Democrats may be able to pass bills raising taxes on high earners and raising the 15 percent rate on capital gains and dividends. But such bills are almost certain to be vetoed, and the response to the 1993 Clinton tax increases suggests that "soak the rich" is not a sure winner in elections.
Increased deductions or tax credits for college tuition is on the Democrats' to-do list and would certainly be popular with beleaguered parents. But colleges and universities have been sopping up previous tax breaks by raising tuitions at above-inflation rates, and presumably would do so again.
Thoughtful Democrats like Clinton aide Gene Sperling and Yale professor Jacob Hacker have argued that Americans, even amid prosperity, are increasingly insecure in our globalized economy and wary of downside risks if they have to change jobs or learn new skills. They look back with nostalgia sometimes toward the unionized lifetime jobs many held 50 years ago in mid-century America, and argue that government needs to provide more protection against risk.
The problem is how to do it. Congress cannot recreate mid-century America by snapping its fingers, and the seemingly risk-free health benefits and pensions that unionized companies promised are now in peril because the business model of firms like the Big Three auto companies, the old-line steel companies and the legacy airlines has become unsustainable.
One interesting proposal by Sperling is for a "universal 401(k)," which would give all workers tax-sheltered savings accounts, funded by employers and employees. One option is to give low earners tax credits, perhaps even refundable tax credits, for their contributions to the accounts. Over time, this would increase low earners' wealth accumulation -- progressive redistribution. But it would also tend to transfer funds from the federal treasury to individuals, from the public sector to the private sector -- not the direction Democrats usually want to go.
It's a proposal that looks a lot like the Social Security individual investment accounts George W. Bush called for, and Democrats scorned. It would be ironic if this turns out to be the major progressive achievement of this Democratic Congress.
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