Make the well-off pay?

by John Quiggin on June 20, 2010

I’m still thinking about policy responses to the latest phase of the crisis, though I suspect events are moving faster than I can think about them. Anyway, I thought I would try a little arithmetic on the question of whether, and how, the fiscal hole opened up by the crisis could be filled[1]. The first question is Who Should Pay? The finance sector, taken collectively, was both the biggest beneficiary of the neoliberal era and also bears most responsibility for the crisis. But at most it will be possible to recoup some of the money that has already been spent on bailouts for the banks, not to mention what will have to be spent in Europe in coming months [2].

The big class of beneficiaries of the neoliberal era have been those in the top quintile of the income distribution, a class that includes me and a fair chunk of CT’s contributors and readers. Since no-one much thinks of themselves as “rich”, I’ll use the term “well-off”. Particularly in English-speaking countries, this group has benefited both from an increase in the inequality of market income and from less progressive taxation.

So, can the well-off be made to pay for the crisis, and should they?

[click to continue…]