President Trump’s tax bill includes provisions to reduce tax rates on corporations, “pass-through” entities, and wealthy individuals, and removes the alternative minimum tax and estate tax. For the good of the country, particularly now, I believe we should raise ― not reduce ― those tax rates.
The additional revenue from these tax increases should be used to fund an American Dream Opportunity Trust Fund, an independent non-partisan entity charged with making American dream opportunities a reality for all citizens. This organization should be headquartered outside of Washington, D.C. and audited by the Office of Management and Budget.
This is an urgent need because we need to plan for the “Smart Machine Age.”
The Smart Machine Age
Over the next decade or two, technological advances have a high probability of displacing as many as 80 million U.S. workers (according to the chief economist of the Bank of England) or 47 percent of the U.S. workforce (based on a 2013 study by leading researchers at Oxford University). According to a study by McKinsey & Company, by adapting technologies already demonstrated as of 2015, as much as 45 percent of current U.S. job tasks could be automated now ― that includes 20 percent of a CEO’s work activities. Not even the most highly skilled or paid jobs are safe. Upcoming automation will impact every sector, including service and professional jobs. The totality of disruption likely will far exceed ― by a magnitude approaching ten times ― the loss of manufacturing jobs to globalization and technology in the last two decades.
Some experts (“techno-optimists”) say not to worry because advancing technology will generate plenty of new, better jobs to replace those automated jobs, because that’s what happened during the Industrial Revolution. In other words, they believe history will repeat itself. I’m very skeptical of the techno-optimistic view for two reasons. First, that prediction downplays the widespread human havoc created by the Industrial Revolution, which in England lasted 60-80 years before society adjusted. Can our diverse and divided society withstand decades of turmoil? That’s a risk with a huge downside. Second, the techno-optimists assume that technology will produce tens of millions of new jobs that technology itself won’t be able to do. That’s highly questionable based on consensus predictions about the arc of AI innovation. And it ignores the fact that any new jobs created for humans by technology will inherently require new, highly advanced skills that displaced workers won’t have and may be unable to attain.
It’s highly possible that work as we know it simply won’t exist for most citizens. During the Great Depression, unemployment reached 25-29 percent. We’re talking about levels that may double that. That will exacerbate income inequality, which already is at its highest level since the late 1800s.
Upward social mobility also will be more illusory in the Smart Machine Age. The likelihood that a child born into poverty will escape it during his or her lifetime is already very small. Even for middle class children, the likelihood of earning more than their parents has declined from 90 percent to only 50 percent, as middle-class families essentially have not participated in income growth over the last 30 years. In fact, the bottom 50 percent of income earners have lost income share since 1980. All the income growth has been captured by the very wealthy.
The American Dream Opportunity Trust Fund
The “land of opportunity” and the American Dream are already myths for many citizens, but the coming technology tsunami will increase socioeconomic inequality to levels we’ve never experienced. To mitigate these risks requires a systemic approach that includes the business, education, and public interest sectors and government coordination and funding. Let’s begin now by creating and building an endowment for the American Dream Opportunity Trust Fund to keep the American Dream alive for every citizen. Let’s return to a culture that values the Common Good like that of the Great Prosperity (late 1940s to mid 1970s) when all income levels participated in economic success without huge disparities. Let’s initiate a new era of Shared Great Prosperity.
Ed Hess is Professor of Business Administration and Batten Executive-in-Residence at the University of Virginia Darden School of Business