Let me connect three dots for you. Draw your own conclusions about the impact of Pennsylvania Senator Pat Toomey’s proposal in the super committee to reduce the federal deficit.
Dot Number 1 — The American middle class is shrinking: The New York Times reports this morning that the middle class is shrinking in America — based on where people live. In 2007, the latest year studied, 44% of families lived in middle-income neighborhoods, down from 65 percent of families in 1970. A third of families lived in very high-income or poor neighborhoods now, up from just 15 percent of families in 1970. The case example used to illustrate this national trend — the Philadelphia metropolitan area.
Dot Number 2 — Toomey proposes to increase after-tax inequality further: In the super committee, Congressional Republicans, led by Senator Pat Toomey, have advanced a plan that they say would raise revenues by closing tax loopholes and eliminating tax breaks while cutting spending by $1.2 trillion. But a closer look shows that, of $3.5 trillion raised by the elimination of loopholes and tax breaks, $3.2 trillion would lower tax rates for the wealthiest. The plan would lower taxes at the top a lot more than simple extension of the Bush tax cuts for the very rich. So the impact of Senator Toomey’s proposal would be to increase economic inequality after taxes: affluent families would pay less in taxes and the middle class and the poor would face cuts in Social Security, Medicare, and other social programs.
Dot Number 3 — High inequality undercuts core American values (opportunity, democracy) and weakens our economy: High levels of economic inequality — such as now exist in the United States — undermine intergenerational mobility (also known as “the American Dream”). (For evidence, see the links in this earlier blog post on inequality or this one.) Such inequality also contributes to the erosion of political democracy — shifting the country further from one person, one vote towards one dollar, one vote. (For analysis of this in the PA context see our 1999 Democracy in Pennsylania report.) And, third, high levels of inequality undermine economic and productivity growth.(On all the negative impacts of inequality, see this online video by Richard Wilkinson. Relevant to Toomey's proposal, Wilkinson notes that greaer equity improves economic and social outcomes whether it is achieved through more equal before tax incomes or after-tax incomes or a combination of the two.)
Let’s process that again. Inequality means the end of the American Dream; the erosion of democracy (wasn’t America — and Pennsylvania — the birthplace of democracy?); and a weaker economy. Three strikes and you’re out.
Question Number 1 — Why? On a day when a national newspaper is using Philadelphia to illustrate the erosion of the middle class, why is Senator Toomey championing ideas that threaten the most cherished American values (opportunity, democracy) and the country’s future living standards? You’d have to ask him.