## How to Make America More Equal

## Source details

**Canonical URL:** [How to Make America More Equal](https://www.imf.org/-/media/files/publications/fandd/article/2020/december/how-to-make-america-more-equal-boushey.pdf)

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### Disparities highlighted by COVID-19
- The COVID-19 pandemic exposes pervasive economic and racial inequalities that increase systemic risk and hinder recovery.
- Recovery prior to the pandemic (the decade after December 2007) was uneven:
  - The top 1 percent "regained what they had lost by 2012."
  - "As of March 2020, US working- and middle-class families had barely recovered their lost wealth, and many families, especially those of color, never recovered."
- The current recession is described as resembling "a sideways Y," with an upper branch benefiting from stock market recovery and employment, and a lower branch facing prolonged struggle.
- Wealth and income concentration is skewed toward the wealthiest 5 percent (distribution by quintile illustrated in the source).

### Causes of inequality identified
- Markets and ideology:
  - Since the 1980s, policy reliance on "unfettered markets" shifted economic risk away from corporations and the wealthy toward medium- and low-income families.
  - Low-income workers have borne the brunt of job loss and exposure risk during the pandemic.
- Tax policy and public investment:
  - "President Donald Trump’s 2017 tax cut" is characterized as benefiting the better-off and as part of a long-run tax-cutting philosophy.
  - "Public investment as a share of GDP... has fallen to its lowest level since 1947."
- Worker power and labor markets:
  - "Eroding worker power" due to anti-union rulings and "right-to-work" laws in 27 states weakened bargaining for wages, benefits, and safety.
- Economic concentration and antitrust:
  - Increasing industry concentration has allowed firms to "set prices, eliminate competitors, suppress wages, and hobble innovation," and may be "dampening firms’ investment."
  - Federal aid during the downturn has "provided far greater aid to large businesses than to small ones."
- Measurement problems:
  - As inequality rose toward "its 1920 levels," GDP growth increasingly reflects gains for the top 10 percent, making GDP a poor indicator of average Americans’ welfare.
- Racism and sexism:
  - "The median earnings for a Black household are 59 percent of those of a White household."
  - "For men and women of all races, a median woman earns 81 cents for every dollar earned by a man."
  - Job segregation places many women and minorities in essential frontline work that often lacks paid sick time and employer-provided health insurance.

### Building a strong, equitable economy — key prescriptions
- Immediate priority: "Eradicate COVID-19" as the first priority for public health and the economy.
- Major public investments are required to address:
  - A "costly health system" that leaves millions with insufficient care.
  - An education system that "is designed not to end inequality but to preserve it."
  - Lack of basic economic stability for most families.
  - Climate change.
- Fiscal approach to investment:
  - Implement "significant tax increases, primarily or entirely on the wealthy" to fund long-term solutions.
  - Tax "the enormous wealth concentrated at the top that is being saved, or kept overseas" and not invested in the economy or societal problems.
  - Proceeds of wealth taxation must be directed to benefit the majority of the nonwealthy to address racial inequities.
- Antitrust, competition, and corporate aid conditions:
  - Ensure recovery programs do not exacerbate concentration; direct federal funds to productive uses that support workers and customers.
  - Corporations receiving aid should be barred from issuing dividends and carrying out stock buybacks.
  - Banks receiving support should be required to suspend capital distributions "during the crisis" to support lending to the real economy.
  - Strengthen antitrust enforcement and bolster laws governing mergers and exclusionary conduct.
  - Consider creating a digital regulatory authority to enforce privacy laws and enhance competition in digital markets.
- Data and measurement:
  - Disaggregate income at all levels to measure progress for all groups, since aggregate GDP will be misleading.
- Race- and gender-targeted policies:
  - Direct wealth-tax proceeds to urgent investments such as "COVID-19 testing and treatment in communities of color," policies that "expressly and progressively support low-wage workers and care workers," and engagement with minority-owned small businesses.
  - Address the gender earnings gap by establishing a national paid family and medical leave policy and a national program to ensure access to quality, affordable childcare and prekindergarten education.
  - Legislation to accomplish paid leave and childcare has been introduced in Congress and "should get serious consideration in the next Congress."

### Implementation and political context
- The author argues markets cannot "perform the work of government" and that transformative policy changes are necessary to produce "strong, stable, and broad-based growth and prosperity."
- The United States faces political obstacles:
  - "Deep partisanship and a constitutional and electoral system that makes it far easier to block transformative policies than enact them."
- Nonetheless, there is "reason for optimism" given shifting public conversations driven by COVID-19, the recession, the Black Lives Matter movement, and recent election dynamics.
- The advantage lies with those who "develop and advocate progressive policies to reduce inequality and build an economy that produces strong, stable, and broad-based growth."

*Author: Heather Boushey*

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_Source: https://www.imf.org/-/media/files/publications/fandd/article/2020/december/how-to-make-america-more-equal-boushey.pdf_