COMMENTS: What's Ahead for America? A Case for Economic Redistribution
Tyler, Gus
A Case for Economic Redistribution Among all the uncertainties of current politics in America, one event—I think—is certain. In the elections of 1986 the Democrats will score a victory: they...
...The minimum wage, pop opinion has it, is "inflationary" and bad for young workers who get priced out of the market...
...The old gadfly warned of the turmoil to follow: "Whenever you see paupers in a state, somewhere in that neighborhood there are hidden away thieves and cutpurses and robbers of temples, and all sorts of malefactors...
...138 It won't be easy for the Democratic party, as a whole, to accept this attitude...
...but he did them...
...These measures were (a) to cut taxes so that consumers would have more to spend...
...The seers will see significance in this...
...they were still spilling their spleen two years later in the midterm to increase Democratic strength in Congress...
...the Marxists and neo-Marxists have not outright assailed Keynes but have been playing a waiting game, counting on the time when capitalism will reject Keynes, and the "final conflict" ensues...
...The answer is to run the economy at maximum capacity...
...they want a reborn liberalism...
...Reagan cut taxes...
...In the light of all this history, we must conclude that the victory the Democrats score in 1986 will, in and of itself, tell us nothing about just what it is the American people are mandating...
...If there is going to be any tax reform, the most important consideration—far more important than simplicity and the amount collected—must be tax equity...
...To them, the "special interests" are welfare mothers, union members, auto workers asking for domestic content, farmers seeking subsidies, families on Food Stamps, and, occasionally, some hard-hit corporation— provided it is not their employer or client...
...I will have forgone the chance to say: "The people have spoken...
...Tax policy should be directed toward creating more capital, not more consumption...
...Both liberals and radicals, however, in their daily struggles have worked for a more equitable distribution of income...
...Traditionally, the Democrats have been the party of the people—and they still are...
...It strengthens employment, maintains America's industrial brawn without which we cannot continue to be a serious power in world politics, and also checks the drift of once well-paid smokestack workers into the service 137 economy where, on the average, their wages are halved...
...Such 135 myths are useful and, since I am both a partisan and an activist, I will undoubtedly someday regret that I debunked in advance the meaning of the Democratic triumph in '86...
...Wealth and poverty," says Socrates in The Republic, "the one is the parent of luxury and indolence, and the other of meanness and viciousness, and both of discontent...
...Of the growth in national income (and there was growth), wages, normally comprising 57 percent of national income, fell to 50 percent...
...The likelihood is that, in pursuit of votes, many Democrats will take on the coloration of Yuppiedom...
...Keynes himself was forthright on this: the two inherent faults in capitalism were its repeated relapses into depressions and its irrational and inequitable division of wealth...
...And when the Democrats win in 1986, they will be confirmed in their belief that the party does best when it is more conservative...
...The social consequences of this, today, are what they were in the time of Plato...
...Liberals and radicals, in the light of Keynes or Marx, know that...
...How can we afford this last item at a time when we are running $200 billion deficits annually...
...Add to their power at the polls their power to persuade, and they are a formidable factor...
...Keynes said that it was possible, with proper governmental intervention, to save capitalism from itself...
...The drop in the price of oil—because of a world glut—also helped...
...America cannot afford to run the kind of trade deficits it has been incurring in the last several years...
...In a review of the way income was distributed in 1984, Joseph W. Duncan, corporate economist of DunBradstreet Corp...
...Today that floor has sunk and is sinking...
...They are no mean political force: they are articulate, wellheeled, and active voters...
...In 1984, these "small-business" proprietors saw their share of the national growth in income actually double...
...The folks who hold these notions dear, having in many instances invented the argument to begin with, are in that upper one-third of the nation who have been doing affluently these days...
...he loosened the money supply...
...And for many decades "redistribution"—some philosophers called it "distributive justice"—was the core of the progressive push in America...
...The push has to come from the "outside," from those who are in the mainstream of the Democratic party electorate but will see beyond the next election, and will press for programs for the coming decade and the new century...
...If the Democrats, however, were to step back and objectively view Reagan's primary economic policies, they would find that Reagan is immersed in Keynes up to his keester...
...Between 1950 and 1968, the minimum was adjusted regularly to represent 50 or more percent of the average...
...That "natural" rate of unemployment costs Uncle Sam $180 billion a year in lost revenue and unemploymentrelated costs...
...Unwittingly they have turned definitions topsyturvy: once the affluent were the "special interests" and the nonaffluent were "the people," the embodiment of the common weal...
...The Great Depression was so traumatic that the voters were not content to vote against Hoover in 1932 alone...
...But even those who think of themselves as Keynesians have, in recent years, devoted themselves to only one-half of his program—governmental measures, fiscal and monetary, to stimulate the economy when it fell into a slump...
...But by the end of 1982 lowered interest rates and bigger deficits turned the trick...
...Put simply, growth in the first half of 1984 was about 8.5 percent...
...This ailment hits a party when it has been in the White House for two consecutive terms...
...This requires dimensions that go beyond the simple Keynesian formula of pump-priming...
...The only exception to this rule—it proves the rule—is 1934, Roosevelt's first midterm election...
...And they have been wearing off during 1984 as maldistribution became more malicious...
...And if it is not what's good for the country, it would be most unfortunate if the Democrats believed that their victory in 1986 was wrought by their informed virtue and not by the luck of the draw...
...There are millions of women, teenagers, and older people— not now active in the labor market—who would become active job-seekers once the economy offered openings...
...and former chief statistician of the Office of Management and Budget, notes that a smaller share went to wages and a bigger share to interest and proprietors...
...The reason...
...others will attribute the result to a Democratic shift to the right...
...Its seeming substitute"fairness"—is vague and understood by different groups (women, minorities, illegal aliens, immigrants, seniors, juniors) in as many ways as there are subcultures in the nation...
...in the second half it was about 2.2 percent...
...Infrastructure" and "environment" are chores for the locals...
...Because of this, it would be unrealistic to expect that the progressive push—in ideas and ideology, in popularization and propaganda—will come from the Democratic party per se, any more than the New Deal came from the Jim Farleys of 1933...
...they will attach some special interpretation to that...
...Indeed, on that last point, this one-third may cast as many votes on Election Day as the other two-thirds...
...He did all these things for the wrong reasons...
...second, an industrial policy that consciously encourages the flow of capital to the modernization of obsolescent sectors of the manufacturing economy...
...But just what the Democrats will be doing between now and the day after the midterm election is not necessarily what America needs...
...For 1986 will be no usual midterm election...
...In Democratic ranks, at the moment, the prevailing posture is that if the country wants what Reagan wants, then the Democrats must act more like Reagan...
...An equitable redistribution—more for the twothirds and less to the one-third—is desirable for sound economic, as well as ethical, reasons...
...This does not mean that the country must necessarily fall into a recession (depression) in 1985 or even 1986...
...To reverse this trend should be at the very top of the Democratic agenda...
...But, setting aside considerations of civic virtue and social peace, our present nialdistribution is economically perilous...
...The other half of the program— redistributing the income so that there would be a natural market for the economy, so that government would not have to run up indebtedness too often—has been neglected, indeed forgotten...
...Such a dual and complementary policy—the secret of most of Japan's success—serves three purposes...
...Now the word has gone out of fashion...
...it will be a special variant of the midterm phenomenon—the sixth-year slump...
...By 1970, the debt had risen to $192 billion, but the economy had grown so prodigiously that the debt was only 19 percent of GNP...
...In the midterm of the second term (the sixth year in power), the party in the White House gets hit hard, harder than in a run-of-the-mill midterm...
...Then, in the '70s, came inflation without adjustment in the minimum wage...
...c) to have the state borrow money and spend it to prop up the market (demand) that was momentarily lacking...
...But to the extent that there are current pressures on the party, they are the pressures of the nouveaux and would-be rich—pushing to the "right...
...Those who are hostile to the Administration, driven by hate and fear, turn out in relatively greater numbers...
...In this century, in every midterm election, the party in the White House lost seats in Congress...
...The symptoms of a coming recession (depression) are already here—as any Keynesian who did not forget the second part of the theorem should suspect...
...he went in for deficit spending with an abandon hitherto unknown...
...The year is not 1932, when the American economy was a nearautarchy, when such words as "environment" and "infrastructure" were not part of our political lexicon, when federal income taxes were negligible for individuals, and when corporations were actually shouldering a huge chunk of the tax burden...
...In 1932 the federal debt was $22 billion, the GNP $55 billion...
...So naysayers, in midterm elections, have an edge over yeasayers...
...Although some of them come out of the revolutionary '60s, they have been cooled in "the big chill" and won't be easy to thaw...
...Our present "structural deficit" assumes that "full-employment" is defined as 6 percent unemployment...
...Equity" means ownership in the accountant's sense, not justice in the philosopher's sense...
...Having written this, my first impulse is to strike out everything I have said so far and to invent a myth in which I foretell the defeat of the Republican party in 1986 because the American people will have come to their senses, and, fed up with the governing of Ronald Reagan, will give a mandate to pursue a progressive political course...
...and proprietors' income, normally making up 5 percent of the national income, rose to 10 percent...
...In recent years, 57 percent of all national income came from wages and salaries...
...The recurrent proof of this psychopolitical law is the "midterm phenomenon" in America...
...Analysts who seek more specific explanations will point to some Reagan gaffe, a recession (if there is one), the leadership of Tip O'Neill, a surge of political action by unions, a backlash against the Moral Majority, an uprising of women, the skills of the new chair of the Democratic National Committee, and so on...
...Guiding any capital flow is "socialist" planning...
...A caveat: spending alone won't do it...
...WHAT THE COUNTRY NEEDS is a redistribution of income...
...To return to something resembling a balance, America must pursue two parallel strategies: first, regulation of trade—multilateral, if possible, but unilateral if necessary...
...More precisely, it needs a reversal of the present redistribution that has enriched the top one-third and has depressed the lower two-thirds...
...And this is not the limit...
...The reelection of Reagan has put a silence on any remaining talk of redistribution...
...It's not in their short-term self-interest to "redistribute...
...Any tax reform that perpetuates the present unfair tax system endangers the total economy...
...But there may be no more significance to this "above-average" gain than there is to the usual midterm "victory...
...Without a more equitable redistribution of income these stimulants—that's what they are—will wear off...
...He pressured the Federal Reserve Board into lowering interest rates and allowing the money supply to expand beyond target levels, because he needed an upbeat economy for the 1984 election...
...People who love the party in power are confident that as long as their man is in the White House all will be well with their beloved country...
...each is a sine qua non of future policy...
...The debt was 40 percent of GNP Then came years of "spending," wars against countries over there and wars against poverty over here...
...Those Keynesian stimulants have lost little of their virility...
...In practice, modern liberalism has been Keynesian...
...For whatever it is that I—and others—may say after the Democratic victory in 1986, the official voices of the Democratic party will announce that the Democrats must have been doing something right to win the election and that the party will hold the course...
...Capitalism is a market economy...
...by the third quarter it was down to 1.6 percent, and by the fourth quarter—with a big Christmas markdown on prices to get rid of overstuffed inventories— to about 3 percent...
...workers did worse...
...Updating the minimum wage is the third item on this economic agenda...
...For many years this "floor," running at about 50 percent of the average hourly wage, was the "safety net" for millions of American workers...
...interest, normally comprising 14 percent of national income, rose to 22 percent...
...yes, there is more poverty—both the number and percentage of people in poverty have risen painfully...
...Now it eats about 13 percent, and it will soon take 20 percent...
...The base of that market is the 80 or so percent of the population that lives by wages and salaries...
...The first quarter of 1984 showed a 10 percent growth rate...
...Job opportunities—job preservation and expansion, with special emphasis on industrial employment— must be the second item on the economic agenda...
...He cut taxes to enrich the rich...
...In short, owners of businesses and substantial bank accounts did better...
...b) to loosen the money supply...
...Without it, the country will be hooked, an economic junkie in need of repeated injections of indebtedness...
...Regulating trade is "protectionism...
...Items One to Four of the agenda proposed above are not frills to suit our sensitive fancies...
...There will be, of course, a few politometricians— the modern numerologists—who will point out that the Democratic gains in 1986 exceeded the average gains in midterm elections...
...He borrowed and spent, because he wanted a big stick with which to beat the Bear...
...We don't mention "redistribution...
...In 1950, the minimum wage of 75' an hour was 54 percent of the average wage...
...If that base is weakened, the market is weakened—and so is our market economy...
...By 1983, the minimum had fallen to 41 percent of the average, and by November 1984 it was 39 percent—and is still falling...
...Some who measure mass moods will discover a "swing to the left...
...Not all of these are the traditional bourgeoisie nor even the petit-bourgeois shopkeeper...
...If Uncle Sam runs a federal deficit of $130 billion (once a powerful stimulant) and if an equal sum of $130 billion goes overseas to pay for our trade deficit, then the government is pouring its elixir into a leaky bucket...
...but to do so he sugarcoated the bill with an across-the-board cut...
...If the election was a mandate for him to go right on, why did the same electorate fail 136 to elect enough Republicans to give them control of the House, and why did the Democrats defeat enough Republicans to weaken their control of the Senate...
...Having turned this matter over in my mind— shall I speak a useless truth or spin a useful myth?—I decided to stick with the truth, less for ethical than for practical reasons...
...They relax, and fewer of them turn out on Election Day...
...We need action in both these areas to stay alive and offer millions of people an opportunity to make a living...
...Many are Yuppies, self-employed professionals, in medicine, accountancy, partners in law firms, hi-tech companies...
...While it is impossible, a priori, to deny the validity of any of these explanations, most of the Democratic victory will derive from a much more transcendental human trait: the predominance of hate over love in American elections...
...Fourth on the agenda is tackling our fractured infrastructure and what's ailing and polluted in our surroundings (the environment...
...Not good...
...Marx concluded that capitalism would, by its greedy exploitations, destroy its own market and commit suicide...
...Ethically, the fact of poverty (more of it) amidst plenty (more of it) is repulsive...
...But, in subsequent years, although FDR was reelected and reelected again, in the midterm elections his party lost seats in the legislature...
...In the elections of 1986 the Democrats will score a victory: they will increase their majority in the House of Representatives and will capture the Senate...
...In effect, wage-earning and salaried households will be taxed to pay off holders of Treasury notes—redistribution of income in the wrong direction...
...Beyond that, there were many other issues and emotional forces at work...
...But by the second quarter growth was down to about 7.5 percent...
...If the outsider-insiders do their work with diligence and intelligence, making a special effort to communicate with the congressional "freshmen" in their preelection gestation, the Democratic victory in 1986 may well be a victory for America...
...Although the current economic cliches of these nouveaux riches reflect the special interest of a special class, the members of this class—like those of all classes before them—think their opinions coincide with the needs of the nation...
...Up to recently, servicing the national debt ate up about 6 percent of the budget...
...Recovery was on the way...
...We are talking about that first half of the Keynesian theorem—the part that deals with stimulating the economy...
...THE PROGRAM we have adumbrated (there is much more), necessary as it may be, won't be easy to sell to the electorate right now...
...Yes, there is more plenty: average family income has risen...
...If we put the presently unemployed to work— the officially unemployed and the "discouraged" workers and the involuntary part-time workers— the savings to Uncle Sam would be in the vicinity of $300 billion...
...The tax cut alone didn't do it: 1981 and 1982 were recession, near-depression, years...
...Redistribution of our national income, as I have said, is the first item on this economic agenda...
...Yes, we can "spend" our way out of our hardships, we have done it before...
...But the Democratic interpretation of what the nation wants, or needs, as drawn from Reagan's reelection may be faulty, if Democrats hold that it was Reagan's economic conservatism that gave him his big vote...
...Reagan may yet double the dosages of Keynesian medicine...
...This mounting debt will become a major, and fairly novel, device for the redistribution of income from earners to owners, from taxpayers to holders of Treasury notes...
...Indeed, argues Duncan, the drop in labor's share of the national income in 1984 was caused, in part, by "a shift by workers who formerly had highpaying heavy industry jobs, into lower-paying positions in services...
...After all, if he got the biggest electoral vote ever, he must be doing something right and appealing...
Vol. 32 • April 1985 • No. 2
