The protestors of the Occupy Wall Street complain about the unfairness of the bailout, unemployment, and taxes. But to make the U.S. economy more fair, Washington needs to use the capitalist system, not to destroy it.
The only way to reduce the U.S. deficit is to spur economic growth, argues Grover Norquist, and the only way to do that is to cut taxes. Andrea Campbell demurs, contending that lowering taxes will only pad the pockets of the rich.
The amount of resources the American public and private sectors commit to all forms of welfare is massive -- the fifth highest outlay in the world. Yet the American way of distributing that money does less to reduce poverty and inequality than that of virtually any other rich democracy. The United States can, and should, reform its welfare state, and it does not need to resort to European style socialism to do so.
(JD Hancock / flickr)
The most important debates in U.S. politics today center on the cost and the role of government. Cutting taxes, limiting expenditures, and reducing debt have become the chief concerns of Republicans, whereas Democrats generally seek to preserve or even expand government spending and are willing to raise taxes to do so. The looming expiration of the George W. Bush tax cuts at the end of 2012 and the economy's weak recovery give these debates special urgency, as decisions made in the next few months are likely to shape the nation's economic, social, and political trajectory for years to come.
Behind each party's position lies not only a particular collection of interest groups but also a story about what the government's role in the U.S. economy is and what it should be. Democrats think Washington can and should play a more active part, using taxation, regulation, and spending to keep the economy growing while protecting vulnerable citizens from the ravages of volatile markets. Republicans, in contrast, think Washington already does too much; they want to scale government back to liberate markets and spur economic dynamism.
When mulling these stories, it can be useful to put U.S. fiscal policy in perspective. Compared with other developed countries, the United States has very low taxes, little redistribution of income, and an extraordinarily complex tax code. These three aspects of American exceptionalism deserve more attention than they typically receive.
EXTREMELY LOW AND INCREDIBLY CONSISTENT
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