In 2015, Nobel Prize-winning economist Joseph Stiglitz returned to Horace Mann High School in Gary, Indiana, for his 55th high school reunion.
As Stiglitz gathered with his former classmates, he said, he saw first the impacts of economic inequality and “some of the consequences of not investing adequately in our young people.”
“You see it in [their] health. You see it in the lives that they lived [and] their ability to contribute to our society,” Stiglitz said. “And in the hope that they have [and] the frustrations, the disparity between what they had hoped for in their lives and what they actually achieved.”
Six years later, Stiglitz is hoping Congress will act and pass President Joe Biden’s $3.5 trillion American Families Plan to help ensure the next generation of Americans avoids the same fate. Biden’s proposal includes a vast array of benefits for middle and low-income families, including paid family and medical leave, affordable childcare and two years of free community college, the White House said in a statement.
It would also extend the child tax credit increases Biden signed into law after Congress passed his $1.9 trillion American Rescue Plan earlier this year, the White House said. The stimulus bill expanded the credits for children under age 6 from $2,000 to $3,600 and for children between ages 6 and 17 from $2,000 to $3,000 for one year, the White House said. Biden’s American Families Plan would extend the program for five years.
For Stiglitz, this an “absolutely crucial moment” in the fight against income inequality.
“The pandemic has exposed and aggravated the inequalities in our society,” Stiglitz said. “And so, because it’s exposed it, it’s made Americans so much more aware of these inequalities, and, you might say, the social injustice. The people who are frontline workers are those with the lowest income [and] the most exposed to the pandemic.
“So, it’s certainly made people, I think, much more aware of inequalities,” Stiglitz said, “and that coming on top of the exposure of the racial inequalities that gave rise to the Black Lives Matter [movement]. I think it is a real moment.”
He added that these inequalities have been “festering and getting worse over a long period of time.” About 40 years, Stiglitz said.
“It sort of took a while for Americans to realize that our economy wasn’t delivering for very large parts of our society,” Stiglitz said. “We looked at [gross domestic product (GDP)], but we didn’t realize that was a metric of how well most Americans were doing.”
Economic inequality hasn’t just impacted people’s wallets — it’s also greatly affected our political discourse. The sense that the system is rigged was “an important ingredient in some of the ugly politics that we’ve seen over the last number of years,” Stiglitz said.
“Unless we address this inequality, I’m afraid we’re going to wind up a much more divided society, divided politics, ugly politics,” Stiglitz said. “And so, we’re at a — you might say — a cusp that if we don’t address it, who knows where our society and our politics is going to go?”
Biden’s proposal not only takes steps to combat inequality but also recognizes that “a 21st century economy is different from the mid-20th century economy,” Stiglitz said.
“It’s making sure we having spending not just on the physical infrastructure, but in our social infrastructure — caring for families, education, research,” Stiglitz said. “So, it’s really thinking about, what are our problems and what can the role of the government be in addressing those problems in a 21st-century economy?”
It also represents a “fundamental philosophical departure from Reaganomics, you might say, which was based on trickledown economics: Give money to the top and somehow everybody benefits,” Stiglitz said. “[It] didn’t work.”
Instead, this proposal builds up society more comprehensively, from the middle and bottom all the way to the top, Stiglitz said.
While there are many different initiatives designed to fight income inequality in Biden’s proposal, perhaps the most consequential is his proposal to extend the child tax credits from his American Rescue Plan.
The Center on Poverty and Social Policy at Columbia University estimates the credit will cut child poverty nearly in half, from 13.6 percent to 7.5 percent. The Brookings Institute said the impacts of the tax credit will be especially meaningful to vulnerable groups.
“The payments are projected to drastically cut child poverty across racial groups, but with particularly large reductions for Black, Hispanic and Native American children,” the Brookings Institute said on its website. “Similar reductions are expected for the number of children living in deep poverty.”
Today there are too many children growing up in poverty in the United States, Stiglitz said. Biden’s proposal shows that it is “totally unnecessary,” Stiglitz said.
“It is, I believe, unconscionable that 20 percent of American children grow up in poverty,” Stiglitz said. “What President Biden showed is that it was totally unnecessary. We could, in one year, get rid of half of the childhood poverty.”
The American Rescue Plan showed that “inequality has been a choice,” Stiglitz said. Not extending the tax credits would be choosing to take a step backwards.
“It would be a crime to say, ‘OK, now that the pandemic is behind us, let’s change our policy to increase poverty back to where it was,’” Stiglitz said. “To me, that’s unconscionable.”
Stiglitz said he doesn’t want to see the tax credit extended for just five years. He said he wants them extended permanently.
“It doesn’t cost very much,” Stiglitz said. “And I would put it more broadly: The cost is negative, because how can you build a strong society going forward if 20 percent of your young people [are] growing up in poverty without adequate nutrition, healthcare, education, you know, seeing everyday as a struggle?
“So, to me, this is part of an investment in our future,” Stiglitz said.
However, making the investment won’t be easy. Not only does Biden have to overcome complete Republican opposition to his plan, but even some members of his own party are saying they won’t support the $3.5 trillion price tag that comes with the plan, according to NBC News. Unless Senate Democrats are unified in their support for the bill, it won’t pass.
America is currently at a fork in the road, Stiglitz said. It isn’t the first time we’ve been here.
“You might say the New Deal was one fork in the road where we tried to create a more equal society. We created social security and then, with [President Lyndon] Johnson, we created Medicare and [that] meant that older people didn’t have to suffer [and] die early because they couldn’t get healthcare,” Stiglitz said.
While Stiglitz believes the Reagan era was an example of a time when the United States stood at a crossroads and made the wrong choice toward trickledown economics, he said he is optimistic about our future.
“Now we have a choice that I think will lead to faster economic growth and more equal outcomes and more equal opportunity as well,” Stiglitz said.
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