Bloomberg’s Plan for Addressing Economic Inequality: not a wealth tax

A bit ago (Jan 8, 2020), the New York Times described Michael Bloomberg’s plan¹ for addressing the income and wealth inequality in the United States that has been a constant topic of discussion by Democratic candidates.  Briefly, as with the robber barons of Teddy Roosevelt’s age, the wealth of the global commerce titans and particularly the private equity fund buyers and sellers of companies (and layers off of employees) has exploded over the last four decades in the US, beginning in earnest with Ronald Reagan’s presidency.  Most of the benefits of productivity gains have gone to a very few people at the top, and the bottom 50% of the wealth distribution actually owns a smaller share of the nation’s wealth than 40 years ago.  The top 1% have gained enormously, and the top 0.5% have been even more enriched.  We have ultra multibillionaires like Jeff Bezos who can pay $9 billion to his wife in a divorce settlement and still be the wealthiest man in the world with more than $130 billion in net worth.  He earns about $78.5 billion a year (counting value of his Amazon shares) or more than $6.5 billion a month² and thus exemplifies this new “gilded age” of ultrawealthy tycoons.  This exists at the same time that the Trump administration proposes work requirements that will eliminate food stamp aid for 700,000 of hungry Americans and, with other initiatives, will take  food stamps from 3.7 million beneficiaries who simply cannot get work that pays well enough to fund a sustainable lifestyle for themselves and their families.³  This will “save” the U.S. about $5.5 billion over five years–less than Bezos ‘earns’ in a month.  This disparity–$5.5 billion to feed 3.5 million hungry Americans versus provide a month’s additional wealth for a person already wallowing in wealth like Jeff Bezos–is why it is clear that the US needs to figure out how to respond to the inequality crisis in order to protect American democracy and ensure Americans have a decent standard of living.

Bloomberg’s plan seems to be a moderate stance like Obama and Biden that attempts to focus on factors other than the wealth gap and the accompanying power gap that wealth provides.  As the NY Times reports, he “frames the economic divide primarily in regional terms–and not along … rich-versus-everyone-else class lines.”¹  The Times article notes that his plan is not unlike the charge Obama gave to Joe Biden for the Middle Class Task Force.^1\

Bloomberg’s proposals for addressing the problem are similarly centered on things long discussed and tried that are difficult to do at a large enough scale to make any inroads into the inequality problem or the power gap problem. He is most definitely not proposing a wealth tax.  His proposals include a focus on education and skills training, infrastructure projects, and entrepreneurial training centers.  Although the GI Bill was a significant part of the post-WWII economic boom because it allowed vast numbers of returning veterans to get a college education, Bloomberg seems to be thinking more of apprenticeships and community colleges (training for a job) rather than university (training for a career and an approach to learning throughout life).  The Times notes his interest in raising the minimum wage to $15 an hour, expanding the Earned Income Tax Credit, and encouraging unions while disallowing noncompetes for low- and middle-income jobs.

All those are minimal steps that any progressive candidate should take, but while they may have marginal impact on middle class mobility, they will not do much at all to ease the income and wealth gap that has been caused by technology, globalization, and financialization of the economy together that has measured success almost solely from stock market numbers and thus allowed corporate and private equity tycoons to garner the major gains in productivity over decades while paying their workers too little (or moving offshore to pay even less), combined with a tax system that privileges wealth, including, among a host of others, extremely favorable corporate tax provisions after the 2017 tax legislation, ridiculously low maximum rates on ordinary income, carried interest provision, section 1031 exchanges, section 1202 exclusion for gains on original issue small business stock, capital gains preference, and an absurdly low flat estate tax above a too-high exemption amount with a step-up in basis for heirs.

Bloomberg is a billionaire who is at least aware that the inequality in this country is problematic and needs to be addressed.  But like most of the “have-so-much” class, he shows little interest in what is truly required–a shift in the direction of redistribution to balance the distorted seesaw of billionaires getting all the height and the rest sitting at the bottom.  FDR’s New Deal is said to have worked because the robber barons were scared that the proletariat would rise up in support of communism–the so-called ‘red scare’ behind the success of social security enactment.  There may not be a red scare now (though the Trump campaigners try to paint democratic socialist programs as communism), but there is a real likelihood that the contrast–and possibly real class warfare– between the squalor and despair of poor families who work hard but cannot fend for themselves and rich kids with silver spoons that only grow bigger and bigger  may eventually threaten the global nation of the plutocrats.⁴

1 Jim Tankersley, Michael Bloomberg’s Jobs Plan is Focused on Place over Class, New York Times (Jan 8, 2020).

2 Hillary Hoffower, We did the math to calculate how much money Jeff Bezos makes in a year, month, week, day, hour, minute, and second, BusinessInsider.com (Jan 9, 2020).

3 Phil McCausland, Trump administration proposals could cause millions to lose food stamps, NBC News (Nov. 30, 2019) (discussing proposed changes to SNAP program that would impose stricter work requirements, cap deductions for utility allowances and ‘reform’ the way states automatically enroll families when they receive other aid).  See also

4. See, e.g., Chrystia Freeland, Plutocrats: The Rise of the New Global Super-Rich (2012) (described in The Guardian book review as “a necessary and at times depressing book about the staggeringly wealthy”).  Freeland is neither Marxist nor socialist, and as I am reading the book, not evenappropriately skeptical of the amount of merit behind the plutocrats’ self-claimed meritocracy.