OP-ED | Income Inequality Is A Bipartisan Issue
Nationally, the issue of rising poverty and income inequality is gaining focus as a rare bipartisan concern. For both humanitarian and fiscal reasons, this is a good thing. As Connecticut continues to experience a pronounced demographic transition to a state with extreme income disparities, we should pay attention to the national debate.
Both parties in Washington have expressed concern that something needs to be done. As usual, different approaches are tied to the emotion of partisan politics. Rather than design policy based upon emotion and posture, let’s promote what works. Therein, however, lies the challenge.
From 1900 through the beginning of the Great Recession of 2008, local, state, and federal government spending expanded from 7 percent to over 40 percent of our national GDP. At $7 trillion dollars, U.S. government spending is the 3rd largest economy in the world. In Connecticut, our state budget has grown well over 150 percent over the past 20 years as our economy has constricted and we have seen zero job growth.
Now that money is scarce and need is expanding, the blue and red people agree we should act. Progressives are outraged that poverty and need are pervasive. Conservatives are angry that it is so expensive. Fine. At least we agree we need to do something — but what?
The truth is that we don’t know.
For as long as anyone can remember, government has established its commitment to an issue by directing funds toward broadly defined labels. We invest in sound bites, such as education or fighting crime. Underlying these labels and expenditures are programs rarely evaluated for effectiveness or financial consequence. Efforts to do so challenge historical funding streams upon which entire economies are based. Poking a $7 trillion bear is a dangerous game.
This is not a partisan issue. Both parties represent constituencies passionately clinging to economic inefficiencies. Democracy is served by funding what works. A non-partisan fiscal analysis tied to any issue funded with public money — especially poverty and income inequality — will benefit society as a whole because effective strategies will reduce need and increase revenues.
The tools to capture data surrounding a wide variety of human behavior are exploding in richness and utility. We have information about why someone buys an iPhone versus a Samsung Galaxy, but we can’t evaluate the effectiveness of $7 trillion dollars? This does not make sense. To begin the process of directing funding toward programs that are successful and have positive economic impact requires a nonpartisan function that measures and evaluates how we spend public dollars. We know we can fund this function — we choose not to. The lack of this function provides an opportunity for financial gain, pure and simple.
Programs that improve economic conditions and decrease social service expenditures should be identified and scaled. Addressing root causes will have the most practical economic impact and, as a result, this should be an approach that can generate significant bipartisan appeal. This is not a quick fix centered on funding one “thing.” Solutions are well beyond our traditional four-year election cycle and require people working together through nasty campaigns and administrative transitions.
For example, transforming people that cost money into folks that generate revenue is an idea with which few could argue. However, implementing programs is a daunting task as a constricting economy and barriers to employment — both manufactured and real — can prove to be overwhelming. A clear and articulate financial argument supporting these investments will go a long way in creating the correct long-term political environment for economic empowerment programs to succeed.
During our nation’s history, financial crisis has followed when we have not closely monitored our financial resources. The failure of our capital markets was remedied by disclosure rules tied to the sale of securities and accounting, specifically the adoption of GAAP. Our public expenditures now need similar reform. Disclosure and analysis of our public investments has the potential to diffuse an increasing cynicism toward government.
There is little that unites us politically these days. In an interesting twist, it appears that improving income inequality and reducing poverty is an issue that both progressives and conservatives can agree upon — if we can just speak the same language.
Brian O’Shaughnessy of New Haven is a principal in the firm Community Impact Strategies Ltd.