Co-Director, Author, Center for Economic and Policy Research
Thomas Piketty's new book, Capital for the 21st Century, has done a remarkable job of focusing public attention on the growth of inequality in the last three decades and the risk that it will grow further in the decades ahead. Piketty's basic point on this issue is almost too simple for economists to understand: If the rate of return on wealth (r) is greater than the rate of growth (g), then wealth is likely to become ever more concentrated.
This raises the obvious question of what can be done to offset this tendency toward rising inequality? Piketty's answer is that we need a global wealth tax (GWT) to redistribute from the rich to everyone else. That is a reasonable solution if we're just working out the arithmetic in this story, but don't expect many politicians to be running on the GWT platform any time soon.
Americans are in a surly mood, confronting rules they feel are rigged against them. President Barack Obama captured this populist temper in his re-election campaign. He then launched his second term declaring that inequality is the “most pressing challenge of our time,” and laying out a popular agenda to raise the federal minimum wage, provide pay equity for women, establish universal preschool and other initiatives that polls show the public strongly supports.
For more than 30 years, the right has been throwing long passes. The Democrats, with some fine individual exceptions in the Senate and House, have been playing an incremental game, eking out gains of a few yards at a time and often being thrown for big losses.