The Price of Inequality: How Today's Divided Society Endangers Our Future by Joseph E. Stiglitz Read Free Book Online
Authors: Joseph E. Stiglitz
chapter 4, I explained that, contrary to the assertion of the Right, we could have a more efficient tax system that is, in fact, more progressive. Earlier I cited studies that showed, on the basis of the response of savings and labor supply, that the top tax rate should be well in excess of 50 percent, and plausibly in excess of 70 percent. 6 And these studies have not fully taken into account the extent to which very high incomes arise from rents. 7
Create a more effective, and effectively enforced estate tax system, to prevent the creation of a new oligarchy. The restoration of a meaningful estate tax would help in the prevention of a new American oligarchy or plutocracy, and so would the elimination of the preferential treatment of capital gains. The adverse effects are likely to be minimal: most of those who accumulate these large estates do so as a result of luck or the exercise of monopoly power, or are motivated by nonpecuniary incentives. 8
Helping the Rest
We can judge our system by its results, and if we do so, we have to give it a failing grade: a little while ago those at the bottom and in the middle got a glimpse of the American dream, but today’s reality is that for a large segment of the population that dream has now vanished.
Some of the reforms described earlier would not only curb the top but help the rest. For instance, ending some of the abusive and monopolistic practices will, by itself, increase their real well-being. Ordinary people will pay less for credit cards, telephones, computers, health insurance, and a host of other products.
Several additional actions would, I think, make a big difference in the plight of the 99 percent. Some of them require resources, and the reforms described above, and amplified in chapter 8, would generate the required revenue.
Improving access to education. Opportunity is shaped, more than anything else, by access to education, and the direction we have been going (income-segregated residential communities, sharply decreased public support for higher education—and the resulting sharp increases in tuition in public colleges and restrictions on places available in engineering and other high-demand but high-cost fields) can be reversed as well, but it will take a concerted national effort. What can be done to improve access to education, and, in particular, to improve the quality of public education, would itself take a tome. 9
But there is one thing that can be done quickly: the for-profit schools, whether financed by government loans, government-guaranteed loans, or private loans, with the noose of nondischargeability, have failed to increase opportunity, and have in fact been a major force dragging down poor aspiring Americans. A few may emerge with better jobs, but the vast majority simply emerge encumbered with greater debt. It is unconscionable that we allow this predatory activity to continue, and even more unconscionable that it is, in effect, supported by public money. Public money should be used to expand support for state and nonprofit higher educational systems and to provide scholarships to ensure that the poor have access.
Helping ordinary Americans save. Wealth dynamics are affected, both at the top and the bottom, by government policies. We described how the tax system helps the rich accumulate and bequeath money to their heirs though a variety of incentives. The poor get no such assistance from the tax system. Government incentives for the poor to save (say, a matching grant or expansion of first-time homeowner programs) 10 would, over time, help create a fairer society, with more security and opportunity, with a larger fraction of the nation’s wealth at the bottom and in the middle.
Health care for all. The two most important impediments to individuals’ achieving their economic aspirations are the loss of a job and an illness. The two together form a lethal combination, one often associated with bankruptcy. Health care in America has
Create a more effective, and effectively enforced estate tax system, to prevent the creation of a new oligarchy. The restoration of a meaningful estate tax would help in the prevention of a new American oligarchy or plutocracy, and so would the elimination of the preferential treatment of capital gains. The adverse effects are likely to be minimal: most of those who accumulate these large estates do so as a result of luck or the exercise of monopoly power, or are motivated by nonpecuniary incentives. 8
Helping the Rest
We can judge our system by its results, and if we do so, we have to give it a failing grade: a little while ago those at the bottom and in the middle got a glimpse of the American dream, but today’s reality is that for a large segment of the population that dream has now vanished.
Some of the reforms described earlier would not only curb the top but help the rest. For instance, ending some of the abusive and monopolistic practices will, by itself, increase their real well-being. Ordinary people will pay less for credit cards, telephones, computers, health insurance, and a host of other products.
Several additional actions would, I think, make a big difference in the plight of the 99 percent. Some of them require resources, and the reforms described above, and amplified in chapter 8, would generate the required revenue.
Improving access to education. Opportunity is shaped, more than anything else, by access to education, and the direction we have been going (income-segregated residential communities, sharply decreased public support for higher education—and the resulting sharp increases in tuition in public colleges and restrictions on places available in engineering and other high-demand but high-cost fields) can be reversed as well, but it will take a concerted national effort. What can be done to improve access to education, and, in particular, to improve the quality of public education, would itself take a tome. 9
But there is one thing that can be done quickly: the for-profit schools, whether financed by government loans, government-guaranteed loans, or private loans, with the noose of nondischargeability, have failed to increase opportunity, and have in fact been a major force dragging down poor aspiring Americans. A few may emerge with better jobs, but the vast majority simply emerge encumbered with greater debt. It is unconscionable that we allow this predatory activity to continue, and even more unconscionable that it is, in effect, supported by public money. Public money should be used to expand support for state and nonprofit higher educational systems and to provide scholarships to ensure that the poor have access.
Helping ordinary Americans save. Wealth dynamics are affected, both at the top and the bottom, by government policies. We described how the tax system helps the rich accumulate and bequeath money to their heirs though a variety of incentives. The poor get no such assistance from the tax system. Government incentives for the poor to save (say, a matching grant or expansion of first-time homeowner programs) 10 would, over time, help create a fairer society, with more security and opportunity, with a larger fraction of the nation’s wealth at the bottom and in the middle.
Health care for all. The two most important impediments to individuals’ achieving their economic aspirations are the loss of a job and an illness. The two together form a lethal combination, one often associated with bankruptcy. Health care in America has
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