So, there’s a recent book by Scheve and Stasavage [Taxing the Rich, a History of Fiscal Fairness in the United States and Europe], who argued through a history of data from many countries, to look at what causes taxes on the high-income people to go up? And what causes redistributions to low-income people to go up? You might think rising inequality does that. But they said that’s not it. The only time our system becomes more progressive is war time. When we’re fighting a war, people become much more concerned about low-income people. And for some years after that there will be a more progressive system.
But it doesn’t respond to inequality. So, I think that one thing I’d like to see is plans made ahead for what we will do if inequality becomes worse, much worse than it is now. And it would be a plan within maybe even the framework of these existing systems, to adjust the way benefits are defined, to adjust the taxes on the wealthy. But it would be a contingency plan made now. And it has a better chance of happening if it’s done in advance. It becomes much more of an insurance.
You know, you have to insure your house before the house burns down. So, we should set up a system to deal with the possibility of higher inequality in the future now, before it happens. Nobody is doing this. I’m saying we ought to.
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