The Great Debate

President Barack Obama made the middle class the focus of his State of the Union address on Tuesday. He was lauded by some as fighting for jobs and opportunity, and even for launching a “war on inequality” equivalent to President Lyndon B. Johnson’s 1960s War on Poverty. He was assailed by others for showing his true colors as a man of big government and wealth redistribution.

Yet the initiatives Obama proposed are striking not for their sweep but for their limited scope. That reflects both pragmatism and realism: Not only is the age of big government really over, so is the age of government as the transformative force in American society. And that is all for the best.

Wait a minute, you might reasonably object: What about healthcare? What about the proposals for minimum -wage increases, for expanded preschool, for innovation centers, for $50 billion in spending on roads and infrastructure? Surely those are big government and aim, effectively or not, for transformation?

Healthcare and the changes under the Affordable Care Act are significant, and for now they have expanded the scope and cost of government However, those costs appear to be growing more slowly than expected, at least according to the Congressional Budget Office. While healthcare costs are increasingly untenable, the issue is one of healthcare costs for society as a whole. Recent legislation means government bears more of them, but someone will bear them no matter what.

So while healthcare is billed as an expansion of government, it is more a continuing issue of cost and delivery of something that has to be paid for by someone and at some cost.

February 1913 marked a turning point in U.S. history. One hundred years ago this month, the states ratified the 16th Amendment, clearing the way for adoption of a federal income tax. Two decades before, in 1892, the Populist Party had first put a progressive income tax on the national agenda.

The income tax faced steep conservative opposition. Since it was enacted, in fact, the political wars over income tax have never stopped. Conservatives battled against it when it was first proposed and have continued the struggle ever since. Now, Tea Party conservativism has given that fight new force.

The economist Joseph Schumpeter called tax systems the “thunder of world history.” Because if you dig beneath the rhetoric, tax systems reveal the underlying direction in which societies move. The saga of the income tax says a great deal about changes in America.

Fear and loathing of income inequality is both totally understandable and ultimately misplaced.

It’s understandable because everywhere around us it seems as if top income earners ‑ those latter-day kulaks vilified as the “1 Percent” by the Occupy crowd and populist politicians ‑ are gaining while the rest of us seem barely able to hang on to a lower-middle-class standard of living.

It’s misplaced because it glosses over strong evidence that the ability to rise above your starting place ‑ the American Dream, by most accounts ‑ is better than it was 40 years ago.

This essay is a response to the Reuters special report The Unequal State of America.

Income inequality is a difficult story to get your arms around, and I think Reuters has done a splendid job. I was particularly intrigued to read about the hollowing out of middle-class jobs within the federal government in D.C. I wasn’t aware that the government had so thoroughly followed the private sector’s lead in this regard.

It is important to acknowledge that while government has played an enormous role in creating the trend toward growing income inequality in the U.S., surprisingly little of that role has involved the most obvious ways government affects income distribution, i.e., taxes and benefits. Overall, the federal government redistributes about one-quarter less today than it did in 1979. But the inequality trend is more pronounced when you look at changes in income before taxes and benefits are taken into account. For example, the share of the nation’s income going to the top 1 percent of households more than doubled from 1979 to 2008. For years economists concluded that such findings meant that income inequality was market-driven. But they failed to ask whether government policies might be shaping the course of the market.

Will Republicans buck anti-tax orthodoxy and strike a budget deal? Since election night, they have begun to utter the dreaded “r-word” (revenue). But they have insisted that those revenues come from reducing loopholes — not increasing rates.

Many argue that this stance reflects the power of Grover Norquist and his no-new-taxes pledge. Yet the pledge forbids not only raising rates but also raising revenue by reducing deductions. So why are such reductions O.K. while President Barack Obama’s call for higher marginal rates is not?

Perhaps because the president’s plan would ask far more from the wealthiest Americans. By insisting that rate increases are off the table, Republicans are retreating to a time-honored position: protecting the richest of the rich at the expense of not just the middle class but also affluent households below the top reaches of the income ladder.

Today’s U.S. Labor Department report on jobs confirms what we’ve known for more than a year: We have entered a new normal for jobs, with marginal gains, marginal losses and higher levels of unemployment becoming the unfortunate norm.

It also confirms that where you live, what you do, what race you are and what level of education you’ve attained profoundly shape your employment prospects. In spite of claims of a youth unemployment crisis and ample anecdotes about a punishing job markets for recent college grads, there is – statistically – no job crisis for the college-educated, with their unemployment rate hovering around 4 percent. That contrasts with the national average of 7.9 percent and an average in the mid-teens for those with a high-school degree. For African Americans of any education level, the rate is 14.3 percent; for Hispanics, 10 percent; for Asian Americans, 4.9 percent. If you live in Nebraska or North Dakota, the jobless rate is less than 4 percent, thanks to robust prices for grains and corn and the oil and gas of the shale revolution. If you live in Oklahoma, Iowa, Minnesota or Kansas, the rate is below 6 percent. But in California, Nevada or New Jersey, it is at or above 10 percent.

Above all, the jobs report confirms that the campaign rhetoric about what the next president and Congress will do to “get jobs moving again” is hollow at best. As the numbers starkly demonstrate, the notion of an evenly distributed national jobs crisis is a fiction. Yet all the vague plans touted by Barack Obama and Mitt Romney treat the challenge of employment in 21st century America as a shared national dilemma. Unemployment is a shared affliction the way Hurricane Sandy is a shared affliction. People who live in the Northeast and Northwest may be linked by common citizenship and a shared sense of community (at least in crisis) but not by equivalent pain and suffering. Same goes for unemployment.

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.

Is President Barack Obama good for black people?  While Obama heads into Election Day with strong support from black voters, some black intellectuals are pressing that question.

In a reproachful op-ed article in the Sunday New York Times, flanked by a large drawing of a black man literally muzzled by an Obama campaign placard, Columbia professor Fredrick C. Harris proposes that “black elites” and voters have effectively conspired to mute criticism of the president because of his race. This argument is plain wrong.

Obama’s presidency, Harris argues, marks “the decline” of a politics devoted to “challenging racial inequality” — a failure facilitated by black America itself. “Black elites” and black constituencies, Harris asserts, have capitulated to a president who does little for them — simply for the “pride” of “having a black family in the White House.”

Every four years, presidential nominees tell voters that this election is the most important of our lifetimes. Such proclamations are largely hyperbole.

In 2012, however, it might be warranted. This election is consequential.

During the next four years, the nation will have to face issues of debt, taxes and fiscal stability that will imprint our grandchildren’s futures and beyond. National and homeland security have received less attention during this election than in the previous few, but they always are an international or national incident away from dominating our consciousness in ways we can’t anticipate.

And issues surrounding inclusion, equality and fairness can’t ever be forgotten for long. Otherwise our essential character as a country — the very essence of the American experiment — will be endangered.