In yesterday’s Washington Post, Larry Summers had an insightful op-ed about inequality in America, arguing that the current public-policy debate isn’t focused on the right problems (e.g., Summers’s old boss, President Obama, has wrongly asserted that, to address our economic malaise, we need to take the problem of high inequality by the horns). Summers suggests that we’d be better served, for a few reasons, by focusing on equality of opportunity:
. . . . Progressives argue that widening inequality jeopardizes the legitimacy of our political and economic system. . . . Conservatives . . . take umbrage at the suggestion that there is something wrong with success on a grand scale. And they worry that policy measures taken to directly combat inequality will have perverse side effects.
Both sides make good points. While I support moves to make the tax system more progressive, the reality is that inequality is likely to continue to rise, even with all that can responsibly be done to increase tax burdens on those with high incomes and redistribute the proceeds. Measures such as allowing unions to organize without undue reprisals and enhancing shareholders’ role in setting executive pay are desirable. But they are unlikely to even hold at bay the trend toward increasing inequality.
Where does this leave the public policy agenda? The global track record of populist policies motivated by inequality concerns is hardly encouraging. However, passivity in the face of dramatic economic change is equally unlikely to be viable. Perhaps the debate and policy focus needs to shift from inequality in outcomes, where attitudes divide sharply and there are limits to what can be done, to inequalities in opportunity. It is hard to see who could disagree with the aspiration to equalize opportunity, or fail to recognize the manifest inequalities in opportunity today. . . .
He then goes on to lay out several ideas for increasing that equality of opportunity, including a general strengthening of public education, a democratization of higher education, and maintaining estate-tax rates and trying to discourage the wealthy from exploiting loopholes to hand on wealth to their children.