Paul Krugman, a past winner of the Nobel Prize in economics, wrote a recent New York Times column with the title “Bernie Sanders is Going for Broke.” He criticizes Sanders for his politics which are characterized as a “go-for-broke maximalism” “without compromise” described as:
“a maximalist agenda on all fronts: complete elimination of private health insurance and a vast expansion of government programs that would require major tax increases on the middle class as well as the wealthy.”
In contrast to Sanders is what Krugman portrays as the “incremental” approach that is the Obama and Biden way for implementing what he sees as “progressive goals.” In Krugman’s words,
“Obama was, and Joe Biden is, clearly in favor of progressive goals such as universal health coverage and reduced income inequality. But Obama pursued those goals via incremental changes. Obamacare was designed to expand health coverage while doing as little as possible to disrupt the lives of people who already had health insurance. Obama raised taxes on the wealthy more than most people realize — by 2016 the average federal tax rate on the 1 percent was almost as high as it was pre-Reagan — but he did so quietly, without much populist rhetoric.”
Krugman is right in claiming that income tax rates on the 1% increased while Obama was president. However, their share of income during Obama’s presidency, according to official figures, resulted in greater income inequality.
This can be seen in the following table from the Federal Reserve Board. During Obama’s time in office, the share of income received by the 1% increased dramatically after falling during the great recession while the share of those in the bottom 90% fell.
The increase in the income tax rate on the 1% may have been more than off-set by greater increases in their income. More critical is where did the top 1% stand at the end of the day. This is reflected in their share of wealth.
Here are the most recent figures from the Federal Reserve Board. To be fair, the following two tables show wealth shares and dollar amounts in the third quarter of 2007. This is the high point of the share of the 1% during the Bush regime before declining during the great recession. The figures for Obama’s presidency start with the first quarter of 2009 and end in the fourth quarter of 2016.
Clearly, what the Fed figures show is that during Obama’s presidency, the amount of wealth held by the 1% almost doubled. At the same time, the wealth of the poorest 50% increased by less than 15% resulting in a widening of the wealth gap between them and the top 1%.
The “incremental changes” of Obama and Biden must have been quite acceptable to the 1% since their wad of wealth increased dramatically.
Essentially, utilizing a tepid approach of “incremental changes” to achieve “progressive goals” resulted in even greater inequality during Obama-Biden’s time in the White House.
Impact of Sander’s Wealth Tax
Sander’s wealth tax is estimated to raise $4.35 Trillion over the next ten years. This part of his supposed “maximalist agenda” will not put much of a dent into the 1%’s holdings. As of the third quarter of 2019, the size of their wealth stood at $34.53 Trillion. Immediately subtracting the Sander’s wealth tax would result in the size of their wealth being greater than its highest amount when Obama was president.[i] One would be right to expect a “maximalist agenda” to go much further in stripping the 1% of its excessive wealth.
Were an afloat Titanic to stand for equality and had Biden as its captain, using the Obama-Biden approach comes across as people on the Titanic who favor greater equality being given a bucket to scoop up water to throw overboard as the ship sinks into a sea of inequality. Krugman’s characterization of the policies of Biden and Sanders is not very convincing.
Note: The Federal Reserve Board figures are updated with the figures on wealth distribution based on the Dec. 23, 2019 update, before the recent declines in the stock market. The figures are different from other articles I have written for Counterpunch using earlier updates.
Obviously, the distribution of wealth is currently undergoing changes with the decline in worldwide stock markets.