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Tuesday, October 04, 2011

Kenworthy: To Boost Incomes, Uncle Sam Should Lend a Hand

Lane Kenworthy sys we need to expand "the Earned Income Tax Credit to make it a full-blown middle-class earnings supplement":

To boost incomes, Uncle Sam should lend a hand, by Lane Kenworthy: The Great Recession and its aftermath are at the forefront of Americans' concerns right now. But wages were in trouble long before the economic crisis hit in 2008. After rising steadily for a generation following World War II, the wages paid to ... the lower half of the earnings distribution have barely budged since the 1970s.
That isn't because the US economy has failed to grow. It's because growth of wages no longer tracks growth of the economy. Economic growth and wage growth have become decoupled.
This is worrisome. Rising income, even more than the opportunity to go from rags to riches, is at the core of the American dream. And people who feel they are better off than before tend to be more generous, altruistic, and participatory. If wage stagnation continues, America risks heightened frustration, alienation, and selfishness.
Moreover, given that pay and incomes have been growing rapidly for those at the top, the country has experienced a sharp increase in polarization. At some point this could engender serious societal friction. ...
What, then, can be done?
... Improving educational attainment might help. ... But boosting school completion rates is difficult, and the payoff is likely to come only in the long run.
A fast-acting solution
To get household incomes rising sooner, I suggest expanding the Earned Income Tax Credit to make it a full-blown middle-class earnings supplement. In its current form, the EITC rises with household earnings up to about $13,000 (for a family with two children), then stays at a flat level, and then begins to decrease, reaching zero at earnings of about $40,000. The maximum EITC benefit amount is around $5,000.
It's a very good program, boosting the incomes of households with low earnings while encouraging employment. It could be revised to better help working Americans without children and to reach households further up the income distribution. ...
This proposal is unlikely to get much of a hearing in today's political climate. But politics can shift quickly and in unexpected ways. With wisdom and public pressure, we may find our way back to reliable income growth for ordinary Americans.

    Posted by on Tuesday, October 4, 2011 at 11:34 AM Permalink  Comments (14)


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