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The Defining Issue of Our Time

Most Americans are willing to pay their fair share to invest in lasting prosperity. But multiple tax cuts for the wealthiest Americans starting in 2001 have drastically reduced their tax burden.
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The "basic American promise," as the president described it in his State of the Union address, is that people who work hard should be able to raise a family, own a home, send their children to college, and save for retirement. The defining issue? "How to keep that promise alive."

Exactly. In this and his December Kansas speech, President Obama recounted the sobering evidence of our shrinking middle class. He is not alone. The struggles of the middle class are a bipartisan topic. It's when we get to "how to fix it" that agreement takes a hike.

The plan sketched out in President Obama's message redresses the balance between the private and public sectors in shaping the economy. Governor Mitch Daniels, presenting the opposing view after the President spoke, took the typical conservative position that the economy will grow when private business people are left unfettered by regulation or taxation. Left alone, they will make money and hire workers. But past experience has not supported this view. Exhibit A: the top tax rates were higher in the 1990s than in the 2000s, but economic growth, investment growth, employment, and salaries were all stronger in the earlier decade. Time and time again, an activist government has set the stage for private sector growth. The president cited the investments in the interstate highway system and the GI bill, which helped returning WWII vets to go to college and buy homes. Fast roads made it far easier to get goods to markets; education and other supports for veterans gave them a chance to be full partners in a growing economy.

The president called for "an economy built to last." That's a good phrase, and it captures an essential point: we cannot achieve lasting prosperity without a sound foundation. That means a well-educated population, able to perform well in jobs requiring increasing command of new technology and constantly updated information. It means infrastructure that can support a growing economy. It also means people protected from the ravages of poverty at all stages of life.

Those whose main goal is to shrink government don't seem to recognize the importance of these core underpinnings of sustained prosperity. They think that if we allow more and more concentration of wealth at the top, these rich "job creators" will power the economy into growth. The economic mess we are still struggling to overcome showed that those accumulating immense wealth were in fact "bubble creators." Private dollars sought quick and easy gain by piling money into overinflated housing securities. The bubble burst, and we're all still paying.

The president's speech was strong in talking about the need for education and infrastructure, but not as explicit in recognizing that an educated workforce depends on ensuring that children are protected from poverty. A lot of years ago, I used to testify in front of Massachusetts legislative committees alongside dedicated teachers in support of a basic safety net for poor children. The teachers would say "Hungry children can't learn." They were talking about their own classroom experience of seeing children distracted by their empty stomachs. That's still true, but there is now additional evidence that children living in families unable to afford consistently nutritious food are more likely to suffer health and developmental problems that can get in the way of learning. Many other poverty-induced hardships, like unsafe housing, frequent moves, or inability to pay for heat, similarly can have the effect of holding children back. Yes - the President is right in calling for federal investment in K-12 education and for an increase in the number of our young people with postsecondary training and degrees. But unacceptably large numbers of poor children will be denied this "fair shot" at economic success if health and development problems prevent them from benefiting from a good education. It doesn't have to be this way. When poor families with young children receive help from SNAP/food stamps, subsidized housing, or home energy assistance, their children have better health and education outcomes.

Investing in children in their earliest stages of development is part of a sound foundation for lasting economic growth. So is economic security for Americans of all ages. Unemployed people or retirees thrown into destitution because their benefits have been cut cannot buy products that sustain our economy. We are now wasting precious human resources: young immigrants eager to put their talents to work in this country, young people who drop out of school, long-term jobless who can get back to work if they get the chance to upgrade their skills, and hard-working service workers who have plenty of skills but don't get paid enough to support their families. The State of the Union message offered hope to many of these people. The president's forthcoming budget and then Congress should be judged on their willingness to translate hope into investment.

Most Americans are willing to pay their fair share to invest in lasting prosperity. But multiple tax cuts for the wealthiest Americans starting in 2001 have drastically reduced their tax burden. Bill Gates has now joined Warren Buffett and a growing group of "Patriotic Millionaires" in saying that he thinks people like him should pay more in taxes. The president rightly asked, "Do we want to keep these tax cuts for the wealthiest Americans? Or do we want to keep our investments in everything else... Because if we're serious about paying down our debt, we can't do both."

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