A cornerstone of the Democrats’ plan to reduce American inequality is higher tax rates. Rich people will keep working, not move taxable activities offshore and/or pursue other tax avoidance strategies, and the government’s coffers will fill up like Pharaoh’s grain warehouses during the seven fat years. Wise officials will then ladle out the cash to the deserving poor and inequality will be reduced.
Is there any alternative to this approach, I was asked at a dinner party by some rich government-connected residents of Cambridge? (they support Bernie Sanders, of course!)
My answer was that a big element of inequality in the U.S. involves real estate. Start with the government’s decision to double the population compared to the “good old equal” days of the 1950s (paying Americans to have children; encouraging immigration both legal and illegal). Add our spectacular failure in all aspects of urban planning and you get the inevitable outcome of only a handful of Americans being able to afford market-rate housing in places where anyone would actually want to live. We have added 150 million people but hardly any new cities or towns that have the features that most people desire. So you need to have a great job and/or be favored by a government ministry that hands out free housing in elite neighborhoods such as Manhattan, Cambridge, San Francisco, etc.
What if we took some of the effort and money that we currently invest in government handouts and used that to create additional attractive cities and towns? (I proposed this idea for an evil billionaire back in 2007, but the evil billionaires are obsessed with saving the rest of the planet instead.) We have a lot of land in the U.S. so there is no reason for land per se to be out of reach for a lower-middle-class American.
[Of course the standard approach to reducing inequality would be to improve public education, but Americans have rejected the Finland-style system in which only successful students can become teachers (see “Smartest Kids in the World Review”) and there doesn’t seem to be any other proven formula.]
My answer was that a big element of inequality in the U.S. involves real estate.
Actually, the real estate issue is right but the solution you propose isn’t the optimal one. We should be de-regulating costly housing markets like Boston, Seattle, LA, NYC, and SF, which would allow supply to increase.
Talking heads are so concerned with inequality because the cost of real estate, education, and healthcare have gone up so much in the last several decades. High prices in those key sectors mean that it’s harder to live a reasonable life with less financial firepower.
Then why not lower taxes so people do have more financial firepower and a better chance at a reasonable life?
But I suppose that would reduce, rather than increase, the opportunities for graft.
Actually, a not-so-evil centimillionaire, Tony Hsieh, has tried to revive downtown Las Vegas in the manner you suggest. It hasn’t gone so well. At least from that experience, it doesn’t look like a problem you can solve by merely throwing money at it.
Phil, you are correct in theory, but in practice your idea goes against the current trend of megacities, which is not due to direct policies, it is just the effect of the fact that larger cities have a larger local economy which means more jobs, more opportunities etc. With the exception of people who are old and boring (like me), many people also prefer well established large cities for the many amenities they offer (in theory, it’s not that people actually can afford them or take advantage of them). A new city will not have a well established opera, and so on and so forth. If you consider that there is also a strong lobby to keep property values up, your idea is never going to fly.
Americans need to clone humans so they’re all equal. They had the technology 20 years ago but took issue with the ethics. Maybe opinions on human freedom have changed enough that equality can be forced genetically, like so many other things that are now forced.