Political momentum on the left for such an effort must face the reality of legal obstacles, particularly from the Supreme Court.Proponents concerned about the wealth gap instead must come up with policies that have the effect of disproportionately building wealth for African-Americans, without singling them out.
“There are ways that you can craft legislation that essentially gets at this effect,” Ms. Baradaran said. “Look at how much legislation we have that gets at the opposite effect.”
Policies like the mortgage interest deduction, for example, disproportionately benefit white families, who are more likely to own homes. So do tax advantages for the rich, who are more likely to be white. Even federal investments in seemingly race-neutral infrastructure like the Interstate Highway System had this effect by enabling the development of all-white suburbs in an era of legal discrimination.
Wealth-building proposals today are trying to engineer a similar if opposite outcome. That makes the details thorny.
“The first and most efficient approach is targeting relief to the people who were targeted with discrimination,” said Dorothy Brown, a law professor at Emory University. “If we can’t get there, then we have to go to next best.”
Ms. Warren’s strategy, she said, is a clever workaround. Rather than specifying African-Americans, Ms. Warren’s bill would target specific neighborhoods where African-Americans harmed by the legacy of lending discrimination are likely to live.
Other researchers argue that a program based on neighborhoods redlined in the 1930s would be too narrow; most African-Americans who buy homes aren’t purchasing in such neighborhoods today (and in some cities, middle-income whites are).
But the kind of neighborhood criteria Ms. Warren has in mind could be one model. Ms. Brown proposes identifying neighborhoods with the least household wealth and allowing tax breaks associated with homeownership, like the mortgage deduction, only to people who live there.
Mr. Booker’s proposal would give $1,000 in a government savings fund to every newborn in America, for use later in adulthood. But the government would seed more money into that fund each year according to a family’s income, giving the most to children in the poorest families. That money could then be spent in adulthood on education, buying a home or starting a business.
“Ultimately, assets give people agency in their lives,” said Darrick Hamilton, director of the Kirwan Institute for the Study of Race and Ethnicity at Ohio State University. His work on the baby bonds concept informed Mr. Booker’s proposal. “Assets give people the ability to make decisions,” he said, “to have choice and have freedom and self-determination.”
Robert Reich debunks 12 misconceptions about tax policy in America.
Those decades of free-market machinations are now paying off, as a quintet of Ronald Reagan administration alumni — Kudlow, Laffer, Forbes, Moore and David Malpass—united by undying affection for each other and for laissez-faire economics, have the run of Washington once more. Members of the tight-knit group have shaped Trump’s signature tax cut, helped install each other in posts with vast influence over the global economy, and are working to channel Trump’s mercantilist instincts into pro-trade policies. Blasted by their critics as charlatans and lauded by their acolytes as tireless champions of prosperity, there’s no denying that the quintet has had an enduring impact on decades of economic policy.
Most recently, in late March, and partly at Kudlow’s urging, Trump announced his intention to nominate Moore to one of two open seats on the Federal Reserve Board of Governors, the body that sets the tempo of the global financial system.
The announcement prompted protests from economists across the ideological spectrum—George W. Bush’s top economist, Harvard’s Gregory Mankiw, said Moore lacked the “intellectual gravitas” for the job—who warned that appointing Moore, a think-tanker with no Ph.D., would politicize the Fed. Soon, it emerged that Moore had made a mistake on a 2014 tax return that led the IRS to place a disputed $75,000 lien against him, and CNN dug up scathing comments Moore had made about Trump during the presidential primary.
Whether Moore can survive the scrutiny and pass muster with the Senate will be a test of the supply-siders’ renewed cachet. They believe they can pull it off.
“I understand there are imperfections,” Kudlow told POLITICO. “I think it can be worked out.”
Moore described some of his recent conversations with Trump, which often turn to Fed Chairman Jerome Powell.
“I think his criticism of Powell is excessive and could be counterproductive,” Moore said, because it could actually provoke Powell to prove his independence by defying Trump’s wishes. Generally speaking, Trump wants Powell to keep interest rates low to decrease the chances of any economic slump before the president faces voters again next November.
Moore also recounted how he and Laffer, who began advising Trump in 2016, helped place Kudlow in his current posting.
Roughly a year into Trump’s term, as Trump’s first NEC director, Gary Cohn, prepared to depart the post, the duo sprang into action. Moore said that during this period, whenever he and Laffer engaged in their semiregular consultations with Trump, they would have some version of the following exchange:
“You know, Mr. President, you’re missing one thing,” Laffer or Moore would say.
“What is that?” Trump would ask.
“Larry Kudlow,” Laffer or Moore would tell him.
“We just drilled the message over and over,” Moore recalled. “‘Larry, Larry, Larry, Larry.’”
During that same period, following the 1974 midterms, Laffer first drewhis famous Laffer Curve — a representation of the idea that at a certain level of taxation, lowering taxes would theoretically spur enough growth that government revenue would actually rise—at a meeting near the White House with Wanniski, Dick Cheney, then an aide to President Gerald Ford, and Grace-Marie Arnett, another free marketeer active in Republican politics.
Reagan would go on to fully embrace supply-side theory, a shift from the party’s traditional emphasis on fiscal discipline, appointing Laffer to his Economic Policy Advisory Board.
Then as now, supply-side economics was criticized for favoring the rich and derided by critics as unrealistic “Voodoo Economics.” The critics got an early boost from a 1981 Atlantic cover story in which Reagan’s budget director, David Stockman, aired his doubts that this novel theory was working in practice.
The piece ruined Stockman’s standing with Reagan—Laffer calls him “the traitor of all traitors”—but Stockman’s young aide, Kudlow, now 71, remained a loyal supply-sider and struck up a relationship with Laffer.
Reagan would go on to appoint Forbes as the head of the Board of International Broadcasting, which oversaw Radio Liberty and Radio Free Europe, and Moore worked as the research director for Reagan’s privatization commission. Malpass, meanwhile, worked in Reagan’s Treasury department. Representatives for Forbes and Malpass said they were not available for interviews.
In the 1988 presidential primary, another supply-sider, the late New York congressman Jack Kemp, lost out to George H.W. Bush, curtailing the crew’s influence within the party.
But they stuck together. Moore, now 59, first became close with Laffer and Kudlow in 1991, after he recruited them to participate in an event celebrating the 10-year anniversary of Reagan’s first tax cuts for the libertarian Cato Institute.
In 1993, Kudlow and Forbes teamed up to craft a tax cut plan for New Jersey gubernatorial candidate Christine Todd Whitman, who went on to unseat incumbent Democrat James Florio.
Meanwhile, Kudlow hired Malpass to work for him at Bear Stearns, where he had been flying high as the investment bank’s chief economist.
The next year, Kudlow crashed to earth—he left the bank and entered rehab for alcohol and cocaine addiction. Laffer stuck by Kudlow, hiring the investment banker to work for his consulting firm in California when he emerged.
In 1996, Forbes, backed by Moore, entered the Republican primary and lost out to Bob Dole, but the group takes credit for getting Kemp picked for the bottom half of that year’s ticket, which lost to incumbent Bill Clinton.
And they have not stopped partying since. Members of the group have continued to actively socialize with each other over the decades, with some spending New Year’s eves together. At one birthday party for Laffer in New York, they presented the aging economist with a signed poster of the Jedi master Yoda. “I’m short, a little bit fat. I’ve got big, green ears,” Laffer explained. “I look sort of like Yoda.”
In 2015, Forbes, Laffer, Kudlow and Moore created the Committee to Unleash Prosperity, a group intended in part to counter the emergence of the “Reformicons,” a rival gang of Republican eggheads who felt the party had gone too far in the direction of laissez-faire policies favoring the rich.
Among the other 29 committee members listed in a press release were both Malpasses, Kevin Hassett, now chairman of Trump’s Council of Economic Advisers, and Andy Puzder, who was Trump’s initial pick for labor secretary until allegations of domestic abuse unearthed by POLITICO derailed his nomination.
The group sought, with considerable success, to vet Republican presidential candidates for their supply-side credentials and to influence their platforms, holding large private dinners at Manhattan venues such as the Four Seasons and the 21 Club, so that committee members and other notable invitees—like Rudy Giuliani and Roger Ailes—could feel out the candidates.
Before meeting with the larger group, candidates would huddle with the committee’s founders to receive economic tutorials. Or in the case of Ohio Governor John Kasich, to give one. “We were all sitting there, and he would talk for an hour,” Moore recalled. “We’re like, ‘No, we’re supposed to be talking to you,’ and he’s talking to us.” Moore called the episode “Classic John Kasich.”
Though the events were supposed to be off the record, journalists often attended, and an otherwise lackluster February 2015 dinner for Wisconsin Governor Scott Walker made headlines when Giuliani barged in, proclaimed he did not believe that President Barack Obama “loves America,” and insisted a POLITICO reporter could print the quote.
The very rich are richer than people imagine.
A peculiar chapter in the 2020 presidential race ended Monday, when Bernie Sanders, after months of foot-dragging, finally released his tax returns. The odd thing was that the returns appear to be perfectly innocuous. So what was all that about?
The answer seems to be that Sanders got a lot of book royalties after the 2016 campaign, and was afraid that revealing this fact would produce headlines mocking him for now being part of the 1 Percent. Indeed, some journalists did try to make his income an issue.
This line of attack is, however, deeply stupid. Politicians who support policies that would raise their own taxes and strengthen a social safety net they’re unlikely to need aren’t being hypocrites; if anything, they’re demonstrating their civic virtue.
But failure to understand what hypocrisy means isn’t the only way our discourse about politics and inequality goes off the rails. The catchphrase “the 1 Percent” has also become a problem, obscuring the nature of class in 21st-century America.
Focusing on the top percentile of the income distribution was originally intended as a corrective to the comforting but false notion that growing inequality was mainly about a rising payoff to education. The reality is that over the past few decades the typical college graduate has seen only modest gains, with the big money going to a small group at the top. Talking about “the 1 Percent” was shorthand for acknowledging this reality, and tying that reality to readily available data.
But putting Bernie Sanders and the Koch brothers in the same class is obviously getting things wrong in a different way.
True, there’s a huge difference between being affluent enough that you don’t have to worry much about money and living with the financial insecurity that afflicts many Americans who consider themselves middle class. According to the Federal Reserve, 40 percent of U.S. adults don’t have enough cash to meet a $400 emergency expense; a much larger number of Americans would be severely strained by the kinds of costs that routinely arise when, say, illness strikes, even for those who have health insurance.
So if you have an income high enough that you can
- easily afford health care and good housing,
- have plenty of liquid assets and
- find it hard to imagine ever needing food stamps,
you’re part of a privileged minority.
But there’s also a big difference between being affluent, even very affluent, and having the kind of wealth that puts you in a completely separate social universe. It’s a difference summed up three decades ago in the movie “Wall Street,” when Gordon Gekko mocks the limited ambitions of someone who just wants to be “a $400,000-a-year working Wall Street stiff flying first class and being comfortable.”
Even now, most Americans don’t seem to realize just how rich today’s rich are. At a recent event, my CUNY colleague Janet Gornick was greeted with disbelief when she mentioned in passing that the top 25 hedge fund managers make an average of $850 million a year. But her number was correct.
One survey found that Americans, on average, think that corporate C.E.O.s are paid about 30 times as much as ordinary workers, which hasn’t been true since the 1970s. These days the ratio is more like 300 to 1.
Why should we care about the very rich? It’s not about envy, it’s about oligarchy.
With great wealth comes both great power and a separation from the concerns of ordinary citizens. What the very rich want, they often get; but what they want is often harmful to the rest of the nation. There are some public-spirited billionaires, some very wealthy liberals. But they aren’t typical of their class.
The very rich
- don’t need Medicare or
- Social Security; they don’t use
- public education or
- public transit; they
- may not even be that reliant on public roads (there are helicopters, after all).
Meanwhile, they don’t want to pay taxes.
Sure enough, and contrary to popular belief, billionaires mostly (although often stealthily) wield their political power on behalf of tax cuts at the top, a weaker safety net and deregulation. And financial support from the very rich is the most important force sustaining the extremist right-wing politics that now dominates the Republican Party.
That’s why it’s important to understand who we mean when we talk about the very rich. It’s not doctors, lawyers or, yes, authors, some of whom make it into “the 1 Percent.” It’s a much more rarefied social stratum.