The Great Debate

The issue of inequality doesn’t usually feature in U.S. presidential debates. Compared with those in Europe, Americans are more relaxed about seeing higher pay as the reward for effort and ability.

This time it is different. The Occupy movement reflected the general anger toward Wall Street bankers who raked in millions during the boom years and then got bailed out in the bust that they helped to create. Income inequality has been quietly rising in the United States for almost four decades. President Barack Obama plans to increase taxes on those with high incomes and Governor Mitt Romney is against such “class warfare.”

One of the main differences between the two candidates in this election is whether or not to raise taxes on the rich. But rather than talking about the underlying causes of increased inequality, the presidential candidates have focused on dealing with its consequences, particularly over taxes and welfare.

President Obama has pledged to keep all the 2001 Bush tax cuts, except for those households with income over $250,000 a year, and to restrict tax loopholes for millionaires. For example, the top rate of income tax for the rich will increase from 35 percent to 39.6 percent under Obama’s plan.

Governor Romney’s criticism of Obama’s plan is that these tax increases will mean lower incentives for entrepreneurs and wealthier individuals to work hard, and the result will be a drag on growth.

Mickey Kaus gives his theory:

It’s easy to forget that, even if Obama’s health care effort is bogging down, the effort itself still serves his presidency as a crucial time-waster, tying up Congress and giving him a reason to postpone (or the public a reason to ignore) those other divisive, presidency-killers. Obama needs some excuse for putting off unpopular Democratic demands; health care’s a good one. If he keeps failing to pass health care until spring, that might not be such a bad outcome. In fact, even quick passage was maybe never in his interest. There are things more unpopular than struggling. ... Cap and trade, immigration legalization, “card check”—these are not what you’d call confidence building appetizers leading up to the main course of Obama’s presidency.

Me: None of it works when Americans have less and less confidence in Obama. And that number will continue to work against him as long as unemployment stays high.