Like it or not, the sharp inequality in the country is a fundamental issue.
The gap between the richest and the rest of us is greater than it has been since 1929—a notable year. The gap between the pay of CEOs and top executives and the average pay of their companies' workers has grown into a yawning chasm compared with the ratio just a couple of decades ago.
One can believe, along with deluded oligarchs such as Tom Perkins, that any criticism of the rich is like Kristallnacht—or, more reasonably, that without the drivers of wealth, the entire society would falter and fail to grow. Or one can believe, as some studies show, that social mobility has not fundamentally changed in several decades—that Americans can still move up the ladder.
Or one can believe that the failure to deal with the stagnant incomes of the lower half of the population will lead to a sag in demand that will itself imperil growth. And one can believe that as our population ages and people live longer—making the ratio of Social Security contributors to Social Security beneficiaries much less favorable—stagnant or lower incomes will undermine the viability of the entire system, much less the ability of those relying solely or mostly on Social Security to get by.
Whatever combination of those things you believe, one thing should be accepted universally: If Americans lose the sense of the American Dream—that if you work hard and play by the rules, you can rise to the absolute limits of your own abilities—and if Americans gain a sense that the rich get richer while the rest of us get screwed, our national unity will be imperiled, and the opportunities for real demagogues to emerge will grow.
Is there any way to deal with this problem that doesn't get caught in our partisan, ideological, and tribal crosshairs? There is, and I am surprised it has not entered our policy discourse at all as the debate over inequality and adequate living standards has raged.
It is called KidSave, and it was devised in the 1990s by then-Senator Bob Kerrey of Nebraska, with then-Senator Joe Lieberman as cosponsor. The first iteration of KidSave, in simple terms, was this: Each year, for every one of the 4 million newborns in America, the federal government would put $1,000 in a designated savings account. The payment would be financed by using 1 percent of annual payroll-tax revenues. Then, for the first five years of a child's life, the $500 child tax credit would be added to that account, with a subsidy for poor people who pay no income. The accounts would be administered the same way as the federal employees' Thrift Savings Plan, with three options—low-, medium-, and high-risk—using broad-based stock and bond funds. Under the initial KidSave proposal, the funds could not be withdrawn until age 65, when, through the miracle of compound interest, they would represent a hefty nest egg. At 8.5 percent annual growth, an individual would have almost $700,000.*
The initial idea of KidSave was to provide a retirement supplement to Social Security, making it easier in some ways to reform Social Security to achieve fiscal solvency. But the concept can serve multiple purposes at a very small cost.