The president’s budget ignores inequality at everyone’s peril
Budgets reflect values, pure and simple. President Donald Trump’s 2021 budget suggests that his administration’s priority is continuing to raise the incomes — and wealth — of those at the top of the economic ladder. What it most certainly does not stand for is spurring strong, stable, and broadly shared economic growth and addressing the needs of families across our society.
Many in Washington are dismissive of the budget because they say Congress will be. I find that extremely short-sighted. Members of Congress most likely will ignore his proposed cuts to the Environmental Protection Agency and the Centers for Disease Control, to student loan assistance, to affordable housing, to Medicaid, and to the Children’s Health Insurance Program. But, like the administration, Congress too will neglect the critical investments we absolutely need right now to spur broad-based growth that benefits all families, not just the few at the top.
More to the point, Congress won’t raise the tax revenue we need to pay for these new investments — even though, according to a new poll, the majority of Americans would support this — to restore some balance to our increasingly lopsided tax code, and to ensure we are on a path to have the revenue to fund everything our government needs to do.
How did we get here? Relying on a failed tax-cutting ideology, the White House promised that the landmark 2017 Tax Cuts and Jobs Act would deliver a boom in private investment in firms across the economy that would lead to a burst of economic growth, delivering more good jobs across the United States. The tax cut would pay for itself, they said. Instead, federal budget deficits have soared, that rush of investment has failed to materialize, wage growth has been subpar, and the administration’s subsequent budgets have cut important programs such as Medicaid and Social Security to pay for the tax cut.
Even if Congress rejects these specific spending cuts, the budget’s fundamentals of inadequate revenues, continued tax cuts for the wealthy, and a lack of overdue investments will remain the same. There is no way any of that spells out a strategy for long-term economic success.
We should think of this entire budget as a photographic negative — a blueprint in reverse — for what our country needs to do. It’s not enough to merely avoid damaging spending cuts. Now is the time to make major new investments in people and infrastructure. We need to not only repeal the Trump administration tax cuts, but also go further in raising taxes on the wealthy to pay for those investments.
For too long, too many in the policymaking community have accepted the supply-side story that the benefits of tax cuts trickle down to the rest of us, that gives serious side-eye to government spending, and that accepts inequality as an inevitable byproduct of growth.
But what about the other side of this story, the one we don’t tell, that asks tough questions such as what investments do insufficient tax revenues require us to forgo, and how would they contribute to economic growth that is broadly shared? As the power of big data allows economists to dig into the numbers on taxes, spending, growth, and inequality, the evidence is piling up. Inequality obstructs, subverts, and distorts economic growth, and key investments by government are absolutely critical to creating strong, stable, and broadly shared growth.
I propose we consider making investments within four key areas. First, in early childhood. For decades, studies have shown the direct relationship between the conditions of childhood — such as neighborhood, family income, and healthcare — and adult well-being, whether financial, social, or physical. Yet the richest country in the world allows nearly 10 million children to live in poverty. Among the 31 members of the Organisation for Economic Co-operation and Development, we rank a dismal 29th in the percentage of children enrolled in preschool. Further, cuts in safety net programs fly in the face of research showing that investments in such programs have lasting positive effects on the lives of poor children. There is incontrovertible evidence that participation in high-quality preschool programs, such as Head Start, improve lifelong outcomes. And a recent study by the National Academies of Sciences, Engineering, and Medicine details sensible investments that would cut U.S. child poverty by half in 10 years.
Second, in education. Among the most stark examples of U.S. inequality are data from The Education Trust, showing the significant imbalance between the public resources devoted to the children of the wealthy and the children of the poor, and between school districts with the most students of color and the whitest districts. The nation’s investment in public education was a major source of the remarkable economic expansion of the 20th century. To achieve similar sustained, broad-based economic growth in the 21st century, we need to provide robust, equitable investments in public education.
Third, in families. Paid leave is one way of ensuring that parents can spend quality time with a new child. Yet the United States is the only advanced economy in the world without a national policy providing workers paid leave following a birth or adoption. Most Americans are willing to be taxed to pay for such a program. And six states and the District of Columbia have put in place statewide paid leave programs paid for by new (small) payroll taxes. Their successes should be repeated nationally.
And finally, in our nation’s infrastructure, which is essential to strong and stable economic growth. The nation’s extraordinary historic infrastructure investments are evident all around us, but so are examples of the inadequate investment in maintenance, rebuilding, and adding new facilities. The president’s budget contains a small additional amount for infrastructure, but it pales in comparison to what is needed. The shameful Flint, Michigan water crisis highlighted inadequate investment in water infrastructure, as well as the enormous disadvantages faced by communities of low-income children. In addition to upgrading our water infrastructure, we need to enhance our sustainable energy capacity with investments in distributed generation and clean energy technologies such as solar and wind power. And we need to bring broadband access to the nearly one in four people who live in rural areas without it. All of our infrastructure investments should be made in ways that ameliorate, rather than exacerbate, climate change.
To afford these investments, we need to demand greater resources from the wealthy, who have benefited most from an economy we’ve allowed to grow for decades in ways that padded their pockets — even as many of our most competitive industries were made possible by the investment of public dollars in basic research and development decades ago. Those at the top of the income ladder already have seen their incomes grow to unbelievable heights at the same time that their tax rates have fallen. This is a matter of fairness, and they can afford to pay more.
Our society was built on ambitious public investment projects such as the New Deal and the Great Society. As the 2020 presidential debate has brought to the fore, there is a renewed and urgent desire among many in this country for similar investments in our people and infrastructure. By ignoring that need, we disavow our responsibility to build a strong, stable economy that allows for shared prosperity for all of us and for the coming generations.
Heather Boushey is President and CEO of the Washington Center for Equitable Growth and the author of the book Unbound: How Inequality Constricts Our Economy and What We Can Do About It.
