“It’s not just about who’s smart,” Friedman said. “And there’s almost universal agreement that having your life possibilities determined by the accident of your birth is not something we’re OK with.”
But economists are in sharp disagreement on whether Biden’s economic agenda will be well-aimed at addressing inequalities. One example: Biden is expected to propose free tuition at the nation’s community colleges.
Free Tuition
Glenn Hubbard, a Columbia University professor who served as chairman of the Council of Economic Advisers under President George W. Bush, has called community colleges “the logical workhorses of skill development.”
But in an interview, Hubbard said the free-tuition idea gets it “exactly backward” by subsidizing the demand for community colleges. He backs a supply-side concept of federal grants to those schools that are contingent on better graduation rates and employment outcomes after graduation.
And that’s not strictly a conservative approach. The proposal’s co-authors included Austan Goolsbee, who served as CEA chair under Democratic President Barack Obama.
There’s a wider divide over Biden’s tax policy.
Higher taxes on companies and the rich will only weaken the dynamic of wealth accumulation that drives investment, which in turn powers economic growth, conservatives argue.
“In this debate, there is a fair element of ‘We just need to punish the rich; they are rich inappropriately,’” said Douglas Holtz-Eakin, president of the American Action Forum, a conservative research group. “With that, it’s hard to get agreement on policy.”
Liberal economists respond unapologetically, that so-called trickle-down economics—where overall economic growth lifts all boats across the income spectrum—just haven’t proved true over the last 40 years.
Spending on investment outside of housing rose an average of 3.4% a year from 2000 through 2019, down from 5.2% the prior two decades and a heady 7.2% in the 1960s—when tax rates were substantially higher.
Companies have the cash to grow, but with wealth and income skewed to the top, “there’s not enough customers to buy the new output,” said Josh Bivens, director of research at the left-leaning Economic Policy Institute.
—With assistance from Catarina Saraiva and Vince Golle.
This article was provided by Bloomberg News.