Mendel Schwarz

OpEd #1 Domestic Economy

Professor Roy Smith
Ocotober 5, 2016

Income Inequality: Do the Candidates Have the Answer?

The Americas have recently reverted back to rightists. In Latin America, for

example, conservative movements are quickly replacing the left. In Brazil, the Workers

Party lost over half of its more than 600 municipalities in last weeks mayoral elections.

In Colombia, the peace treaty with the Revolutionary Armed Forces of Colombia (FARC)

fell through after the people sided with right-wing oppositionist Alvaro Uribe Velez, who

claims the deal only benefits the FARC and in Argentina, Cristina Kirchners left-wing

government was replaced by right-wing candidate, Mauricio Macri.

During their years as the opposition, conservative parties in Latin America

remained largely unchanged, archaic in their ideology, and obsolete in their ways.

However, they learned one lesson: the importance of social programs in a liberal

economy. America has a hard time grasping this duality that is now inherent to South

American right-wing politics. According to British economist Anthony Atkinson, a

specialist in income inequality, social programs are our most powerful weapons against

Americas most prevailing socioeconomic issue. But how do you sustain a system that

drains billions from public accounts, while dealing with one of Americas largest deficits

in history? None of the two presidential candidates seem to know the answer.

Atkinson contends that an increase in taxes is the only viable method to sustain

social and welfare programs. Both Clinton and Trump agree that the government needs

money but differ in the reasoning and means to attain the extra revenue. Clinton intends

to use incremental revenue streams from her progressive tax plan to expand social

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security, reform Medicare delivery systems, lower drug costs, and make college-debt free

by taking on student debt. The Republican candidate not only disagrees with the

progressiveness of her taxation system but also ignores a variety of social issues central

to a modern society. Trump has only acknowledged the need to preserve social security,

while guaranteeing Medicare for future generations. Yet Trump offers a taxation system

that would revitalize the economy by fomenting entrepreneurship and expanding existing

businesses, thus indirectly increasing tax collections.

America does not need more progressive taxes but it desperately needs welfare

and social programs. Currently, the top 1% of America, who earn more than $730,000 per

year, are responsible for 16.7% of pretax income but pay 27.9% of all federal taxes

(Rubin). As the Tax Foundations president, Scott Hodge, stated, almost no other

industrialized nation depends on the rich to pay their bills more than the United States.

Therefore, all we need is a shift in the allocation of funds that favors these social

programs. Why? Because 54% of federal discretionary spending in America went to the

military in the fiscal year of 2015, while 45 million Americans are desperately in need of

the militarys dollars to better their standard of living and become active agents in the

economy. Their increased participation would grow revenues, which could then be

reinvested into the military, for example. Of course, this is all theoretical but it does

illustrate an imbalance and a lack of focus on the real issue behind unsatisfying social

welfare programs.

Instead of reallocating government spending, Clinton is focused on taxes.

Clintons tax reforms would bring in $1.9 trillion over a decade; however, the effects on

businesses would be disastrous hindering the implementation of welfare programs

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because of reductions in tax contributions, especially from corporations. Greater taxation

disincentives investment, which in turn lowers the demand for money supply, thus

decreasing interest rates and sending foreign investors looking for more profitable

markets. By 2014, cumulative direct foreign investments in the U.S.A represented $2.9

trillion according to the Organization for International Investments. Therefore, one must

look no further than simple economic theory in order to presume that the U.S would be

faced with a recession if taxes were increased. Furthermore, American companies are

hoarding money internationally because nationalizing is too costly. Matt Egan argues that

this was the reason why American companies held $1.4 trillion in cash in the last quarter

of 2015. As Trump contends, lessening the tax burden on nationalizing foreign

investments could provide the governments largest incremental revenue stream. John F.

Kennedy outlined, in a speech delivered to the New York Economics Club in 1962, the

enigmatic relationship between tax increases and decreased earnings by the government:

It is a paradoxical truth that tax rates are high today and tax revenues are too low and the

soundest way to raise the revenues in the long run is to cut the rates now. Trump agrees.

It is clear that these programs are costly and that the U.S does not have the necessary

means to pay for them. However, the Republican candidates plan for creating wealth by

slashing corporate taxes and taxes on the middle class can close this gap and provide the

money the programs require. It truly is a pity that his focus is far from the needs of the

poor. Trump promises to cut government spending in order to remedy Obamas budget

deficit due to an unjustified yet ubiquitous Republican belief that deficits are threatening.

This is even more unreasonable than Clintons take on taxation, especially considering

the low interest rates currently in place.

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 In sum, both candidates are missing key elements in approaching income

inequality. Trump heavily relies on private initiative to ensure the jobs, education, and

care needed to bridge the gap between social classes, while Clinton bets on tax reforms

that will cause economic distress, harming those who she intended to help. It is true,

however, that the U.S experienced growth from 1993 to 2003 despite the increase in taxes

and that lower taxes do not necessarily correlate with growth. Nonetheless, the clearest

path towards acquiring the funds necessary for social reform seems to be a part of

Trumps plan. It is worrisome that none of the two main candidates have a logical

strategy for tackling income inequality since economical radicalism will be very costly to

America, mainly to those that cannot afford it.

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 Works Cited

Archive, Shin's. "Is Leftist Era Fading in Latin America? Ask Colombia and Brazil By

SIMON ROMEROOCT. 3, 2016." Shin's Archive:. New York Times, 03 Oct.

2016. Web. 04 Oct. 2016.

Atkinson, Anthony B. "'Why It's So Hard to See Politicians' Financial Data' Diff Viewer

(0/1) - News Sniffer." 'Why It's So Hard to See Politicians' Financial Data' Diff

Viewer (0/1) - News Sniffer. Thestar.com, 29 Sept. 2015. Web. 04 Oct. 2016.

Egan, Matt. "Heres How Much Hillary Clintons Tax Plan Would Hit the Rich." Investor

Insider. CNN, 20 Mar. 2015. Web. 04 Oct. 2016.

Kasperkevic, Jana. "Welfare Programs Shown to Reduce Poverty in America." The

Guardian. Guardian News and Media, 12 Nov. 2014. Web. 04 Oct. 2016.

Long, Heather. "Taxing the Rich Won't Solve Inequality." CNNMoney. Cable News

Network, 13 Oct. 2015. Web. 04 Oct. 2016.

Organization for International Investment. "Foreign Direct Investment in the United

States." Foreign Direct Investment in the U.S 2016 Report. Organization for

International Investment, Feb. 2016. Web. 04 Oct. 2016.

Rubin, Richard. "Donald Trump vs. Hillary Clinton on Tax Cuts for the Rich."WSJ.

Wsj.com, 27 Sept. 2016. Web. 05 Oct. 2016.

Shaheen, Faiza. "This Is How We Solve Inequality." The NEF Blog. NEF, 9 July 2014.

Web. 4 Oct. 2016.

Wihbey, John, and Mike Beaudet. "Why Its So Hard to See Politicians Financial Data."

New York Times. New York Times, n.d. Web.

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