The key election result this fall is the outcome for control of the Senate and the key to Democratic performance is voter turnout.
Democratic voters, I think, get depressed when things don't go their way, and stay home. Republican voters get angry and turn out to vote. The key is to get Democratic voters angry not depressed.
If you focus on the front pages of the newspaper (oh, I am sorry, I am now in the 5% of voters who still read newspapers) or rather the 30 second blurbs on television, you will think that the courts are about to kill ObamaCare and it is a done deal that the Republicans will win the Senate and force President Bush to cut taxes for the wealthy, maintain corporate welfare and balance the budget on the backs of the poor, in order to keep the government running.
But that is the key. Income inequality is complicated, as well as being a natural part of the economic scenery. What is unnatural is how much income inequality has increased. What is unnatural is how the GOP cannot see that without a thriving middle class, the U.S. will not have sufficient domestic demand for new things that generate economic growth. What is unnatural is how the GOP does not see that income inequality is a crisis for the middle class. Trickle down economics has failed.
Creating hope for the middle class is equally complicated but can be boiled down to a few points: there is no chance of raising up your children's circumstance without good healthcare and good education and there is no chance of reducing income inequality without a thriving middle class.
Turning around the effects of globalization and technology based improvements in productivity on the middle class without reducing the benefits that globalization and technology based improvements in productivity have brought for the economy as a whole is complicated and almost beyond my comprehension. And if it is beyond the comprehension of a University of Chicago M.B.A., it is beyond the comprehension of the masses. But that is what Congressional hearings are about, listening to really smart people of all political persuasions who focus on this stuff and have ideas. Out of that will come ideas.
But I suspect the key is tax reform. Simplifying tax returns by eliminating tax deductions and reducing tax rates. However, in doing so, the recharacterization of earned income as carried interest, and therefore a capital gain, must be eliminated. This is one of the greatest sources of influence that is creating income inequality. Beyond hedge fund and private equity guys who earn carried interest, there are all the highest paid employees of the corporate America who get most of their compensation in forms of stock that get capital gains treatment. All of this is taxed at 20%, not the top marginal rate of 39%. Now, you might want to still give capital gains some tax break, but it might be means tested like the GOP ideas for fixing entitlements (which by the way I agree with).
People who don't understand globalization do understand access to health insurance and a fair tax system that is aimed at reducing income inequality. Perhaps, corporations should get a lower tax rate, if they employ a higher percentage of their workforce in the United States. Say, there is a base corporate tax rate, with limited tax exemptions, of 25%. For every 10% of workers >50% employed in the U.S., you get a 1% reduction in your marginal tax rate to a lowest rate of 20%.
Combine that with a "Going to the Moon" focus on fixing our infrastructure and you have a plan for rebuilding the middle class.
Let me review the program.
People need access to affordable health insurance and good education.
The tax system must be fair and the current abuse of tax schemes is not fair and encourages companies to re-domicile abroad. Tax reform could encourage the maintenance and return of jobs from abroad.
People want good roads, functioning water and sewage systems. These need maintenance and replacement on a good schedule.
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