A very clear argument is emerging in this year's presidential campaign: higher taxes for the wealthy and investing in the middle class versus lower taxes for the rich and cutting middle class entitlements. The Republicans argue that lowering taxes and cutting entitlements will stimulate growth -- a dubious proposition at best. The Democrats argue for more fairness in the tax code and long-term investment in the middle class.
While the logic of this debate, especially in a democracy, would seem to fall to the greatest good for the greatest number, the Republicans insist that economic growth depends on lower taxes and cutting spending. Although they may have a point that we must reduce spending in the long run, drastic cuts are never helpful for economic growth in the short term. And their argument that high taxes on the rich inhibit growth is clearly contradicted by history -- strong growth in the '50s and '60s was coupled with tax rates for the rich at 75 percent and above.
But there is a more serious question than taxes or economic growth at work here. It is the issue of political leadership and the future of our democratic society. In the recent book Why Nations Fail: The Origins of Power, Prosperity and Poverty, authors Daron Acemoglu and James Robinson argue that nations fail because of the unrestrained greed and ignorance of the political classes. Societies that are more inclusive and have restraints on the wealthiest and most powerful also do better economically.
The authors cite the differences between the absolutism of the Spanish monarchs in the 17th and 18th centuries versus the relative restraint on the British crown after 1688. The powerful Spanish elites became dissolute and corrupt, ultimately destroying their empire, while the British system flourished, mostly because of the rise of a merchant class. Rejecting the "exceptionalist" arguments of the Tea Partiers or "geographic good fortune" arguments made by Jared Diamond and others, Acemoglu and Robinson cite the corruption of a powerful, unrestrained ruling class as key to the failure of nations.
Americans have always been reluctant to see their society as rooted in a class system, or primarily ruled by tiny elites. But the financial crisis has laid bare many of the realities of our economic and political system, and it is not a pretty picture. Economic inequality has become more pronounced and, more ominously, political power is now concentrated in a wealthy elite, a trend that was cruelly accelerated by the Supreme Court's ruling in Citizens United, which opened the floodgates of political power for the rich.
The most pressing thesis of Why Nations Fail is that economic success depends on a political system -- and in particular political leadership -- that is the most inclusive. This is especially true in the emerging global economy, where technology has opened global markets, allowing greater access to millions of people. Greater inclusion has meant more growth, and nations around the world are benefitting.
However, in the United States, we are still having a debate not about greater inclusion, but about increasing the power and exclusivity of the economic and political elite. From immigration to health care and education reform, the Republicans are arguing for restricting access not only to the poor, but chiefly to the middle class. At the same time, they are arguing for a greater concentration of wealth among the elites through everything from lower tax rates and unrestricted campaign donations to limiting access to health care and educational opportunity.
The misguided Republican political and economic philosophy lies in a twisted and unrealistic view of America's history and political system. America has always succeeded when it took an inclusive approach to its political and economic system. From restraints on monopolistic trusts to welcoming immigration policies to social welfare programs such as Social Security and Medicare, America has focused throughout its history on the broadest possible political and economic participation. With the new economic and political realities of the global economy, it is more important than ever that we reject the Republicans' stunted and myopic view of our country.