Building a just social democracy takes money. Do Democrats have the political courage to pay for it?
As low-hanging fruit in the tax code disappears, Democrats face a bind.
The Democrats have a problem. The party wants to expand government spending to help middle- and lower-class Americans. But as the 529 accounts debacle recently showed, getting the needed revenue will be exceedingly difficult. The ranks of the super-wealthy are too small to provide the money, and the upper class is hellbent against paying higher taxes.
Thomas Edsall laid out the problem in particularly stark terms in The New York Times. The percentage of Americans making over six figures — a good proximate for the upper class — has grown substantially in recent years. They now make up almost a third of the voting public, and in recent years more of them have been defecting from the GOP to the Democratic Party.
The problem is they’re largely defecting over social issues, not economic ones. Like their well-heeled Republican brethren, they remain leery of tax increases or high spending. The GOP still depends more on the upper class to fill out their coalition, but the Democrats’ reliance has grown considerably from 20 or 30 years ago. So along with standard external opposition to its economic populism, the party is facing increasing internal opposition as well.
Can Democrats overcome this opposition to fulfill their vision of a just social-democratic state?
What’s especially important to note is the role inequality plays here. Think of it as a “bell curve" economy versus an “hourglass” economy. In the bell-curve economy, the bulk of the population is clustered around a median income — the peak of the bell. And the “tails” of the curve — those making substantially more and substantially less than the majority — are small.
This sort of distribution comes with all sorts of positive effects. The number of people in truly desperate need of government aid are few, which keeps spending down. People who are taxed are more likely to also benefit from government programs, and thus see what they’re getting for their money. And even if they don't directly benefit from government spending, the people paying the taxes are in close social and economic proximity with those who do — they’re all more likely to work at the same firms, live in the same neighborhoods, go to the same churches, send their kids to the same schools, etc. Social distance is at a minimum, and empathy and solidarity are at a maximum.
But in the hourglass economy all of this breaks down. The population is concentrated in two “bulbs” at the high end and low end of income distribution, which occupy mutually alien social and economic worlds. One pays most of the taxes but needs little if any (explicit) government help, while the other needs most of the help but can’t afford to pay much of the taxes. They don’t live in the same neighborhoods or run in the same circles, and thus fail to put themselves in the others’ shoes.
The problem is that one of these bulbs — the high-end one — has far more clout in our political system, and is far more able to shape policy towards what it wants. And as the hourglass trend becomes more acute, that asymmetry gets worse.
This is where we’re headed. The upper class is growing, but the middle class isn't filling in behind it. The distribution of Americans along the income spectrum isn't clustering; it's splitting. That’s building a wall in terms of what's politically possible, and eventually the Democratic goal of pushing the country towards more social democracy is going to run smack into it.
A huge part of the conundrum facing Democrats can be traced to the Bush tax cuts in the early 2000s. So far we’ve only been able to restore the tiny portion of those rates that apply to families making over $450,000 — less than the top one percent. Clawing back the rest of that revenue will require raising taxes further down the income distribution, which has so far proven politically impossible.
Meanwhile, Medicare and Social Security — traditionally impervious to cuts — will become more vulnerable as inequality grows. The upper class needs Medicare and Social Security far less than poorer Americans, and eventually the wealthy will be happy to whittle the programs down — a spending formula adjustment here, a benefit cut there — to avoid having their taxes raised.
When conservative writers point out this looming problem, they do so with smug schadenfreude. But Edsall appropriately regards it with grim trepidation: we’re talking about the possible death of America’s capacity to be a just and compassionate society.
The question is, can we break out of this spiral? Maybe. We have the budgetary wiggle room and the policy tools. But they'll mean tax increases or big-time deficit spending or other policy changes to shove the economy back towards the bell curve. And both those options will require mass mobilizations of disaffected and forgotten Americans against the upper class and the wealthy.
A slow slide into an oligarchical world of hourglass economies and small and ragged social safety nets seems equally probable.