shared equally in the gains since 1979.

So what would it all cost? The Tax Policy Center crunched the numbers: The policy would deplete federal coffers by $1.02 trillion over a decade.

That is serious money.

Sure, it’s serious money. But it’s only the tip of the iceberg. By my calculations (illustrated in the chart above), national income per adult and the average income of the bottom 90 percent (both in 2013 dollars) were almost equal in 1970. But national income per adult has risen a whopping 87 percent since 1970, while the average income of the bottom 90 percent has actually fallen, by 6.7 percent.

If we want to make up that gap, it’s going to cost much more than $1.02 trillion. In fact, it would take about $5.6 trillion—equal to the amount of the tax cuts President-elect Donald Trump wants to shower on wealthy individuals and large corporations—just to close the gap for one year.*

Now that’s serious money.

And it doesn’t begin to make up for all the pay working-class Americans have lost since 1970.

The only way to close the gap and to compensate working-class Americans for the pay they’ve lost over recent decades is to not to tinker with the tax system (or, for that matter, close the trade deficit, boost economic growth, or attempt to protect the safety net), but to change the existing set of economic institutions—by giving workers a real say in how the extra income they create gets distributed.

 

*My back-of-the-envelope calculation (90 percent of tax units times the gap between national income per adult and average income of the bottom 90 percent) is for 2013.

Comments
  1. […] victimized during the Second Great Depression. As I have shown elsewhere (e.g., here and here), as a class, they’ve fallen further and further behind the tiny group of employers and […]

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