Election 2014 is upon us; all eyes are on targeted races around the country and the balance of power in Washington. One young French economist may shape outcomes on Nov. 4 and beyond more than any other candidate: Thomas Piketty. Since earlier this year, Piketty has made tremendous waves as a critic of free markets and an advocate of a global wealth tax in his bestselling academic treatise, Capital in the 21st Century. He has been published in over 20 countries, while his influence has been seen in governments from the Netherlands to Columbia. I even found the bestseller on bookshelves in South Africa during my recent trip there.
Here in the U.S., he is providing the intellectual ammunition for President Obama and allies who call income inequality “the defining challenge of our time.”
Of course, Piketty is not truly a candidate for office, but the buzz surrounding his repetitious messaging of “income inequality” is weighing on the psyche of voters. Consider a CNNMoney survey conducted earlier this summer. Nearly six in 10 respondents concluded that the American Dream is out of reach. Of course, news headlines continue to hammer at growing pay gaps between employees and executives.
{mosads}So does this mean that voters will only support candidates that pledge to close the divide by hiking wages at the bottom or punishing super salaries at the top with pay caps, the Buffett Rule or even Piketty’s favorite global wealth tax?
Not so fast. Another recent survey by the Global Strategy Group found by almost the same percentages that Americans prefer a candidate who focuses on economic growth to one who emphasizes economic fairness.
The 2014 election will be the first test of Piketty and the inequality issue. The second will be in the 114th Congress, where the stage is already being set for a major discussion on tax reform. Paul Ryan (R-Wis.), the heir apparent to take the reins from retiring House Committee on Ways and Means Chairman Dave Camp (R-Mich.), forecasts that tax reform could happen within one to three years.
On the campaign stump, several Republican candidates are departing from traditional red meat about “tax cuts” and talking more about real tax reform, such as California Rep. John Campbell, the No. 4 Republican on the House Budget Committee: “We have to stop being one-trick ponies. We can’t say tax cuts will cure this, cure that and cure the other thing, because it’s just not credible. The purpose of tax reform is not to cut revenue to the government or to cut taxes — it’s to grow the economy.”
Both Speaker John Boehner (R-Ohio) and President Obama have indicated a willingness to revisit tax reform, most likely out of interest for their own legislative legacies. Jerry Seib with The Wall Street Journal notes that a GOP takeover in the Senate may make compromise easier, pointing to past success stories of bipartisan compromise during eras of evenly split power.
Adding to that collaborative spirit, Senate Finance Chairman Ron Wyden (D-Ore.) recently issued a public invitation to Boehner: “Let’s sit down together and figure out how to get tax reform done. … While there are many varying viewpoints and approaches to comprehensive tax reform, we share a common goal of ensuring that the United States is on a long-term path to sustained economic growth.”
Bipartisan tax reform may be just window dressing and beyond the realm of possibility, but there is a public appetite for it. A new poll by the U.S. Chamber of Commerce finds that 69 percent of voters want Congress and the president to work together to reform the tax code. We can expect any tax reform debate to be a boxing ring of economic justice vs. economic growth.
The third and true test of Piketty and income inequality will be in 2016 and the presidential election. Potential candidate Hillary Clinton has already introduced the Piketty mantra: “[Piketty] talks about Europe, but it is the same thing in the United States. [The current] disparity makes people believe that they’re stuck. They no longer believe that things are going to get any better, no matter how hard they work. People have lost trust in each other and the political system and I think that’s very threatening to democracy.”
Some suggest 2014 is a sleeper election, but it is just the beginning of a long discussion on equality, fairness and growth that will have lasting impact.
Bloomfield is president and CEO of the American Council for Capital Formation, a nonprofit, nonpartisan organization dedicated to public policies supportive of saving and investment to promote long-term economic growth, job creation and competitiveness.