I recently heard David Brooks, a Canadian born American, columnist for the New York Times, and the most astute commentator of the current crop of journalists, opine on the likely outcome of the upcoming mid-term elections in the United States. Amongst other points David said the American Electorate was confused and extremely distrustful of the elites, of which he himself was included, to the point where there was little chance in dissipating the current gridlock in Washington.
I take this to mean voters have stopped listening to their leaders, or would be leaders, who have in the past, qualified as elites. If this is indeed the case we should not be surprised. The days of political leadership are long gone, leaving vindictive attack ads in their wake. Vast sums of money spent on this form of propaganda, have all but shut out rational debate of the issues, to the point where the electorate has tuned out.
Policy wonks would have us believe that the electorate is driving the issue of a great divide between those who want less government and those who want more. This I suggest is a highly simplistic way of looking at a very complex matter.
The real problem, it seems to me, is that the elites have promised the moon and failed to deliver. Globalization has reduced rather than increased the standard of living for all but a few, and the wreckage of the credit crisis has made matters a lot worse for a great swath of the population.
What would a leader like FDR ( a super elite) say today, 75 years after his inauguration speech at the depth of the Great Depression “Trust me, things will get better,” or maybe “That guy Hoover is an idiot” I don’t think so. Rather I think he would lead from the front, rather than the rear and would not promise more than could safely be delivered. When your at the bottom of hole a chicken in every pot does not sound so bad.
The New Deal was a grand experiment advocated by another super elite, John Maynard Keynes (the British Economist) It was far from perfect but at least gave hope to the millions of unemployed. Did it work? Well, sort of. We will never know how well, because the advent of the Second World War set in motion, a controlled economy that guaranteed work or military service for all.
Fast forward to today and we have another grand experiment. This one involves flooding the World with money and liquidity, the likes of which has never been seen. Has it worked? Well, sort of.
For now printing bags full of money appears to have helped the largest economy in the world by creating high asset values (maybe an asset bubble) as evidenced in ever rising housing and share prices. But a closer look reveals a different picture. Printing money has helped the rich but not the lower-income members of society. Millions remain under employed and struggling to make ends meet, It’s almost like the reverse of the New Deal that helped the poor at the expense of the rich. Income disparity is now the hot buzz word of the intellects where everybody is portrayed as working for Wal-Mart or MacDonald’s and loving it.
This is a puzzlement that will have to be solved if the ship is to righted. Why not try Tax Reform? There is no better subject for a rant du jour than tax reform, particularly when it applies to income disparity. Surely its’ time to admit that the graduated income tax as a tool of social policy has failed miserably. If the elite are willing to gamble trillions on Quantitative Easing why not try a Negative Income Tax as advocated by Milton Friedman to stimulate spending by the less fortunate. Such a modest effort could be financed by an adjustment to income deductions for the middle class. Unlike a lot of other hair-brain schemes it is almost certain that such a program would work, and quickly. Since it would affect consumers in the bottom third of income brackets it would also go a long way to dampen the fears of deflation and the dreaded Japanese Disease.
It seems to me that Negative Income Tax could be fertile ground for compromise between left and right, and foster broader tax reform that is so desperately needed in most of the Industrial World.
Will it happen? Maybe.