Sibling Rivalry
When parents pick favorites, kids don’t turn on their parents; they turn on each other.
During the pandemic, the U.S. government injected $8 trillion of new money into the economy, more than doubling the balance sheet of the Federal Reserve in 22 months. We’re now in an uncontrolled experiment to see what happens next.
So far, the results have been divided: housing affordability (FIXHAI) fell to a record low last year and, for the first time in American history, childcare is more expensive than median rent in all 50 states. Meanwhile, the S&P 500 (SPX) hit a record high last month and the median U.S. home price (MSPUS) has almost doubled since 2020.
America remains the best country in the world to pursue economic opportunity. There is no comparison. Take it from the Punjabi business owner who installed a replica of the Statue of Liberty on his house after his U.S. visa application was denied:
[T]he owner of the house, Gurmeet Singh Brar…explained he 'always had this dream of getting settled in the US' which he calls 'the most powerful country in the world' and so the replica is ultimately his family's 'tribute to America'.
"[It's] given us a lot since we came here. Not only our business flourished after moving to the US, but we are also leading a good life.”
Still, if I were to have children one day, I’d want them to grow up in a society where the gap between the have’s and have not’s is shrinking, not widening.
2024 is an election year.
Trump is running on lower taxes for everyone and a strong stock market by keeping corporate taxes low. This will worsen the cost-of-living crisis because the rich own assets. Affordability for the average American will decline, because assets will inflate faster than most workers will be able to save from tax cuts. The rich will get richer.
Biden is running on higher taxes on high-income earners and business. This will flatten out the middle class because it pits W-2 earners against each other while the asset-rich get to watch the brawl go down while sipping martinis poolside in Palm Beach, untouched. The American Dream will be harder to attain.
Both plans are short-sighted because they widen the divide—not just economically, but in civic society (e.g., Americans’ empathy for one another)—and ultimately tear at the fabric of a functioning democracy. Because when parents pick favorites, the kids don’t turn on their parents. They learn to turn on each other.
For more on our tax code, I recommend Owners vs. Earners by Scott Galloway.
What can we do to address the real problem? Here’s research from policy experts on what would work: simplifying the tax code, introducing consumption taxes (specifically, on luxury goods), introducing financial transaction taxes, making dying less lucrative for generational wealth, and so much more our elected officials could do to drive real economic expansion.
When I first moved to San Francisco, I used to joke about becoming libertarian, thinking we are simply most vocal against the forces we fear greatest in ourselves. (Loud libertarians are usually closeted authoritarians.) Increasingly, I understand the cause.