The Democratic Party has long advocated strong government, paired with the power of markets, to achieve broad economic well-being. But for the first time in the five decades I’ve been involved in Democratic policy and politics, the fundamental structure of our market-based economic system is being seriously debated. A recent Gallup poll found that a majority of young Americans have a positive view of socialism — however amorphously defined — while their opinion of capitalism has declined.
This concerns me: No country has succeeded economically in the postwar era without a baseline commitment to markets. Even India and China only began to see serious growth when they moved from state control toward markets (though China today is a complicated mix of the two).
Capitalism’s critics are correct that there are many critical issues — from climate change and overcoming poverty to health care costs and coverage — that markets, by their nature, will not address. Our failure to meet these challenges has led to understandable anxiety and anger in our nation and our party. But the solution is not to abandon market-based economics, which is perhaps the only way to achieve long-term, inclusive growth. The solution is to pair markets with strong and effective government that meets our challenges.
We should fiercely debate the best way to do that. The Democratic Party is not bound by a rigid ideology; at its heart, it is inclusive and pragmatic. Focusing on our shared goals is Democrats’ best hope to beat President Trump in November, and the only way the next Democratic president could enact his or her agenda.
An illustrative example of a policy area where a more cohesive approach is needed is income inequality, a concern virtually all Democrats share. Reading the coverage of the presidential primary, you could be forgiven for thinking my fellow Democrats have to choose between two stark alternatives: a wealth tax on one hand, and supporting the status quo on the other.
I believe there is more potential for common ground — and intellectually honest give and take — than the drama of the primary suggests. Finding this common ground, however, will require both sides to make concessions. For the party’s more moderate factions, that starts with recognizing that the measures Democratic presidents have been able to achieve to address income inequality have fallen short. The gap between the wealthiest 0.1 percent of Americans and the other 99.9 percent is greater than ever. To close great and growing wealth and income gaps, and to raise badly needed revenue for public investment, it’s not enough to lift the bottom up; we need to ask more of those at the top, too.
Moderate members of the Democratic Party must recognize the popular resonance of a wealth tax, even if, like me, they don’t support it. Roughly 74 percent of American voters, including a majority of Republicans, support a 2 percent wealth tax on those worth more than $50 million. When I served in government, Americans were wary of taxing the very wealthy, but public opinion — and the politics of taxation — has changed. A wealth tax is on the table.
But it shouldn’t be the only option on the table. Just because the wealth tax is good politics doesn’t necessarily make it good policy. A plan to bring the top down and reduce inequality must be constitutional and administrable. There are strong reasons to believe a wealth tax is neither. A wealth tax is likely to be struck down by the Supreme Court as a direct tax not apportioned among states, as the Constitution requires. And even if it survives legal challenge, valuation is likely to prove prohibitively challenging and taxing illiquid assets presents serious problems.
Even those who strongly support a wealth tax must concede that other plans exist, and that they ought to be part of the debate. Economists have put forward revenue-raising proposals that reduce inequality, such as raising corporate, capital gains, and personal income tax rates; broadening the tax base; converting deductions to more limited credits; strengthening the estate tax (including by eliminating stepped-up basis, a tax code provision that allows heirs to minimize estate taxes); and imposing a financial transactions tax, as recently proposed by Mike Bloomberg and supported by many leading progressives.
Such a tax policy agenda may not have the bumper-sticker appeal of a wealth tax, but it would be likely raise more revenue and do more to unwind concentrated wealth — and it’s constitutional and doable.
Of course, neither wing of the Democratic Party is likely to completely sell the other on its position. What matters is that Democrats unite around shared goals, while recognizing that we may initially disagree on the steps we ought to take. Each side should treat the other as an eventual ally to be reconciled with, rather than an enemy to be demonized. The alternative is to allow those who are determined to do nothing whatsoever to reduce inequality to take advantage of a divided opposition and exacerbate our economic challenges.
This is true not just when it comes to income inequality, but with all our pressing issues. The real choice Democrats face is not between the left and the center. It’s between vicious debates that yield pyrrhic victories and fail to deliver real change, or a better, more pragmatic approach to intraparty debate that gives America a chance to tackle its most pressing challenges. Let’s hope we choose the latter.
Robert E. Rubin was the secretary of the Treasury from 1995 to 1999.
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