Thursday, March 5, 2015

Larry Summers Becomes a Progressive on Inequality

Larry Summers, who withdrew from consideration as the new chair of the Federal Reserve in 2013 because of opposition from progressives, has lately been sounding like one of his progressive critics. Among other things he has become very skeptical that more education can reduce inequality:
It is not likely, in my view, that any feasible program of improving education will have a large impact on inequality in any relevant horizon.

First, almost two-thirds of the labor force in 2030 is already out of school today. Second, most of the inequality we observe is within education group — within high school graduates or within college graduates, rather than between high school graduates and college graduates. Third, inequality within college graduates is actually somewhat greater than inequality within high school graduates. Fourth, changing patterns of education is unlikely to have much to do with a rising share of the top 1 percent, which is probably the most important inequality phenomenon. So I am all for improving education. But to suggest that improving education is the solution to inequality is, I think, an evasion.
Summers recently co-wrote a report for something called the "Commission on Inclusive Prosperity" that argued for a wide array of liberal ideas. One I especially like is converting tax deductions to tax credits:
While deductions deliver a larger benefit to tax payers in higher tax brackets, credits deliver the same benefits to all tax payers, making the tax code more progressive,
The rest of the program includes
tax and regulatory policies to encourage employee ownership, the strengthening of collective bargaining rights, regulations requiring corporations to provide fringe benefits to employees working for subcontractors, a substantial increase in the minimum wage, sharper overtime pay enforcement, and a huge increase in infrastructure appropriations – for roads, bridges, ports, schools – to spur job creation and tighten the labor market.
attacking rents in the form of “exclusionary zoning practices” that bid up the price of housing, “excessively long copyright” protections, and financial regulations “providing implicit subsidies to a fortunate minority.”
Summers used to personify the neo-liberal economics of the Clinton years, so his turn toward progressive ideas strikes me as significant. The Democratic establishment as a whole seems to be moving in that direction, driven by growing inequality and middle class stagnation. But will Hillary Clinton run on these issues? And do the Democrats have any chance of retaking Congress with this platform?

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