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Building an Economy That Works Again

A practical blueprint for reform in the wake of the coronavirus shutdown

It’s not often we get to see the U.S. economy shaken to its core, but many of us have now seen it happen twice in just over a decade. This spring, the American economy quite literally shut itself down due to a health emergency. Large sectors of the economy will not be operating for several months, and perhaps even longer. During this period, the economy will contract by as much as 20 or 30 percent.

Who gets through this crisis more or less whole, and who does not, is almost entirely a political decision. If we feel like wiping out the shareholders in the airline industry, we can just let the market work its magic. The same would be true for the shareholders in the major hotel chains, the restaurant chains, and the cruise ship industry. We can also bid farewell to the high rollers in the financial sector who thought it was clever to speculate in junk bonds. Perhaps some major banks would also be in this category.

All of this could be accomplished by letting the market run its course through the shutdown period. As a practical matter, we are not likely to see wealthy shareholders or big actors in the financial markets among the losers in this crisis, for a simple reason: They have the political power to protect themselves. Donald Trump and the Republicans make little effort to hide their primary allegiance to the wealthy. The Democrats will feel a need to protect the interests of ordinary workers, but they too are mostly happy to ensure the wealthy are not harmed, since the rich contribute to politicians in both parties.

Given the current configuration of power in Washington, there may be little opportunity to prevent yet another big handout to the very rich, but we should at least use this second recent economic rescue of large sections of corporate America as a valuable learning experience. The unprecedented $2 trillion-plus coronavirus bailout shows yet again that determining the winners and losers in the U.S. economy is not a story about market outcomes; it is a story about how the rules get made. The idea that the wealthy in the United States are disciplined worshippers of an unfettered market is complete nonsense. The wealthy are the people who have structured the market to ensure that they get as much money as possible. We should learn from their playbook. We can structure the market so that income and wealth do not flow upward, and to ensure that the benefits of the economy are broadly shared.

Of course, any such effort will involve rewriting the economic rules that now work to remorselessly skew such benefits upward, toward the already privileged. It’s tempting to propose doing this all in one fell swoop—to take a sledgehammer to the arrangements that outlandishly benefit the rich at the expense of the rest of us. But the stubborn fact remains that when we get through this shutdown period, all the same bad actors who were there before the crisis will still be exerting outsize influence in the policymaking realm.

Despite such forbidding obstacles, the present crisis makes it clearer than ever that we must envision a different American economy—one that’s less unequal, less vicious, and less prone to force people into unsustainable trade-offs that pit their basic health and well-being against the interests of an elite caste of patent monopolies, private-equity titans, tech moguls, and finance professionals. I should stipulate at the outset that this preliminary sketch of what such an economy can and should look like will not be a standard wish list of social-democratic policy aims, such as free college, universal day care, and Medicare for All. These would figure prominently in my own perfect-world roster of economic priorities, but the immediate task ahead is to sketch out concrete, achievable measures—programs that would be politically feasible while also serving as real steps forward to achieving longer-term goals.

One other caveat is in order: We’ve already seen a number of analyses laying out what the economy will look like in the post-pandemic world. These are best ignored, since the shape of the economy will be determined far more by the course of the coronavirus than by any immediate economic factors.

If, for example, after a couple of months we have developed treatments that bring down the mortality and morbidity rate to levels comparable to a conventional flu—or, alternatively, have improved testing to the point where we contain the spread—we should be able to operate the economy more or less normally. On the other hand, if we have the virus only semi-contained, with new outbreaks constantly arising, forcing new shutdowns, we will face a far worse economic situation. An expert in epidemiology can tell you which of these scenarios is most likely, but economists are just making stuff up when they try to predict the post-pandemic economy without first knowing how these fundamental issues are likely to play out.

But whatever course the virus takes, there are some things we can say. First, a mass reopening of millions of businesses will be chaotic. After being shut down for several months, stores, restaurants, and other businesses will suddenly be rushing to buy everything from pens and paper to bathroom supplies. Depending on how much of our manufacturing capacity has been shut, this backlog will be filled in a span of days, weeks, or months.

Far more important, businesses will have to reemploy their workforce. If they have been continuing to send out paychecks through the crisis, they will generally be able to count on having most of their workforce back. If they just laid off everyone and did not send out checks, then they will be forced to hire and train new staff. This is likely to be a difficult task even for businesses such as restaurants that employ relatively less-skilled workers.

At the same time, we will probably see a big surge in demand. The rescue package approved by Congress does a good job of keeping workers whole through this disruption. That should leave them with a lot of money to spend—and after being cooped up for so long, they’ll be anxious to go to restaurants and movies, and to travel. A surge in demand, combined with an at least temporary inability of businesses to keep up, is a pretty sure recipe for inflation. This is not necessarily a big deal, so long as it represents a onetime jump and not a sustained wage-price spiral. But if the Federal Reserve Board responds by jacking up interest rates, it could lead to a very bad story.

Another important thing to note in this connection is that sorting out bills will be an enormous mess. A huge number of bills, starting with tax obligations, will not be paid for the duration of the shutdown. This means that outstanding payments will be a massive headache to sort through once business returns to something like normal.

But the bigger challenge ahead is to ensure that “normal” translates into far more just economic outcomes for the vast majority of Americans. If the November election produces a Biden presidency, the incoming administration will need to wrestle with these unprecedented logistical challenges at the same time it must rapidly implement a dramatic set of across-the-board economic reforms. Biden would face an enormous agenda of urgent needs, in addition to whatever ongoing issues related to the pandemic still require resolution. One critical order of business was already a crisis before the coronavirus leveled much of the economy: the threat of climate change.

In addition, the pandemic has further exposed enormous gaps in our health care system. A Biden presidency would have to move quickly toward universal coverage that is not dependent on employment. Biden will have to take major steps to reverse the enormous rise in inequality that we have seen over the last four decades.

Fortunately, there is a single step that can help address all three problems: reducing the importance of patents, copyrights, and other forms of intellectual property. It is mind-boggling that our outmoded and regressive system of intellectual property has not featured more prominently in debates about inequality.

It’s become a truism in today’s policy world that technology has been a major factor, if not the major factor, in the rise in inequality. However, the winners and losers from technology are not determined by the technology; they are determined by the rules we’ve adopted to disseminate our technology, and the benefits that it creates. If anyone could freely copy Windows and other Microsoft software, Bill Gates would probably still be working for a living. It was only because the government gave Microsoft patent and copyright monopolies on its software that Gates became one of the richest people in the world.

To be clear, these government-granted monopolies provide important incentives to innovate and do creative work. But it’s crucial to recognize that these incentives are created and structured by government policy. These incentives could be made larger or smaller. We could also easily provide incentives through other mechanisms—as we already do to a substantial extent.

If technology has allowed people like Bill Gates to become hugely rich, and for many others to benefit at the expense of less-educated workers, this is because we have structured our incentive system to allow this outcome. We can and should structure it differently. An alternative structure of incentives will be essential for both reforming the health care system and combating global warming.

Specifically, we should rely far more on open-sourced, publicly funded research. If we pay for this critical work in advance, then we don’t need patent or copyright monopolies to recoup the cost. Researchers can still be well compensated for their work, but they may find it more difficult to accumulate vast fortunes. And, because there won’t be any incentive to deliver the products of their research into the arms of venture capitalists, they will be cheap compared to what such tech-engineered innovations now cost consumers.

If the public understands that it is a set of elective policy arrangements that determine who gains from technology, we will be better situated to change how people think about economic policy and the economy. Conventional progressive tax-and-transfer measures are important in mitigating inequality, but the biggest problem is that policy has been structured to redistribute before-tax income upward. We have to change this structuring as we go forward. That is not an issue of interfering with the market, as conservative and laissez-faire economists are apt to complain; it is rather a question of structuring it differently. There is nothing natural about the structure that shifted so much income upward. We can structure the market in ways that are every bit as efficient, while also permitting it to create and distribute far more broadly based gains.

The pumpjacks of the South Belridge Oil Field, one of the largest and most productive oil fields in the U.S., on April 24.
David McNew/Getty

In the wake of a nationwide health crisis, the health care sector is an obvious target for reform—as has indeed been the case throughout modern American history. Many on the policy left have embraced Medicare for All as the goal for health care reform. There is indeed a good case to be made for the elimination of private insurers, which are an enormous source of waste in the system. But it’s always been unlikely that any such dramatic shift can be done in a single step—and it is clearly not going to be done with Joe Biden in the White House.

What’s more, the waste created by the private insurance industry—as devastating as it may be for individual patients caught up in the system—is not even the biggest source of waste in the U.S. health care system. As a number of studies have shown, we pay roughly twice as much for health care inputs as people in other wealthy countries. This means we pay twice as much for prescription drugs, for medical equipment and supplies, and twice as much to our doctors and dentists. If we want to get our health care costs in line with those in other wealthy countries, we have to ensure that we’re also paying what other countries do for drugs and other key health care inputs.

The main reason we pay high prices for prescription drugs and medical equipment is that we give their developers patent monopolies and let them charge whatever they want. The cost of these monopolies became very clear in the coronavirus crisis with the ventilator shortage. A standard ventilator sells for around $25,000 in the American market.

This is not due to the cost of the materials, manufacturing expenses, or any other traditional production cost. At the worst point in the shortage, a team of scientists at M.I.T. open-sourced a design for a ventilator, and determined that the parts for the machine only cost $100. The $25,000 ventilators are surely more durable and would offer other benefits relative to the M.I.T. team’s version, but one doesn’t have to be an economist to realize that there is a very long distance between $25,000 and $100—a 250-to-one price ratio, to be exact. It’s hard to imagine that the M.I.T. ventilator, or some variation on it, would not lead to huge savings relative to the standard ventilator.

Much the same story holds in how the market price is set for other types of medical equipment. Big-ticket medical equipment such as MRIs, kidney dialysis machines, and other treatment and diagnostic aids carry high price tags primarily because these products enjoy patent monopolies, not because of the cost of the labor and materials used in manufacturing them.

Patent monopolies are likewise the force that sent the price of prescription drugs skyrocketing. Spending on prescription drugs has soared over the last four decades, rising from just 0.4 percent of GDP in 1980 to 2.2 percent of GDP in 2020. We will spend more than $500 billion this year on prescription drugs, or $4,100 per family. However, these drugs are rarely expensive to manufacture and distribute. In many cases, high-quality generic versions are available in other countries for less than 1 percent of the patent-protected price in the United States. In some cases, the cost is less than one-tenth of 1 percent.

One of the great developments we have seen in the coronavirus crisis was the worldwide crowdsourcing of research findings among scientists rushing to develop a vaccine or treatments for the disease. Scientists are focused on the goal of saving lives, giving little consideration at the moment to securing patents or getting academic credit.

This cooperative spirit is a great model for biomedical research more generally. Science proceeds most quickly when findings are open and widely shared. This can be done if we pay for the research up front. We now spend more than $40 billion a year financing research at the National Institutes of Health. We would have to double or triple this figure to replace the industry research now supported by patent monopolies, but this could mean that all new drugs are available as cheap generics from the day they are approved by the Food and Drug Administration.

We will also need some mechanism to allocate research costs internationally, which presumably would be based on countries’ per capita income and size. An international agreement on rules for sharing costs may seem like a big lift—but it’s important to realize that the current patent monopoly system also leads to difficult international negotiations. Rules on patents, copyrights, and other forms of intellectual property have been at the center of every recent U.S. trade agreement and have often been highly contentious. In fact, disputes over intellectual property provisions held up an agreement on the Trans-Pacific Partnership for several years. The deal almost certainly would have been approved under the Obama administration had it not been for this IP-driven slowdown.

If we pursued a new global regime of equitably shared costs in pharmaceutical research, the United States would stand to realize a huge savings by slashing our half-trillion-dollar annual prescription drug bill. This would get us a long way indeed toward handling the cost of expanding health care coverage and the eventual goal of Medicare for All. Getting rid of patent monopolies would also largely eliminate the incentive for drug companies to mislead doctors and the public about the safety and effectiveness of their products. We’re still suffering from the fallout of their most egregious effort along these lines—misleading doctors and the public about the addictiveness of the new generation of opioids.

There are many other interim steps that we should look to take toward the eventual goal of Medicare for All. Most important, we should allow everyone to buy into a reformed Medicare system. Lawmakers have long needed to enact a cap on total out-of-pocket payments within Medicare; they also need to turn the patchwork network of coverage that currently operates under the umbrellas of Medicare into a single integrated system. The provision of Medicare coverage now occurs through a needlessly complicated and costly segmentation, under which people pay separately for hospital insurance, insurance covering doctors’ payments, and prescription drug insurance.

If we made a reformed Medicare universally available and took large steps toward getting our payments to drug companies, medical equipment manufacturers, and doctors in line with what other countries are already paying for these items, it would be a major step toward Medicare for All. In fact, if such universal reforms are done right, they should create a strong incentive for health care providers to opt for a single, efficient, cost-controlled coverage model in the public sector. Over time, many hospitals, doctors’ offices, and other providers may simply refuse to deal with private insurers. A reformed Medicare system, ideally merged with Medicaid, which allows people to buy in, is likely to make up far more than half of the market for health care. Many providers may decide that the additional complexity of dealing with private insurers, each with its own frequently shifting rules for the extension and withdrawal of coverage, co-pays, and deductibles, is simply is not worth the bureaucratic hassle.

Much the same set of bold restructuring initiatives must refocus our economic attention on the climate emergency. The international cooperation that we are now seeing among medical researchers struggling with the coronavirus should be harnessed to quickly develop new and better ways to produce and store clean energy and to reduce energy consumption. Clean energy is another area in which the United States lags well behind the performance of most other wealthy countries. Part of this gap is due to the comparative advantage much of Europe previously enjoyed. Many West European nations started from a much lower level of per capita emissions—roughly half the 15 tons of carbon emissions per capita in the United States.

China is likely to be an especially important source of technological progress in the crucial pivot to clean energy. It already has almost as much wind and solar power as the rest of the world combined. China’s annual purchases of electrical cars also represent nearly half of the world’s consumption. As is the case with biomedical research, we should be looking to set up international collaborative efforts to drastically reduce carbon emissions, again permitting scientific results to be quickly shared, so that the whole community of researchers can benefit.

This would mean turning the Trump administration’s trade demands against China—which unfortunately have been endorsed by most Democrats—on their head. Trump has been concerned about locking down the intellectual property rights of U.S. corporations, in response to widely repeated complaints against “theft” by Chinese companies.

As a practical matter, the United States will stand to gain far more from negotiated access to Chinese technology than the other way around. China’s economy is already almost one-third larger than the U.S. economy—and by the end of the decade, it’s likely to be more than twice as large. Since China already spends roughly the same share of its GDP on research and development, it is almost inevitable that it will bring many more useful technological breakthroughs to bear within a regime of clean-energy collaboration—or in any other tech-reliant sphere—than its U.S. partners would.

We will also need to create incentives and penalties to get people to move to clean energy sources and to use fewer dirty ones. The former approach means larger subsidies to help with the installation of solar panels, better insulation, and a more robust market for electric cars. We also need to ensure that we have the infrastructure to support electric cars, notably a widely distributed network of charging stations across the country.

We will also need to adopt a carbon tax—especially if oil prices stay at the extraordinarily low levels they hit in the fallout from the coronavirus. It will be very difficult for electrically powered cars to be cost competitive with gas selling for $1 a gallon. However, if the current plunge in oil prices is not reversed, it will mean that the market is the main factor displacing workers in the fossil fuel industry, although we should look to reemploy these workers elsewhere as part of a just-transition strategy under a global carbon-reduction initiative. Measured in absolute numbers, there will be far more workers employed installing solar panels and retrofitting houses and businesses than those who are now losing jobs in fossil fuel industries.

Better and cheaper mass transit also needs to be a big part of the picture. Several cities, most notably Kansas City, Missouri, have made their bus service free. There should be federal support for free or low-cost bus and mass transit service everywhere. Charging fares is a way to discourage usage, and the aim of climate-conscious mass transit is to encourage usage.

We must also look to take advantage of some of the free lunches, or near-free lunches, that should be a part of a serious global bid to reduce carbon emissions. If, for example, a significant portion of drivers switch their car insurance to pay-by-the-mile policies, they will have a powerful disincentive to drive. With annual car insurance costs averaging close to $1,000, this would work out to a net cost of 10 cents a mile for a driver who travels 10,000 miles a year. In practical terms, that works out to the same disincentive to drive that would be achieved under a $2.50-a-gallon gas tax imposed on drivers with cars that get 25 miles to the gallon.

Congestion pricing is another near-free lunch. This plan was introduced by former London Mayor Ken Livingstone two decades ago. The idea is to charge a high fee for private cars driving into a city center during the workday. This both reduces the huge amount of greenhouse gases emitted by cars stuck in traffic and encourages people to take alternative modes of transportation.

Of course, we will not stop global warming with such incremental measures to alter individual behavior. But these are relatively simple and low-cost initiatives that will produce other desirable side effects. We will have fewer traffic accidents in the case of pay-by-the-mile insurance and more family-friendly workplaces with more widespread telecommuting. In the effort to slow global warming, we need to take advantage of every tool available.

Rush hour on Interstate 110 in Los Angeles, California, on April 10.
Kent Nishimura/ Los Angeles Times/Getty

It would be self-defeating, in the larger scheme of things, to set out to address the existential-grade crises of health care and climate change without also tackling the scourge of inequality in the American economy. Our unequal and top-heavy economy has greatly magnified the present health emergency—which in turn has illuminated the tenuous nature of most workers’ access to basic health care and income.

The full list of policies that we need to reverse the upward redistribution of wealth and income over the last four decades is a long one, but inequality is another sphere in which attacking patent and copyright monopolies can get us much of the way there. Yes, these monopolies have incentivized the creation of a new billionaire class of digital-age robber barons—but that’s just the most visible and extreme distorting effect they’ve created in the American political economy. It’s also the case, after all, that the relatively high pay for people in STEM fields results directly from the existing system of IP enforcement. We could redirect resources from these dubiously productive sectors via weaker IP protections and/or a set of incentives to reward workers in greener stretches of the economy.

The general principle here is that if we have less money going to the tech sectors, we’ll have more money for everyone else. If we can save $500 billion a year on prescription drugs and medical equipment, this effectively means that everyone else has an additional $500 billion in income (more than 4.0 percent of the national wage bill), since health care ends up costing much less money without the exorbitant rentier fees paid out to patent holders.

Liberals and left-leaning policy types consistently fail to understand this dynamic, which has meant in turn that they have created an artificially narrow universe of policy choices. While every businessperson understands that cutting their workers’ pay by $1 million is another $1 million in his or her pocket, many people fail to recognize that reducing the money paid to high-income people for prescription drugs, medical equipment, or other items effectively puts money in their pockets.

Any serious effort to reverse the upward redistribution of wealth and income also needs to focus on the financial industry’s role in upholding the present unjust system of top-heavy distribution. The financial sector creates enormous waste in the economy while generating equally enormous fortunes. In gauging the actual value of financial services in the real economy, it’s important to remember that the financial sector is an intermediate form of enterprise, like trucking. As with trucking, it does provide an essential service to the economy, but we do not get direct benefits from finance in the same way that sectors like health care and construction contribute straight to our quality of life. An efficient financial sector is a small financial sector.

The narrow financial sector (that is to say, securities and commodities trading, together with investment banking) has exploded relative to the size of the economy over the last half-century. In that time, it’s gone from less than 0.5 percent of private-sector output to almost 2.5 percent. This dramatic increase reflects in no small part the many outlandish fortunes that the industry has kicked up. But, as is the case in tech, financial services is also the source of a large cohort of lesser fortunes, pulled down by bankers and traders earning millions or tens of millions annually. If the trucking sector had increased fivefold relative to the size of the economy, any serious observer would think that something was badly amiss in the way its contribution to the economy at large had been stupendously overvalued. The same clearly holds true in the case of finance, since it would be exceedingly difficult to identify what we have to show for its enormous expansion, particularly in the wake of the 2008 meltdown of the global economy.

A quick way to downsize the sector would be to impose a modest financial transaction tax (FTT) of, say, 0.2 percent on stock trades, with rates appropriately adjusted for other assets. Over the past 25 years, FTTs have gone from the fringes of economic debate to the Democratic Party mainstream, with all leading presidential candidates championing the proposal during the 2020 primaries. An FTT has a certain elegant justice that one rarely encounters in the landscape of tax policy, with tax revenue minted directly from industry coffers. Most analyses show that if we increase the cost of trading by, say, 50 percent, trading volume will fall by roughly the same percent. This means that what an ordinary investor might pay in taxes under an FTT will be offset by the savings realized via a reduced overall volume of trades. Since people do not make money on average from trading (half the trades are winners and half are losers), a lighter trading load by itself would not leave investors worse off.

The overcompensated and outsize financial sector presents many other first-order policy challenges, such as the urgent need to rein in hedge and private-equity funds that often monetize the effective destruction of major corporations. But the larger aim should be to ensure that financial transactions are restructured so as to serve the economy, rather than to generate enormous fortunes for a tiny group of people.

The tech sector also needs some serious reworking, starting with industry giants like Google and Facebook. Here again, we see the baleful impact of a narrow-gauged patent and copyright system run amok. Shorter and weaker patents, accompanied by greater complements of open-source, publicly funded research, would go far toward reducing the massive flows of income to a handful of players in this sector.

Part of the story is clearly a monopoly issue—the result of federal antitrust enforcers essentially taking a four-decade-long vacation. But the problems posed by monopolization of the economy can be exaggerated. Most of the upward redistribution within the American economy has occurred within the wage structure; it wasn’t a direct transfer of wages to profits, as many conventional models of monopoly would predict. The wage share of national income in 2019 was 2.7 percentage points below its 1979 level. This means that if the wage share had remained constant since 1979, wages across the board would have been 4.3 percent higher in 2019. Put another way, the shift from wages to profits accounts for just one-tenth of the gap between productivity growth and wage growth for a typical worker over this period. By far, the main cause of wage stagnation for the median worker was the upward shift of income from ordinary workers to CEOs, Wall Street types, and highly paid professionals.

It also seems that the gap between wages and profits was being closed in the relatively tight labor market of recent years, after expanding greatly in the weak labor market immediately following the Great Recession. The labor share of national income rose 0.7 percentage points in 2019, under conditions of near-full employment. At this rate, we would have returned to the 1979-level share of worker income in another four years. The wage share typically rises in a recession, but, given the structure of this bailout, that would not be a safe prediction this time.

But even if increased monopolization is not the main factor in income inequality, there’s still a strong argument for reining in the tech giants. The current regulatory structure—inherited mostly from the 1996 Communications Decency Act—essentially regards them as common carriers. We treat a typical tech giant as though it were a phone company that has no control over the content of phone calls. Unlike a conventional phone company or utility, both Facebook and Google exercise control over, and directly profit from, the content they carry.

One obvious step would be to repeal Section 230 of the Communications Decency Act, which protects these internet giants from the same sort of liability faced by their counterparts in traditional media. While The New York Times or CNN can be sued for passing along libelous material, Facebook or Google cannot. If such liability would extend to Facebook, for example, it would mean that if I were to libel someone in a Facebook ad or on my Facebook page, Facebook could be sued as well. It would likely be impossible for Facebook to monitor hundreds of millions of its users’ pages—but the company could be required to evaluate complaints when they are brought to its attention, if the company brass faced a possible libel penalty for their publication.

Creating a team to evaluate the accuracy of published material would be expensive for Facebook—but it’s an expense that traditional media outlets already incur to guard against the threat of a libel action. If Facebook did not want to go this route, it could choose to become an actual common carrier, charging people a flat fee to operate a Facebook page—and without Facebook engineers employing any algorithms to place ads or harvest personal information. That would be a complete transformation of its business model, and surely a much less profitable one, but the public has no obligation to give internet giants special privileges.

This roster of near-term jolts to a flailing U.S. economy could of course be expanded at great length—key features of a Green New Deal, such as a public works employment program for workers retrofitting buildings and businesses to lower carbon emissions, might emerge out of a dramatically altered political consensus. But here I’ve focused mostly on actually achievable goals to flatten out long-standing trends of income and wealth inequality, and laying the basic groundwork to expand health care and mitigate climate change on a serious policy footing.

I’ve also deliberately concentrated on measures to influence the flow of before-tax income. That is where most of the upward redistribution within the American economy has taken place, as much research shows. Many left-leaning critics of the economic status quo focus on the sharp decline in the top bracket for federal income taxes—which means they often overlook the deeper dynamics that fuel inequality. Federal income tax rates have indeed fallen sharply, but this reduction in federal tax rates is offset in part by higher state income taxes (13.0 percent in California and 11.0 percent in New York City) and the 3.8 percent Medicare tax that applies to all income. Many of the richest people in the country still face a marginal income tax rate of more than 50 percent.

We can of course raise taxes on the rich further, but there is less money to be gained through this route than many believe. In addition, steeper tax rates on high earners would provide a big boost to the tax avoidance industry, which itself is a source of inequality and a complete waste from an economic perspective. A marginal tax rate of 90 percent means that we are paying rich people 90 cents to hide a dollar of income. Many will take advantage of this deal.

Efforts to make the tax code more progressive are worthwhile, but as we’ve seen in this broad overview, the bigger problem lurks on the before-tax side of the ledger. We can arrive at a more achievable and just outcome if we work to structure the economy so that it’s not redistributing so much income upward. It’s far easier, in practical terms, to prevent the rich from getting another $1 billion in the first place, than it is to tax it away after they have it. And not incidentally, such a program is also likely to be a much better sell politically.

The ongoing fallout from the coronavirus crisis should open many opportunities for progressive change. That was also true at the time of the housing bubble’s collapse. Let’s hope we do better this time.