President Obama made an important speech in which he clearly described the rise in income inequality in the US (and elsewhere) and the negative effect of rising inequality on social mobility. He also indicated some the ways in which he intends to reverse this trend. Some of the changes that he listed will help to reduce income inequality. His speech was good, but not great news for those who care about inequality and social mobility. We would not have heard such a speech from a US President if Mitt Romney had been elected, but most of data on inequality and social mobility cited by the President is old news to those who care about these things. The real question is what can government do to address these problems.
Robert Reich shares Obama's concerns about rising inequality and decreasing social mobility and he is worried about the political consequences. This trend cannot go on forever without further polarizing our nation and fostering extremism. Reich argues that politicians don't like to propose income redistribution as a solution to the problem because it has bad connotations. He probably understands that many countries in Europe have a similar problem with rising income inequality, but they are much more aggressive in the use of downward income redistribution than the US. He offers an interesting way to frame the debate about income distribution in the US. The government has many programs which redistribute income to those who are well off. The list of tax breaks and subsidies provided to the wealthy is lengthy and well understood by those in government. Reich proposes that we can easily pay for programs that will reduce the effect of market income inequality by ending the tax breaks and subsidies that are generously provided to the well off. Ending upwards redistribution to the those who not need government help can be used to provide it to the less fortunate who have little defense against the economic and political forces that are responsible for rising inequality.