Solve Inequality with Democracy

We both work in New York City, where the deepening inequality documented in the preceding articles is palpable in everyday life. Housing prices in Manhattan recently reached an average of $1 million, a cost that requires annual earnings of about $400,000 to amortize. Looking at the country as a whole, CEOs in the financial sector receive compensation packages in the tens of millions, about 500 times the median household income.

Meanwhile, working families struggle to find public schooling for their children, increasing numbers of ordinary people endure two- and three-hour commutes in a desperate search for housing they can afford, the average worker's pay packet has shrunk in real terms since 1979, and the poverty rate has returned to that of 1973. And it is people of color who are disproportionately affected.

Our system is entrenching inequality rather than promoting broad upward mobility. As this series of articles has shown, economic and political inequality are mutually reinforcing. So what can we do to reverse this vicious cycle?

Let's remind ourselves that there is nothing natural or inevitable about these trends. They are man-made phenomena rooted in a reinforcing mix of public and private actions. Recent policy has rigged the tax code so that it actually increases inequality. We have allowed the minimum wage to erode significantly. By 1999 it had lost more than 20 percent of its 1979 value. After Congress failed to pass labor-law reform in that same year, the share of private-sector workers protected by union contracts has decreased by 50 percent. Because unionized workers are nearly 30 percent more likely to receive employer-provided health benefits, the decline in union representation accounts for a significant share of the increased number of uninsured Americans, now an estimated 44 million.

Trade policy has helped pave the low road for American employers and their international competitors by keeping labor and environmental rights out of trade agreements, thus advantaging those, at home and abroad, who are most willing to exploit their workers and degrade the environment. And, since making an unprecedented investment in the education of the Second World War generation with the GI Bill, we have done so little that today, three-quarters of the students at elite universities come from upper-middle-class or wealthy families and only 5 percent from families with household incomes of less than $35,000. The enormous returns to elite education compound the inequality that barred the admissions-office door to lower-income students in the first place.

The good news is that if public-policy decisions helped create the inequality that mars American society, we can undo our own work and choose another path -- a higher road. We need to restore the equalizing institutions that once characterized our mixed economy: progressive taxation, social investment, and regulation of the market's distortions. The challenge includes both the policies and the politics.

Earnings. The minimum wage should be increased so that its purchasing power returns to the levels it reached before 1980. Labor-law reform should be passed, and government should celebrate the value of collective bargaining, as FDR did. Low-road employers have learned how to hold wages and benefits down for all workers by exploiting the vulnerability of immigrants. We need a broad legalization program for current undocumented workers and a more realistic policy of legal immigration with full rights.

Assets. Because asset inequality is even greater than income inequality, we should also make it possible for poor and working Americans to develop assets. These asset-development policies would include creating a child savings account for every child born in America and encouraging homeownership, not just with down-payment assistance but with long-term mortgage availability without danger of predatory lending.

Social Investment. Public schools need far more adequate funding, and high-quality education needs to be extended to 3- and 4-year-olds. Affordable and accessible child care would help working families and relieve one large out-of-pocket cost. Creating a working, single-payer health-care system would reduce inequality, both by stopping the drain on incomes caused by the erosion of insurance coverage and by equalizing access to medical care.

Revenues. Such public outlays would require us to restore federal revenues, which are now at their lowest level as a share of the gross domestic product in six decades, creating a fiscal straitjacket that effectively blocks these and other needed measures. State and local revenues have come under similar pressure as the consequences of 1990s tax cuts become clear. As Representative Barney Frank argued earlier this year, "Our problem today is too little government," not too much. We should restore the rate schedules for the two highest brackets and the estate tax to their 2000 levels. We should repeal the rate reduction for both capital-gains realizations and dividends received -- two income streams skewed dramatically up the income-distribution ladder. Repeal of the foreign-investment earnings deferral would do much to reduce inequality at home by reducing the incentive to move job creating capital offshore.

Regulation. Decisions of corporate America have contributed mightily to the rise in inequality. The corporate-reform movement that has grown in response to a decade of financial and governmental scandals must broaden its horizons and concern itself directly with business practices, including compensation, tax avoidance, facility location, and contracting procedures. Some 50 percent of publicly traded domestic equities are in the hands of institutional investors -- public and private pension funds, mutual funds, insurance companies, and trust institutions. The underlying owners of these assets are, to a substantial extent, ordinary working people who are disadvantaged by the behavior of the very firms that they own. This can be reversed. The key here is nominating, electing, and firing directors, which would require proxy voting reform so that the funds can do more than withhold votes from the management nominees, as they have recently done at Disney and Citigroup.

Three things are striking about the agenda sketched above. First, all of the steps advocated would increase economic equality; second, all have been part of the policy discourse for some time; and third, all seem unimaginable in the current political environment.

Our political system has been infected and disabled by the pervasive inequality that disfigures our economy, and any effort to combat the latter must begin with political reform that creates a vibrant and inclusive democracy. Combating economic inequality requires that we end the dominance that moneyed interests and entrenched officeholders now enjoy, lower the barriers to participation, and encourage engagement by the massive number of Americans who are alienated from, or frozen out of, the American political debate.

The agenda for political reform is broad and varied. There is no magic bullet that will fix the problem. Rather, we need a two-track approach that initiates an upward spiral of engagement. The first track must dismantle barriers to full participation:

• Make it easier for people to vote. We should make election day a holiday, expand mail-in voting, and extend the voting period.

• Make it easier for people to register. In the 2000 presidential election, nearly 3 million people experienced registration problems that ultimately prevented them from casting a ballot, and countless others missed a deadline that can be as much as 30 days prior to the election. Election-day registration increases participation by 3 percent and 6 percent in all six states where it is in place.

• Restore voting rights for people with felony convictions. More than 4.65 million citizens nationwide are prevented from voting due to a felony conviction, and the average disenfranchisement rate is nearly five times higher for blacks than non-Hispanic whites.

• Ensure that the Help America Vote Act, passed by Congress in 2002, is implemented in a competent, nondiscriminatory, and broadly inclusive way. We need machines that are accessible and language proficient, that count votes reliably, and that produce a verifiable paper trail; poll workers who are properly trained; and voting lists that are accurate and not improperly purged.

The second track requires restoring the promise of genuinely contested elections and ensuring that all voices can be fairly and equally heard in the democratic process. This includes:

• End redistricting abuses, recently raised to new heights by Tom DeLay in Texas but that have been a routine part of logrolling politics for decades. Nonpartisan redistricting panels would begin to reverse this process.

• Encourage greater competition by easing ballot access and allowing instant runoff voting.

• Keep big money from swamping democracy. This includes restoring a credible presidential public-financing system, now that our current system has been dismantled and discarded by both parties. Such reform includes ensuring candidates access to the airwaves by requiring free broadcast time and curbing exorbitant charges for political advertising rates.

• Expand public funding of all campaigns. Such measures have already changed the nature of politics in Maine and Arizona. While other states should follow this lead, true reform will ultimately require the overturning of Buckley v. Valeo, a decision that enshrined inequality by declaring unlimited campaign spending and free speech as synonymous.

• Encourage democratic participation throughout the year by stimulating community organizing and embedding forms of deliberative democracy in governmental processes at all levels.

This brings us, circularly, back to where we began. Inequality, with all of its poisonous consequences, is the result of deliberate political decisions and can only be mitigated and ultimately reversed by reclaiming democratic politics. And if skeptics doubt this syllogism, ask them one simple question: How is it that the repeal of the estate tax, which affects less than 1 percent of all taxpayers, is ferociously high on the political agenda while the payroll tax, which affects just about everybody and now takes more money from most working people than the income tax does, goes almost totally unchallenged and unmentioned? Our efforts will have succeeded when we no longer need to ask that question.

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