The Conscience of a Liberal

1. America's economic inequality has returned to Gilded Age levels

America in the 1950s was a middle-class society, to a far greater extent than it had been in the 1920s—or than it is today.

Income concentration at the top. Since the 1970s, income inequality in the United States has sharply increased, reaching levels not seen since the 1920s. The top 1% of earners have captured a disproportionate share of economic growth, while middle-class and lower-income wages have stagnated.

Erosion of middle-class prosperity. This trend has led to:

• Stagnant or declining real wages for most workers
• Increased economic insecurity for many families
• Growing wealth gap between the rich and the rest of society
• Reduced social mobility and equality of opportunity

Consequences of high inequality:

• Strain on social cohesion and democratic institutions
• Increased political polarization
• Reduced economic growth due to decreased consumer spending
• Heightened social tensions and potential for unrest

2. The Great Compression created a middle-class society post-WWII

The Great Compression in itself—or more accurately, its persistence—makes a good case for the crucial role of social forces as opposed to the invisible hand in determining income distribution.

Policies drove equality. The Great Compression, occurring from the 1930s to 1970s, dramatically reduced income inequality through:

• Progressive taxation
• Strengthened labor unions
• Increased minimum wages
• Expanded social programs

Middle-class prosperity. This period saw:

• Broad-based economic growth
• Rising living standards for most Americans
• Reduced gaps between rich and poor
• Increased social mobility

Political consensus. The era was marked by:

• Bipartisan support for many New Deal policies
• Acceptance of a larger government role in the economy
• Reduced political polarization
• Belief in shared economic progress

3. Movement conservatism reshaped American politics since the 1970s

Movement conservatism as a powerful political force is unique to the United States.

Ideological shift. Movement conservatism emerged as a response to the New Deal consensus, advocating for:

• Lower taxes, especially for high earners
• Reduced government regulation
• Skepticism towards social welfare programs
• Free-market solutions to social problems

Institutional network. The movement built a powerful infrastructure including:

• Think tanks (e.g., Heritage Foundation, Cato Institute)
• Media outlets (e.g., Fox News, conservative talk radio)
• Advocacy groups and political action committees
• Academic and intellectual supporters

Political dominance. Movement conservatism achieved significant political success by:

• Capturing control of the Republican Party
• Winning multiple presidential elections
• Shifting the overall political discourse to the right
• Implementing policies that increased economic inequality

4. Race and cultural issues have been exploited for political gain

Southern whites started voting Republican.

Southern strategy. Republicans, particularly since the 1960s, have used racial appeals to attract white voters, especially in the South:

• Opposing civil rights legislation
• Criticizing welfare programs
• Emphasizing "law and order" rhetoric
• Using coded language to appeal to racial anxieties

Cultural wedge issues. Conservative politicians have also leveraged cultural issues to gain support:

• Opposition to abortion rights
• Resistance to LGBTQ+ rights
• Emphasis on traditional family values
• Appeals to religious conservatives

Impact on policy. This strategy has allowed conservatives to:

• Win elections despite unpopular economic policies
• Shift focus away from economic inequality
• Create a durable political coalition
• Implement policies that often work against the economic interests of their supporters

5. The U.S. healthcare system is inefficient and leaves millions uninsured

The United States spends almost twice as much on health care per person as Canada, France, and Germany, almost two and a half times as much as Britain—yet our life expectancy is at the bottom of the pack.

Inefficient and unequal. The U.S. healthcare system is characterized by:

• High costs without correspondingly better outcomes
• Millions of uninsured or underinsured Americans
• Complex and fragmented insurance system
• High administrative costs due to multiple payers

Comparison to other countries. Unlike other developed nations, the U.S.:

• Lacks universal health coverage
• Spends more on healthcare as a percentage of GDP
• Has worse health outcomes on many measures
• Allows significant disparities in access to care

Economic impact. The current system:

• Burdens businesses with high employee health costs
• Contributes to personal bankruptcies due to medical bills
• Reduces economic mobility and entrepreneurship
• Diverts resources from other economic priorities

6. Universal healthcare is both morally right and economically beneficial

Health care reform is the natural centerpiece of a new New Deal.

Moral imperative. Universal healthcare is justified on ethical grounds:

• Ensures basic human right to health
• Reduces suffering and preventable deaths
• Promotes equality of opportunity
• Reflects societal values of compassion and fairness

Economic benefits. A well-designed universal system could:

• Reduce overall healthcare spending
• Improve public health and workforce productivity
• Eliminate job lock and promote entrepreneurship
• Reduce administrative costs and inefficiencies

Political opportunity. Implementing universal healthcare could:

• Address a top concern for many voters
• Demonstrate the effectiveness of government action
• Build support for other progressive policies
• Create a lasting political legacy

7. Reducing inequality requires both market and aftermarket policies

One way to reduce inequality in America is to do more of this: to expand and improve our aftermarket policies, which take the inequality of market income as given but act to reduce its impact.

Market policies. These address inequality at its source:

• Strengthening labor unions and collective bargaining
• Raising minimum wages and promoting living wages
• Regulating executive compensation
• Promoting competition and reducing monopoly power

Aftermarket policies. These redistribute income after market forces:

• Progressive taxation
• Social insurance programs (e.g., unemployment insurance)
• Public assistance for low-income families
• Universal public services (e.g., education, healthcare)

Balanced approach. Effective inequality reduction requires:

• Combining both market and aftermarket policies
• Addressing both pre-tax and post-tax inequality
• Considering short-term relief and long-term structural changes
• Balancing economic efficiency with social equity

8. Higher taxes on the wealthy can fund a stronger social safety net

Suppose we agree that the United States should become more like other advanced countries, whose tax and benefit systems do much more than ours to reduce inequality.

Restoring progressivity. Increasing taxes on high earners could involve:

• Letting Bush-era tax cuts expire for top income brackets
• Raising capital gains tax rates
• Eliminating loopholes that benefit the wealthy
• Implementing a more progressive estate tax

Revenue potential. Higher taxes on the wealthy could fund:

• Universal healthcare
• Expanded education and job training programs
• Improved infrastructure
• Stronger social safety net programs

International comparison. U.S. tax rates on high earners are lower than:

• Historical U.S. rates during periods of greater equality
• Current rates in many other developed countries
• Levels needed to significantly reduce inequality

Political challenges. Implementing higher taxes on the wealthy requires:

• Overcoming opposition from well-funded interest groups
• Shifting public opinion on the role of government
• Building a broad political coalition for reform
• Demonstrating the benefits of increased public investment

Last updated: October 2, 2024