Time to Talk About Inequality

It isn't just a social issue—it's putting the future of the U.S. economy in peril

By Rana Foroohar Monday, Feb. 10, 2014
    • Larry Downing / Reuters

    U.S. President Barack Obama delivers his State of the Union speech on Capitol Hill in Washington January 28, 2014.

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    The most economically promising part of the President's speech centered on education, in particular transforming secondary education by bolstering science, math and technology skills and linking educators with job creators. In last year's SOTU, the President pushed ideas like the six-year high school model rolling out in New York City and Chicago, which allows companies such as IBM, Microsoft and others to help design the curriculum that kids need in order to become employable. Students also graduate not just with a high school diploma but also an associate's degree. This year, it's clear Obama wants to take that idea national, which makes sense in a world in which the majority of the 14 million jobs created in the next decade will require at least two years of college, if not more.

    Getting businesses, which are more flush than ever, to play a greater role in what have traditionally been public-sector arenas like education is absolutely essential. But education is a long-term proposition. As Warren Buffett once told me, "We can't educate ourselves out" of the inequality problem in the short term; that's why we're going to need some wealth redistribution in order to buffer the next few years of job destruction and evolution. While the President called for the closing of some corporate loopholes, we need to have a serious conversation about raising the capital gains tax, ending deductions that favor debt over equity and disproportionately reward the rich, and increasing incentives for firms that put more money into R&D; and less into share buybacks or overseas bank accounts.

    I also wish the President had talked more about long-term entitlement reform. The truth is that businesses in the U.S. are investing, but only in short-term assets (meaning those that mature over 15 years or less). After that, corporate investment drops off a cliff, which many experts take as proof that business doesn't believe in the country's ability to come up with a realistic budget and growth plan after that point. It's a telling metric--and one Obama only scratched the surface of in his SOTU speech.

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