Rising inequality “is the defining issue of our time,” said President Obama in his Osawatomie speech that echoed the “New Nationalism” address Theodore Roosevelt delivered in that same Kansas town a century ago.
In the last two decades, the average income of the top 1 percent in the U.S. has grown by 250 percent, bemoaned our populist president, while the income of the average American has stagnated.
“This kind of inequality – a level we haven’t seen since the Great Depression – hurts us all,” said Obama.
“Inequality … distorts our democracy. … It gives an outsized voice to the few who can afford high-priced lobbyists … and runs the risk of selling out our democracy to the highest bidder.”
But is the president, a former disciple of radical socialist Saul Alinsky, truly serious about closing the inequality gap?
Or is this just political blather to frame the election year as a contrast between Barack Obama, champion of the middle class, and a Republican Party that supposedly hauls water for the undeserving rich?
Obama’s retort to those who say he is waging class warfare?
Republicans alone prevent him from raising the top U.S. income tax rate from 35 to 39.6 percent, where it stood under Bill Clinton, and advancing America toward true equality.
Republicans reply that the top 1 percent of U.S. taxpayers already carry 40 percent of the income tax load, while half of the nation and a majority of Obama voters pay no income tax at all. Moreover, these free-riders also consume almost all of the $900 billion the nation spends annually on Great Society programs.
Yet, a path has just opened up to test the seriousness of the president, to determine if he is a phony on the inequality issue, or a true egalitarian eager to close the gap.
That opportunity comes from a report last week that income inequality in America is at its greatest in the electoral precinct where Obama won his largest majority: Washington, D.C.
In Washington, the top 5 percent of households have an average income of $473,000, highest of all of the 50 largest cities in America. The average income of the top 20 percent of district households is $259,000. Only San Francisco ranks higher.
Moreover, that $259,000 average household income for the top 20 percent is 29 times the average household income of the bottom 20 percent, which is only $9,100 a year.
The citadel of liberalism that Obama carried 93-7 has a disparity of incomes between rich and poor that calls to mind the Paris of Louis XVI and Marie Antoinette.
Washington is a textbook case of the inequality Obama says “distorts our democracy,” and it is the ideal place to prove that he is serious.
For Washington is Obamaville. The mayor is a Democrat. The city council is Democratic. There are more lawyers and lobbyists concentrated here than in any city in America.
Here we have the perfect test case – the most liberal city in the republic, with the greatest income inequality, where Obama’s political clout and personal popularity are highest. And there is no obstructionist Republican cabal to block progressive reforms.
If Obama and the Democratic Party will not use their power to close the inequality gap right here in their own playpen, how do they remain credible in Middle America?
How to proceed, if the left is serious about inequality?
Consider. The District of Columbia income tax reaches 8.5 percent after the first $40,000 in income. A 5 percent surtax takes that rate to 8.95 percent for incomes over $350,000.
Yet, half a dozen states have higher and more progressive income tax rates than that.
Obama should call on his allies in the city government to raise the district income tax to the 15 percent level New York had in the 1970s.
Since district income taxes are deductible against federal income taxes, this would translate into an actual top tax bite on the Washington rich of 9.75 percent. Is that too much to ask of true progressives?
The new revenue could be transferred to Washington’s working class and poor through tax credits, doubly reducing the district’s glaring inequality.
Republicans will argue that raising the district tax rate to 15 percent on incomes above $250,000 will precipitate an exodus into Maryland and Virginia, where the top tax rates are not half of that. Conservatives believe as an article of faith that tax rates heavily influence economic behavior.
But Obama, who has kept the U.S. corporate tax rate among the highest in the world and wants U.S. personal tax rates raised closer to European levels, rejects this Republican argument.
Has he the courage of his convictions?
When the district’s schools were desegregated in the 1950s, liberals fled. Let us see if they will stick around for a “progressive income tax” to reduce this unconscionable inequality between Kalorama and Spring Valley – and Anacostia and Turkey Thicket.