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The Great Depression finally ended with the massive Keynesian spending of World War II. The economy continued to expand after the war because of policy changes in the 1930s that reversed widening inequality and spread the benefits of growth: collective bargaining, the 40-hour workweek, the minimum wage, Social Security, and then, after the war, wider access to higher education.
What can be done now to reverse widening inequality?
First, award tax cuts to companies that link the pay of their hourly workers to profits and productivity, and that keep the total pay of their top five executives within 20 times the pay of their median worker. And impose higher taxes on companies that don’t.
Raise the minimum wage to half the average wage, and expand the Earned Income Tax Credit.
Increase public investment in education — including early-childhood education. And allow college students to repay the cost of their higher education with a 10 percent surcharge on the first 10 years of income from full-time employment.
And pay for all this by adding additional tax brackets at the top and increasing the top marginal tax rate to what it was before 1981 — at least 70 percent.
Even the rich would do better with a smaller share of a rapidly growing economy than with a large share of one that’s barely growing at all.
Our political leaders in Washington have for now chosen supply-side austerity economics over Keynesian economics. That’s bad enough.
Their inability or unwillingness to do much of anything about widening inequality will prove a larger error.
Robert Reich, former U.S. Secretary of Labor, is professor of public policy at the University of California at Berkeley and the author of “Beyond Outrage,” now available in paperback.
The Opinion section is produced by the Editorial Department to foster discussion about key issues. The Editorial Board represents the institutional voice of the Star Tribune and operates independently of the newsroom.