This article is part of TPM Cafe, TPM’s home for opinion and news analysis.
Former New York City mayor, ninth-richest person in the world, and candidate for president Michael Bloomberg has been rising in the polls in recent weeks and just recently qualified for his first debate of the primary season. As the candidate with a net worth of $61.7 billion takes his agenda to the national stage today, viewers may be surprised to hear him assert that addressing inequality is one of his top priorities. While Bloomberg gets some important points right about tackling inequality, there are some very important things that he either misses or doesn’t address when it comes to this critical issue.
The good news is that, even though he is a billionaire himself, Bloomberg accepts that inequality is a major problem that requires serious, sustained action to fix. Furthermore, he is right to underscore that inequality is only getting worse. In 1980, the richest 1 percent of Americans took home just over 10 percent of all the income and owned about 25 percent of all the wealth. By 2018, those shares had risen dramatically to 20 and 40 percent, nearly matching record highs that we haven’t seen in this country since before the Great Depression.
Bloomberg is also right to point out how regressive tax policies have contributed to rising inequality. For example, our system taxes income that results from capital gains — the growth in value of investments like real estate, stocks and bonds — at a lower rate and with far more favorable terms than it taxes income that stems from work. And since rich people disproportionately get their income from capital assets, they end up with lower overall tax rates than a lot of everyday, working people.
But if the 2020 candidate really wants to tackle inequality, there are a few other points that he needs to grapple with.
First, inequality is not just a negative outcome of our broken system, it is itself a key contributor to the problem. Extreme inequality of income and wealth, along with the massive concentrations of power that come with it, are themselves a drag on the overall economy, siphoning opportunity and prosperity away from the vast majority of people. In numerous ways, inequality acts as a form of economic pollution, seeping into everything and making the economy sick. According to the most cutting edge research, inequality makes bubbles more likely, it undermines the foundations for innovation and productivity and it weakens and destabilizes consumer demand. At a very big picture level, more inequality leads to less overall growth.
Bloomberg would do well to incorporate these insights into his own thinking about the issue. They support his own declared intention to make combating inequality a top priority and he can fairly characterize his efforts as being not only morally right, but economically right as well.
The second big thing that Bloomberg misses about inequality is that, while bad tax policy has been an important contributing factor, it isn’t the only one. Our economy is suffering right now from excessive concentrations of power in the hands of a relative few, facilitated by, yes, tax policy, but also antitrust policy, labor policy and more. For the last forty years, federal policy has largely encouraged and exacerbated the formation of these large concentrations of private power.
For example, in the past, one important counterweight to the influence and power of corporate CEOs was organized workers themselves. By coming together and bargaining as a unit, they could ensure that the benefits of their hard work weren’t siphoned away by executives and large shareholders, and in so doing ensure that hard work, ingenuity and productivity were properly rewarded. Unfortunately, labor unions have been under unrelenting attack which has been aided and abetted by changes in federal labor policy, making them far less able to counteract the power of corporate CEOs. It’s no wonder, then, that as fewer and fewer workers belong to unions, the share of national income going to the middle class has declined in near lockstep.
Fundamentally, an effective policy agenda to rebalance our economy and “fix” inequality will require a dramatic shift away from the private concentrations of power that pervade the economy and our democracy in favor of putting power back in the hands of everyday people. The simple, but dangerous, fact is that private concentrations of power are self-reinforcing and corrosive to both our economy and our democracy.
And ironically, Bloomberg himself provides us evidence for how such concentrations of private wealth can affect our democracy. That Bloomberg has the capacity to spend over $400 million of his own personal fortune in a few short months of campaigning is a testament to just how rigged toward the uber-wealthy the system is, across the board.
It’s a good thing that Bloomberg wants to make fixing inequality a top priority. But it would be a strange quirk of history if the only way to address extreme inequality is by relying on one of its most famous beneficiaries.
Michael Linden is the executive director of Groundwork Collaborative, a Washington, D.C.-based organization that advocates for a more progressive economic worldview. Linden is also a fellow at the Roosevelt Institute.