Helping the Middle Class

Economist and ex-Harvard president Larry Summers has an LA Times piece on how to play “win-win” with the middle class:

If the new Congress sees itself as having any kind of economic mandate, it is for policies that "stand up" for ordinary Americans against the perceived threat from corporate and moneyed interests. . .

Although workers have normally received about three-quarters of corporate income, with the remainder going to profits and interest, labor has received only about one-quarter of the increase in corporate income since 2001. . . ordinary American families do not feel like they are in the same boat as corporations and their chief executives, or even able to benefit from the same rising tides.

. . . populist economic policies . . . rarely achieve their objectives but incur huge collateral costs. Policymakers forget at their peril that globalization has enabled the U.S. economy to enjoy the very favorable combination of low unemployment and low inflation, and that without open markets, product prices would be rising much faster than they are, making living standards even worse for middle-class families.

[Find] policies that complement the market system while responding to fairness concerns. [Restore] the progressivity of the tax system — where much can be accomplished without changing the rate structure.

[Don’t] audit disproportionately the tax returns of those in the bottom half of the income scale at a time when most of the $500-billion tax gap comes from those with high incomes.

There is no policy justification for allowing the corporate income tax to be eroded through the pervasive use of tax shelters and the manipulation of transfer-price rules. Not only does this cost the government revenue, it puts unfair competitive pressure on firms that try to meet their obligations to their workers and their country.

[Also:] disclosing executive compensation, leveraging the volume of government purchases, making the financing of education more equitable, finding ways to assure that businesses continue to take responsibility for the healthcare costs of their workers . . .

President Kennedy famously challenged Americans: "Ask not what your country can do for you. Ask what you can do for your country." In the years ahead, this question will be put with increasing force to American corporations.