THE BLOG
12/23/2013 11:01 am ET Updated Feb 22, 2014

A Democratic Contract With America: How to Retake the House and Combat Economic Inequality

Woman holds a sign saying

DEMOCRATIC CONTRACT WITH AMERICA

PREAMBLE:
As Democratic Members of the House of Representatives and as citizens seeking to join that body, we propose a clear set of policies to address the most important issue of our time: income inequality.

First, we must define the problem and understand how we got here. After the 1980 election of Ronald Reagan, our government shifted to a policy of trickle-down economics. Since that time, the government chose -- through tax and other policies -- to favor the wealthiest among us at the expense of average Americans.

From 1979 to 2007, the income of households in the top 1 percent went up by 275 percent. For households around the middle, their income went up by a little less than 40 percent, and for those near the bottom, income went up by a measly 18 percent. And in case you're wondering, this is after people paid income and other taxes to the government, and after government benefits were paid out. Right now, the income gap separating the top 1 percent from the rest of us is at its highest point since just before the Great Depression hit.

The top 1 percent have captured the lion's share of income growth in recent decades. That wasn't an accident, it was a result of tax cuts for the rich and other policies that our government enacted under Republican presidents named Bush and Reagan, which were partially undone by Democratic Congresses and presidents named Obama and Clinton.

Now is the time to finish that job. We must have a rising economy that really does lift all boats, not just redistribute wealth upward. In fact, that's the kind of economy we had from World War II until the 1980s. If you elect a Democratic majority to the House of Representatives in 2014, we can do it again. Here's how.

DEMOCRATIC ACTIONS:

1) Increase the federal minimum hourly wage to $12.50 and index it to inflation.

2) Create jobs through federally funded infrastructure spending.

3) Improve education--and save money in the long run -- by funding universal pre-kindergarten.

4) Increase the earned income tax credit and make more middle-income families eligible.

5) Increase the personal exemption on federal income taxes by $500.

6) Shore up Social Security by subjecting income over $300,000 to the payroll tax.

7) Implement the Warren Buffett Rule to ensure that people earning over $1 million are paying at least an effective tax rate of 30 percent.

8) Eliminate "Mitt Romney's favorite tax break" to ensure hedge fund managers pay regular income tax rates on their incomes.

9) Eliminate subsidies that go to millionaire farmers.

10) Close other corporate tax loopholes, including ones that reward corporations for moving jobs overseas.

WHY WE PROPOSE TO DO THIS:
This bold plan will restore equality of opportunity in our country. It enshrines the central value of the American Dream, that every American child should have an equal chance at achieving the good life: a job that allows him or her to support a family, and eventually enjoy a safe, secure retirement.

Our plan is fiscally responsible. First of all, increasing the minimum wage will directly save our government money by leaving fewer working people in need of government support. Today, millions of people who work full-time still need Medicaid, food stamps, and other aid because the minimum wage is too low to bring them out of poverty. McDonald's is even telling its employees to seek out government assistance.

Not only will raising the minimum wage will save the government money, so will funding universal pre-kindergarten. In the long run, every dollar invested in pre-kindergarten generates about $7 in overall savings to federal, state, and local governments according to a study out of the University of Texas and Rice University. And -- don't forget -- kids who otherwise wouldn't have access to pre-school do better for themselves as well. A National Institutes of Health study found a payoff of "$11 of economic benefits over a child's lifetime for every dollar spent initially on the program."

We Democrats also want to directly create jobs by undertaking desperately needed spending on roads, bridges, the electrical grid, and other parts of our long-neglected infrastructure. Both parties used to recognize the need to keep our infrastructure strong in order to support economic growth. If Democrats have to go it alone on that front, so be it.

The other proposals we've made here simply and directly undo the favoritism that trickle-down policies showered on the top 1 percent. They will shore up Social Security's long-term future, help reduce the radically high levels of income inequality back down to where we stood before 1980, and make sure our contract doesn't require more government spending overall.

One of our greatest Supreme Court Justices, Louis Brandeis, once said: "We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can't have both."

Children born to a middle-income or poor family should be able to rise as high as their abilities and efforts will take them. That's the American Dream, but it hasn't been the case for too many of the 99 percent in recent decades. We Democrats pledge to fight to restore equal opportunity for every American.

We know that American people support these kinds of measures to fight income inequality and the lack of upward mobility in our society. Here's the most recent polling from the Washington Post/ABC.

Last time I checked, I hold no official position within the Democratic Party or among Congressional Democrats. They, and you of course, can feel free to quibble with some of the specific proposals I've made. Additionally, the specific numbers can be adjusted to ensure that the overall proposal is revenue neutral -- when properly scored, i.e., indirect savings must also be included, things such as the increased economic growth and thus tax revenue that result from infrastructure spending and a minimum wage increase.

The overall thrust of the argument in this proposed Democratic Contract with America, however, is not open to negotiation. The Democratic Party has to be the party of regular people, of the people who are working hard and struggling to get by. We have to make sure that our economy works for them, not just for those at the top. It has to work for every American. Otherwise, what's the point of the Democratic Party?

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There's plenty more data out there, but below are graphs to support the claims I made above on income inequality and infrastructure spending. One wouldn't include them in the text of any such contract, so I've placed them here as a kind of appendix. And for anyone wondering, increasing the personal exemption is strongly progressive, in particular because the exemption phases out at higher income levels.