Danny Leipziger is Professor of International Business at George Washington University, in Washington DC. He replied to a letter in the Financial Times from a Paul Marshall, who opined that the ills of the US economy were caused by political capture by the wealthy.
Prof. Leipziger puts the problems down to regulatory capture, poor corporate governance, and an ill-informed public that seemingly votes against its own economic interests. He calls for a “modern New Deal” to replace the current “Raw Deal” the public is now being served. Attention has to be focused on the deterioration of institutions, particularly those that oversee the financial sector. These have allowed top bankers to escape scot free with huge sums of money, to be heavily fined, but never to resign. The overseers have been more interested in saving the banks than than helping ordinary people restructure their mortgages. At the moment “the economically powerful can always gain public protection”. He goes on to say that American voters support a textbook version of capitalism that no longer exists, and that inequality and concentrations of wealth are now self-perpetuating.
The diagnosis is excellent, but the treatment is elusive.
Tomorrow I would like to suggest answers to the problems posed above, and I hope readers will join in the discussion. This affects all of us!
l
We’ve heard a lot about how large income inequality is in America, but all of the solutions seem to involve raising taxes on the wealthy- in a country where the wealthy pay a larger proportion of the total taxes collected than in any other country in the developed world. (http://taxfoundation.org/blog/no-country-leans-upper-income-households-much-us) What most Americans realise, is that any left-wing solution to income inequality will involve raising taxes on the middle class- which they, including Obama, are unwilling to support.
In Washington one always has to probe to find out who is saying something, why, and what their agenda might be (it makes you a bit cynical , living there). I know nothing about the Tax Foundation. I would, however, point out that the membership of the Board is not exactly composed of your average Joe or the owners of dry cleaning shops or gas stations. Do you think there is a possibility that they could represent companies who are engaged in either hiding corporate profits abroad, or who help rich people avoid tax? :
Mr. David P. Lewis (Chairman)
Vice President – Global Taxes,
Chief Tax Executive & Assistant Treasurer
Eli Lilly and Company
Mr. James W. Lintott (Treasurer)
Chairman
Sterling Foundation Management LLC
The Honorable Bill Archer
Senior Policy Analyst
PricewaterhouseCoopers LLP
The Honorable Philip English
Co-Chair, Government Relations Group
Arent Fox LLP
Dr. Douglas Holtz-Eakin
President, American Action Forum
Sixth Director of the C.B.O.
Mr. Stephen Kranz
Partner
McDermott Will & Emery
Ms. Sarah McGill
Senior Vice President, Tax
PepsiCo, Inc.
Ms. Pamela Olson
Principal, Deputy Tax Leader
PricewaterhouseCoopers LLP
Mr. Tom Roesser
Senior Director of Tax Affairs
Microsoft Corporation
Mr. Scott Hodge
President
Tax Foundation
Their statistics might well be spot on, but all that proves is that the richest 1% have cornered a disproportionate percentage of the wealth, and it may be the case that they are under-taxed. I will ask a friendly economist to comment, if I can.
It isn’t just the tax foundation, there are other sources, including the Treasury itself. I’m not saying the rich are overtaxed, but rather, that the middle class are undertaxed. All of the Bush tax cuts should expire. My point was that this position is very unpopular amongst the American electorate. I too, support higher taxes, but not just on rich people. In northern Europe, the middle class pays higher taxes but they get so much more in return.