October 6, 2015
Closing the D.C. Reality Gap
Posted on Mar 3, 2014
To understand the country’s frustration with politics, we shouldn’t focus primarily on “gridlock” and “polarization.” The larger problem is a disconnect between what the nation’s capital is talking about and what most citizens are worried about.
The issues discussed at kitchen tables and over back fences relate to getting and keeping good jobs, better educating our children, improving living standards (or, these days, keeping them from falling), and holding families together. The issues that fixate Washington are abstractions such as tax reform, deficit reduction, and whether small government is better than big government. Call the distance between the two sets of priorities the Reality Gap.
We got another reminder of this with all the attention showered on the tax reform proposal offered last week by Rep. Dave Camp, R-Mich., and the widespread mourning over the fact that Camp’s plan is going nowhere this year.
Because meanness is now so much a part of our discourse, it’s worth saying upfront that Camp, the outgoing chair of the Ways and Means Committee, is a serious, thoughtful and decent politician. He deserves kudos for detailing his choices, even if his plan uses gimmicks to disguise the way in which it would almost certainly increase the deficit in the long run.
Square, Site wide
Some of Camp’s ideas, such as ending the special-interest break for hedge fund operators, are sensible. Others would make things worse. As the Center on Budget and Policy Priorities showed, his changes to the Child Tax Credit and the Earned Income Tax Credit would eventually have the effect of cutting $2,000 from the annual income of a mother with two children who works full time at the current minimum wage. That’s not what tax reform should be about. And by eliminating the tax deduction for state and local taxes, Camp’s plan punishes states that are spending their own money to solve their own problems.
But it’s Camp’s premise that’s wrong: At a time of rising inequality, we do not need fewer, lower tax brackets. The fastest income growth has been in the top 0.1 percent. This points to the need for new, somewhat higher tax rates at the very top. We need to use tax reform to increase revenue, not cut it. The purpose is not to penalize the rich, but to address the widening gaps in income and in opportunities for mobility. These demand a much more aggressive response from government.
When President Obama releases his budget on Tuesday, it should thus be measured by where it lies along the spectrum defined by the Reality Gap—whether it is investing enough to begin returning us to the days when economic growth was broadly shared.
Obama intends to signal the end of austerity politics. He’s giving up for now on a fruitless quest for a grand budget bargain, since Republicans clearly have no interest in pursuing one. He’s right about this. Also to the good will be the spending the president is seeking for training and apprenticeship programs, new manufacturing initiatives, infrastructure and pre-K education.
Still, we need a new benchmark. It should be set not by what a divided Congress might be willing to enact but by what we should be doing to help families trying to improve their circumstances against strong headwinds. Obama’s budget will likely fall short by this standard. My hunch is that the president, at least privately, would probably agree.
To begin this conversation, here’s one idea that uses the typical family’s struggles as its starting point. (And thanks to my Brookings Institution colleague Elisabeth Jacobs for thinking this through with me.)
Those who lose their jobs need not only unemployment insurance—and yes, we should be extending the program—but also a chance to train for new work, in some cases by going back to school. Conservatives such as the American Enterprise Institute’s Michael Strain have suggested relocation subsidies so people could move to more promising labor markets. Many parents need paid leave time for a newborn or for family emergencies.
Isn’t it time to consider a comprehensive Life Cycle Insurance program that wraps these benefits, and perhaps others like them, together? It might be funded through a modest addition to the payroll tax. We need to remember the American tradition of using government to empower people and reduce their level of economic insecurity.
Alienation from politics will keep growing as long as Washington’s conversations have so little to do with the challenges families face every day. It’s time to start closing the Reality Gap.
New and Improved Comments