Written by Michael Ettlinger and Gadi Dechter, Center for American Progress
The Occupy Wall Street movement presents a growing chorus of millions who are fed up with mounting economic inequality in the United States.
The movement reflects the frustrations of people across the country saddled by debt, working harder for less, and with less chance of getting ahead.
It has captured our national attention by demonstrating that America’s economy is not working for most Americans today. But it is working for the richest 1 percent, who control two-fifths of the country’s wealth and get a quarter of all income.
Some people in Washington think the right response to this economic inequality is to give more to the 1 percent and hope it reaches the rest of the country. They support tax cuts for the well off—and spending cuts to Social Security, Medicare, and Medicaid, and other programs that the middle class relies on. They want to slash education, energy, and technology investments that are the bridge to our future prosperity.
To further the important public discussion on economic inequality catalyzed by the Occupy movement, we propose nine simple steps that policymakers can take immediately to reduce inequality, get our upside-down economy back on its feet, and begin restoring the promise of the American Dream—the idea that no matter who you are, if you work hard and play by the rules, you can succeed.
To be sure, the modern economy is a complicated creature, and all our problems will not be solved by these nine ideas. But these common-sense measures, described in detail at the links, are actions that Congress could take today to strengthen the middle-class backbone of the economy and pave the way for a brighter future for everyone.
1. Reduce student debt and hold colleges accountable.
Federal student loan debt, piling up faster than credit card bills, will reach $1 trillion by the end of this year. The government backs these loans, so it should take the lead in preventing credit-ruining defaults and helping borrowers keep their debt loads manageable.
The administration’s “Pay As You Earn” proposal, which allows borrowers to cap their student loan payments at 10 percent of discretionary income, is an important step, but it should go further. This income-based repayment option should be an automatic part of the student loan program, rather than a small, opt-in program.
We should also hold colleges accountable when their students routinely fail to pay their loans or get meaningful work. And the government should give serious consideration to adopting for nonprofit and public colleges a version of the for-profit “gainful employment” rule, which penalizes schools that saddle students with overwhelming debt.
2. Ease the crushing debt burden of mortgages.
Homeownership has long been a source of economic security for middle-class Americans. But that came crashing down with the collapse of the housing market. One in four homeowners is currently “underwater,” owing more on their homes than the properties are worth.
It is difficult to refinance a loan on an underwater mortgage, so these homeowners can’t take advantage of current low interest rates. If they could it would help them and the economy as a whole since they could do more with their income than pay down debt. When more borrowers can refinance their mortgages at lower interest rates, it is good for the consumer, good for the taxpayer, and good for the economy.
The Obama administration should vigorously implement recently announced changes to the Home Affordable Refinance Program, or HARP, making it easier for underwater homeowners to refinance. But action shouldn’t stop there. There are still some unnecessary barriers to beneficial, competitive refinancing, and federal regulators should ensure financial institutions face significant consequences if they do not participate actively in such refinancing.
Other reforms to help struggling homeowners should also be pursued. For borrowers who can no longer make their monthly mortgage payments but could afford to rent the same property, the Federal Housing Finance Administration should expand the Fannie Mae “deed for lease” program in which eligible homeowners have the option to exchange their mortgage for a monthly rental agreement. In this way more homes remain off the for-sale market and occupied, helping communities struggling with too many foreclosures. And through a carefully designed “lease-to-own” option, some of these new tenants could be given the opportunity to rebuild equity in the home over time though slightly higher rent payments.
3. Repeal the Bush tax cuts for the wealthiest Americans.
The evidence is in: Lower taxes for the rich don’t help the economy. They inflate the deficit and they weaken support for the middle class. At a time of mounting inequality, it’s long past time to repeal massive tax cuts for the rich passed last decade by President George W. Bush and a Republican-controlled Congress.
Extending the Bush tax cuts for the wealthy, as conservatives are demanding, will cost about $90 billion over just the next two years. Instead, we could lower taxes even more for middle-income Americans; make sure that teachers, firefighters, and police officers aren’t laid off; rebuild crumbling roads and bridges; and invest in science and technology research.
Congress should make permanent the lowered tax rates for the 98 percent of Americans earning less than $250,000 and ask the wealthiest among us to pay their fair share—by letting their rates go back to where they were under President Bill Clinton, when the economy was strong.
Read more: banks, bush-tax-cuts, center for american progress, consumer rights, corporations, foreclosure, labor unions, middle class, occupy wall street, one percent, student debt, tax cuts, tax cuts for the wealthy, taxes, unemployment, unions, universities, wage inequality, wages, wall street
Photo from DoctorTongs via flickr
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