The Distributional Games

To many Americans, the U.S. economy of recent years has become a vast casino in which too many decks are stacked and too many dice are loaded. I hear it all the time: The titans of Wall Street made unfathomable amounts gambling with our money, and when their bets went bad in 2008 we had to bail them out. Yet although millions of Americans are still underwater and many remain unemployed, not a single top Wall Street banker has been indicted. In fact, they're making more money now than ever before. 

Top hedge-fund managers pocketed more than a billion dollars each last year, and the stock market is higher than it was before the crash. But the typical American home is worth less than before, and most Americans can't save a thing. CEOs are now earning more than 300 times the pay of the typical worker, yet most workers are earning less, and many are barely holding on. 

In 2001, a Gallup poll found 76 percent of Americans satisfied with opportunities to get ahead by working hard, and only 22 percent were dissatisfied. But since then, the apparent arbitrariness and unfairness of the economy have taken a toll. Satisfaction has steadily declined and dissatisfaction increased. Only 54 percent are now satisfied, 45 percent dissatisfied.

According to Pew, the percentage of Americans who feel most people who want to get ahead can do so through hard work has dropped by 14 points since about 2000.

Another related explanation I get from students who refuse $200 or more in the distribution game: They worry that if the other guy ends up with most of the money, he'll also end up with most of the power. That will rig the game even more. So they're willing to sacrifice some gain in order to avoid a steadily more lopsided and ever more corrupt politics. 

Here again, the evidence is all around us. Big money had already started inundating our democracy before "Citizens United vs. Federal Election Commission" opened the sluice gates, but now our democracy is drowning. Only the terminally naive would believe this money is intended to foster the public interest. 

What to do? Improving our schools is critically important. Making work pay by raising the minimum wage and expanding the Earned Income Tax Credit would also be helpful. 

But these are only a start. In order to ensure that future productivity gains don't go overwhelmingly to a small sliver at the top, we'll need a mechanism to give the middle class and the poor a share in future growth. 

One possibility: A trust fund for every child at birth, composed of an index of stocks and bonds whose value is inversely related to family income, which becomes available to them when they turn eighteen. Through the magic of compounded interest, this could be a considerable sum. The funds would be financed by a small surtax on capital gains and a tax on all financial transactions. 

We must also get big money out of politics -- reversing "Citizens United" by constitutional amendment if necessary, financing campaigns by matching the contributions of small donors with public dollars, and requiring full disclosure of everyone and every corporation contributing to (or against) a candidate. 

If America's distributional game continues to create a few big winners and many who consider themselves losers by comparison, the losers will try to stop the game -- not out of envy but out of a deep-seated sense of unfairness and a fear of unchecked power and privilege. Then we all lose.