The U.S. economic pie couldn’t be carved up much more unequally. The top 10 percent manages to capture about 47 percent of total pre-tax income, while the bottom 90 gets the rest. The top 1 percent alone walks away with 20 percent of national income.
And, of course, the distribution of wealth is even more unequal: the bottom 90 percent owns only 28 percent of total household wealth, while those in the top 1 percent own more than 37 percent.
As Justin Fox explains, the mainstream view—among both liberals and conservatives—is that, in the face of growing inequality, the main goal of economic policy is to increase the size of the pie.
We’ve just been through a long era during which discussion of economic policy was largely about growing the pie from which all of us partake. Yes, Democrats have been a bit more interested than Republicans in redistributing the pie through taxes and government spending. But economic advice givers in both parties had since the 1970s been focused mainly on what they think will stimulate growth.
That was certainly the thrust of the economic plan proposed by Hillary Clinton—grow the pie and hope that everyone would be satisfied with their obscenely unequal pieces.
The new Trump administration, for all of its chaos and lunacy (which is keeping many of us up at night, and making it difficult to focus on anything else during the day), appears to be inspired by a radically different approach.
Here’s Michael Anton (under a pseudonym), a former George W. Bush speechwriter who is now a national-security aide in the Donald Trump White House, writing last year in support of Trump’s stances to tighten immigration and renegotiate international trade agreements:
Who cares if productivity numbers tick down, or if our already somnambulant GDP sinks a bit further into its pillow? Nearly all the gains of the last 20 years have accrued to the junta anyway. It would, at this point, be better for the nation to divide up more equitably a slightly smaller pie than to add one extra slice—only to ensure that it and eight of the other nine go first to the government and its rentiers, and the rest to the same four industries and 200 families.
The globalists gutted the American working class and created a middle class in Asia. The issue now is about Americans looking to not get f—ed over. . .That’s what the Democrats missed. They were talking to these people with companies with a $9 billion market cap employing nine people. It’s not reality. They lost sight of what the world is about.
Now, I understand, many in the current White House team (from Secretary of State Rex Tillerson to Treasury Secretary designate Steve Mnuchin) are members of the very same junta and the kinds of globalists excoriated by Anton and Bannon. The battles among them have barely begun.
My point is only that Trump won the presidential election—and will proceed to formulate economic policy—at least in part on the basis of a critique of the status quo. Simply growing the economic pie was an insufficient response to the discontent generated by the grotesque inequalities that have emerged in the United States during the past three decades and that reemerged during the recovery from the crash of 2007-08.
It’s true, there’s nothing in Trump’s economic plan that will actually reverse those inequalities. The likelihood, in fact, is that the United States will end up with a smaller pie and an even more unequal distribution of the pieces.
But there is a rational kernel to the critique of the mainstream idea that all needs to be done is to raise productivity and increase economic growth and the problems associated with inequality will somehow disappear.
We also need to recognize that, with Trump, that rational kernel is standing on its head. It is up to us to turn it right side up again.