Hillary Clinton and Donald Trump don’t agree on much. But there’s one theme that’s central to both of their campaigns: The U.S. economy too often benefits the powerful few over the struggling many. Trump has pledged to be the “voice” of the masses fighting against a “rigged” system. Clinton, though less fiery in her rhetoric than either Trump or Bernie Sanders, her former Democratic rival, has pledged to make the “super-rich” start paying “their fair share.” As I wrote last month, the 2016 election has marked a distinct shift in the political message of both parties, away from promises to grow the economic pie and toward discussions of how to divide it up more fairly. [...]
In recent years, inequality has shifted from being an issue that mostly concerns the political left to one that worries even mainstream economists. Groups such as the International Monetary Fund and the OECD have released reports arguing that a greater concentration of wealth among the rich leads to slower overall economic growth. And while economists disagree about the causes and consequences of rising inequality (and, even more, what to do about it), there is relatively widespread agreement that the recent trend of explosive income growth among top earners and minimal gains for everyone else is unhealthy for the economy. [...]
The CEA report argues that Obama has fought inequality in three main ways. First, the administration’s actions during the recession — extending unemployment benefits, temporarily cutting payroll taxes to stimulate growth and bailing out the auto industry, among others — kept unemployment lower than it would otherwise have been. Since recessions tend to hit the lowest-earning workers hardest, policies that mitigate their impact will tend to reduce inequality. Second, the CEA argues that the Affordable Care Act, by making health insurance more affordable for and accessible to low-income workers, has greatly reduced disparities in health care. And third, the CEA argues that the administration’s tax policies — which raised taxes on the rich, cut them for the middle class and expanded programs such as the Earned Income Tax Credit that help poor families — made the tax code more progressive. All told, the CEA estimates that the poorest fifth of American households will earn 18 percent more in 2017 than they would have without the administration’s policies.
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