Edward Hadas

Whoever wins the U.S. presidential election will preside over a relative decline in the country’s global economic position. He should, but probably will not, accept the inevitable.

There was a time when almost everything about the American economy set the world standard. In 1960, The United States was the world’s largest market. It had by far the most developed infrastructure, easily the best educational system and undoubtedly the most business-friendly government. It was the source of most innovations, from safe highways and comfortable suburban houses to computers and advanced pharmaceuticals.

Those days are long gone. The creation of the European Union has left the U.S. market in second place. Overall, the infrastructure in Europe and Japan is at least as advanced. The United States is still the global leader in many areas of industry, education and government, but it has fallen behind in some, and the gaps have narrowed in all.

The automobile industry provides a good example of the trend. Researchers Joyce Dargay, Dermot Gately and Martin Sommer point out that in 1960 the United States had 411 vehicles for every 1000 people, while Sweden, then the European leader, had 175, only 43 percent as much. By 2002, the U.S. ratio had almost doubled to 812, but the ratio in the current European leader, Italy, had increased much faster – to 656 or 81 percent of the U.S. level. In Japan the ratio moved from 19 to 599. Almost inevitably, in the interim the United States lost its clear pre-eminence in automotive design and manufacturing.

The principal cause of the end of American economic predominance is the sincerest form of flattery: imitation. Other countries have learned from the American teacher, and copying proved easier than creation. Some of the students learned so much that they are now teachers. The catch-up was only hastened by American economic weaknesses, most notably insufficient investment in infrastructure, a persistent trade deficit in manufactured goods and financial mismanagement.

None of these problems as well as the painfully slow recovery from the 2009 recession is likely to have much effect on the basic pattern in the next presidential term or for many terms thereafter: the U.S. economy will continue to advance, but much of the rest of the world will advance faster. The largest relative losses will no longer be to Western Europe and Japan, which are basically in the same economic position as the United States. They are rich and slowly getting richer despite financial, social and demographic weaknesses. However, about 80 percent of the world’s population live in countries which have a long way to go to catch up to global standards. Some may languish, but others will move fast enough along the path towards prosperity to ensure that America’s lead narrows.

What should the next President do?

He should recognise reality. The truth may be painful, but it is better to know. An American president will be better at promoting American interests if he does not assume he has the right to set the global agenda on trade, finance or technology. Recognition will also make him better at calibrating military and diplomatic ambitions to economic reality. The president might just be more motivated to address domestic economic weaknesses if he has no notions of inevitable national superiority.

After he admits the hard truth, he should relax. Not only is there nothing much to be done, but the relative decline of the United States is basically a good thing. More extensive prosperity is good and lesser global economic inequality is even better. Americans who believe in the nation’s manifest destiny to teach the world the right way to live can be pleased that one part of the American dream, the tremendous economic enterprise, is becoming more of a global reality.

Finally, he should act responsibly. Although the American economic era is slowly ending, the country has a disproportionate residual importance. Its currency is the global reserve and its research universities remain the world’s best. In many parts of the globe, America is considered almost as much the archetypical land of opportunity as it was a few decades ago. A president who wishes to conserve as much of the country’s position as possible would do his best to nurture these legacies. For example, he would try to reverse the current fiscal and monetary policies, which might have been designed to make the dollar untrustworthy.

Unfortunately, neither candidate shows much sign of taking my advice. At least in public, they vie to show more confidence in American greatness. Such boosterism may be an electoral necessity, but it is poor preparation for dealing with the challenge. In the 19th century, France suffered from refusing to recognise that the Napoleonic conquests marked the peak of the nation’s influence. The UK repeated the mistake in the 20th century. The United States looks all too likely to do the same.

The winner of the presidential election should do something about U.S. unemployment. The current rate of 8 percent is high by America’s historical standards, and that measure does not capture the gravity of the problem – too many people have spent too long out of work or have decided to leave the workforce because jobs are too hard to find. European leaders face an even greater challenge. The EU unemployment rate is 10.4 percent, and during the last decade it has been below 7 percent for only half a year.

What is to be done? Neither Mitt Romney nor Barack Obama has a clear plan. The Federal Reserve has an idea, but it is hard to see how $40 billion a month of newly printed money will actually help create jobs. I have an alternative approach: EAST. It is both an analysis of the problem and a solution.

E is for Efficiency. The industrial economy continually makes more stuff out of less labour. More efficient workers, machines and systems constantly add to consumption, and constantly subtract jobs. The lost labour has mostly been dangerous or tedious, so there is little to regret.

Still, the job drain presents a social challenge. Unemployment is an affront to people’s need to do something meaningful. Fortunately, for more than two centuries advanced economies have more or less managed to compensate for increased efficiency. New jobs have been created to provide consumers with additional goods and services. Labour-intensive bureaucracies have expanded in law, finance and government. The available labour has been shared out over more people, leaving more time for education, leisure and retirement.

A is for Asymmetry in the labour market. Despite the success at keeping people busy, job destruction remains much easier than job creation. Destruction is the natural result of the relentless increase in production efficiency. It also fits in with the productivity mindset; employers are always thinking of ways to cut unproductive headcount.

Conversely, job creation is much less natural. While companies often need to add staff in order to grow, it is still risky for employers – the new employee may not earn his keep. Tax and benefit payment reduce the odds of success. New initiatives are often thwarted by social inertia, powerful incumbents, unsympathetic banks and smothering regulators.

S is for Surplus, the structural surplus of labour. The asymmetry of job creation and destruction creates a perpetual risk of persistently high unemployment. The actual problem is much more serious in poor countries than in rich ones, but unacceptable levels of unemployment are always and everywhere a threat. Crises are especially dangerous. When U.S. financial system stumbled badly and when the Greek government ran out of money, old jobs were quickly lost – and replacements have not yet been found.

Economists often get this wrong. They worry far more about insufficient GDP, a mythical problem in already rich advanced economies, than about the structural challenge of a potential oversupply of labour. The blind spot leads to backwards analysis. It is misleading to say that a decline in GDP caused the current U.S. unemployment problem. The predominant causality goes in the other direction: excessive job destruction led to a fall in GDP – and the GDP recovery will come only when new jobs are created.

Finally, T is for Target. Employment is best increased by making it a direct target of public policy. The old communist governments did this well. They provided jobs for all. Their method was frequently wrong – the police and domestic spying services were big employers – but the goal was right. Non-communist economies should also make full employment the first goal of economic policy.

In the long run, the goal can only be reached through a determined fight against labour asymmetry; governments should discourage job destruction and encourage job creation. Germany, where unemployment has shrunk steadily for six years, has shown the power of relatively minor changes in regulations. In the United States, hiring is probably less of a problem than firing. Law, custom and lenders all push employers to rush to let people go when times are tough. The incentives should be pushing them in the opposite direction.

The long-term goal is not to make factories less productive; that would be mad. It is to support valuable activities, from highly skilled crafts to labours of care, which are too easily judged to be marginal or “uneconomical” because they are insufficiently efficient.

In the short term, the government should be an employer of last resort, just as it has become a lender of last resort. It can create jobs directly – for example through public works projects – or indirectly by subsidising new jobs in the private sector. Right now, all the Fed’s newly created money is flowing into the financial markets. The next president would be wise to look EAST and put cash into the pockets of newly hired employees.

Barack Obama and Mitt Romney put the economy at the top of their campaign agendas. They have both focused primarily on labour – the high rate of unemployment. The attention is deserved, but other parts of the economy should not be ignored. There is the worrying decay of the nation’s capital stock – the physical, social and financial infrastructure. There is also something wrong in the consumption side of the economy, but there is a heated debate on just what the problem is.

Many commentators believe that the middle class, which makes up the bulk of the population, has a big problem: a decline in living standards. After all, the Census Bureau reports that the $50,054 median household pre-tax income in 2011 was 9 percent below the all-time peak, adjusted for inflation, reached 12 years earlier. That decline in income is so large that it must have led to some erosion in the typical family’s consumption.

Even if purchasing power really had declined by a few percent, the slide was from such a high starting place that loud complaints about deteriorating lifestyles would be unseemly. In fact, though, the median income measure distorts consumption reality. It omits services received without cost, for example healthcare provided by the government and insurers. It excludes the effects of changing taxes and shrinking household sizes. It underestimates the value of technological improvements – think mobile phones and the internet – and of the vast expansion of new, now-cheaper housing during the bubble.

These adjustments are almost certainly large enough to offset the reported decline. So the middle class doesn’t need a lecture on the virtues of making do with less. The adjustments also explain the lack of massive political indignation, even if there is evidence of minor irritation, at declining incomes. The placidity is not a sign that the American middle class has found stoic fortitude in the face of adversity. Rather, it is a reasonable response to consumption which is not really falling.

On the left, the common view is that the rich, or more precisely the widening gap at the top of the income ladder, is the nation’s leading consumption problem. For the top 1 percent of earners, income – after taxes and government transfers and adjusted for inflation – has multiplied four-fold since 1980, while the median has not even doubled. The disparity might be reduced by statistical adjustments, but the trend is real. The rapid increases in pay for celebrities, top executives and financial professionals are typical.

President Obama sometimes criticises this increase in income inequality in favour of the rich. That may be politically astute, but it dodges the ethical question of whether, and why, this change is undesirable. For egalitarian purists, it is, on principle, but the gains of the wealthy do not necessarily imply that the less well-off have fewer economic opportunities. For those who worry that the country is becoming a plutocracy the increased concentration of wealth is clearly a step in the wrong direction, but the wealthy have always had a great deal of political power in the United States.

There are good reasons not to worry too much. The actual increase in consumption which comes with an increase from very great to awesome wealth adds almost nothing to an already high quality of life. Further, more people have joined what might be called the luxury class. In 2011, 4.2 percent of American households had a pre-tax income of more than $200,000. In 1968, the proportion above that threshold (in 2011 dollars) was a mere 0.7 percent.

Another increase in inequality – against the poor – receives much less attention. For four decades until 2000, poverty was waning; the proportion of households with an income under $15,000 dollars (at 2011 prices) fell steadily. In the new century, though, the trend has clearly reversed. That is a real problem, even though the typical consumption of America’s poorer families is high by global standards.

The median cash measure understates the poor families’ decline. They have also lost out on cost-free services. Compared to richer Americans, today’s poor receive worse health care, leave their free public schools earlier and have less effective police protection. It is also worrying that today’s poor are also socially needier than the poor of their parents’ generation; overall they are less able – or, as some Republicans would have it, less willing – to help themselves.

Only a major social commitment could address this problem, but fixing poverty is low on the agenda of both candidates. Their indifference is politically sound – the bottom of the economic heap will not win them the election – but morally regrettable. Complaints about the supposed income losses of the middle class sound self-serving. Whines about the gains of the rich are often tainted with envy. A serious commitment to the poor would show that generosity still thrives in the world’s richest country.

In one corner of the intellectual boxing ring is Stimulo. His fighting words: more economic stimulus. History and theory, he declaims, teach that governments should run much larger fiscal deficits in a downturn. In the other corner is the Cutback Kid, who delivers the opposite message: more austerity. He asserts that history and theory teach that governments should reduce their deficits. The two contestants for the Economic Policy Prize are in the midst of a long fight. Amazingly, they are both losing.

Stimulo has the open-hearted enthusiasm often associated with residents of the United States, for three decades known as the land of big fiscal deficits and small worries. His favourite example is the 1930s Great Depression, which only government spending could end. Now, almost four years after the collapse of Lehman Brothers, GDP growth remains slow and the unemployment rate high. The government deficit, he says, should be increased by as much as necessary to push the economy out of its current stagnation.

The Cutback Kid has a more restrained charm, the sort sometimes associated with suave European intellectuals. He praises the virtue of balanced government budgets: sound finances keep inflation far away, support the value of the currency and promote a strong economy by not stealing savings from the private sector, the source of durable growth. After four years of extraordinarily high government deficits, he says, it’s time to cut back.

There have been no knock-out blows. Neither stimulus nor austerity seems to work as predicted. The United States has tried stimulus and the UK austerity, but the results in both countries have been disappointing. The euro zone, which has tried less stimulus and more promises of austerity than either, has not done any better. Japan has been stimulating for years, without either recovery or inflationary disaster.

Here is a summary of the most recent round: Cutback Kid opens with a one-two punch – first Latvia, where punitive austerity is turning the suffering economy around, and then history, which shows that fiscal contractions often help restore economic growth, while large fiscal deficits usually have bad consequences. Stimulo is not deterred. He ducks Latvia – austerity isn’t really working there – and he punches back with examples of successful borrow-and-grow polices. Then he strikes hard with Greece, where austerity is crushing the economy.

And so it goes on. Stimulo responds to his failures with cries for more of the same, while Cutback Kid demands more policy finesse and more patience, because hard work cures slowly. As they argue, the economic news from almost every rich country does not get better. It’s hard to believe either side really has what it takes to win.

The boxing image fits the pugilistic tone of the stimulus-austerity argument. The protagonists often sound less like calm economists than politicians trying to “diss” their opponents. Indeed, the fervour reflects strongly held political views: the trust in governments and distrust of finance on one side and wariness of government and enthusiasm for fair markets on the other. However, the debate is emotional, not rational. The economic theory on both sides is flimsy and the historical evidence is ambiguous.

The intellectual obscurity is so great that even basic definitions are controversial. Does any fiscal deficit count as “stimulus”, or only increasing deficits? Or is stimulus limited to deficits that go beyond those created by the higher spending and lower revenue that inevitably arrive with an economic slowdown? Do virtuous intentions to reduce deficits count as “austerity”, or only actual reductions? Where does monetary stimulus – low policy interest rates, central bank purchases of debt and support for financial institutions – fit into the picture?

Despite the wild claims from the intellectual boxing ring, no one really knows how to restore financial order and economic health after a financial meltdown in countries which account for half of the world’s GDP. The best that can be said is that policymakers should restore confidence, strengthen institutions, avoid unnecessary financial pressure and reduce debts without destroying the financial infrastructure. The translation of those platitudes into policy is, to put it mildly, not obvious.

History’s lessons are hard to read, but there is one relevant – and frightening – precedent for the current problems: the discrediting of the orthodox 19th century model of laissez-faire capitalism and hard money. The failure started to become clear about a century ago; it then took 40 years – with depressions, great inflations and two world wars – to develop a more stable arrangement.

The post-war system evolved over the subsequent decades into one based on much debt, little regulation, free capital movements and narrowly focussed central banks. The Lesser Depression has discredited this model, and it will take time and imagination to find a replacement. The fight between Stimulo and the Cutback Kid is a pointless diversion from the task.

Debt, a little like sex, is a two-sided relationship which, when used appropriately, pleases the partners and is good for society. But both are also intoxicating and can easily become excessive and anti-social.

The financial bubble of the 2000s was the financial equivalent of the 1960s enthusiasm for “free love”. The delights of nearly free debt set pulses racing. Since the financial collapse, the dangers of uncontrolled borrowing have been recognised, but the bad habits have hardly changed.

When debt is used as it should be, lenders receive a just return on their assets and borrowers pay a just price for the use of the fruits of other people’s labour. Loans finance helpful investments and assist governments and individuals to manage periods of adverse fortune. But debt can also be used for promiscuous pleasure-seeking, unaffordable consumption, unjustified corporate investments and excessive government spending.

In the recent debt party, the United States led the world. The ratio of total U.S. debt (private, corporate and government) to GDP increased from 256 to 373 percent between 1997 and 2008, according to Federal Reserve calculations. The whole country borrowed from foreigners to fund its trade deficit. The financial sector borrowed cheaply and invested dangerously to increase returns and remuneration. Homeowners borrowed more and more to buy more expensive houses.

At first, all this indulgence appeared to be beneficial. GDP growth was strong, consumption was high, unemployment was low and higher asset values – the other side of higher debts – made borrowers feel richer. But when Lehman Brothers failed in 2008, the dangers of frequent debt relations with multiple financial partners became clear. With everyone borrowing from each other, losses on bad loans, and the fear of further losses, spread rapidly around the world. A Lesser Depression set in, and there is no end in sight.

Despite much talk about the end of an era of hedonistic borrowing, financial rectitude remains a distant prospect. Governments have stepped up borrowing just about as much as the private sector has cut back. In the United States, debt remains an alarmingly high 359 percent of GDP.

What can be done to restore financial order? For irresponsible borrowing, a sudden outbreak of prudence would probably aggravate the economic problem. The economist John Maynard Keynes called it the paradox of thrift. If everyone tries to save more and spend less, the result will be a decline in total consumption, which leads to higher unemployment and then to more saving against rainy days. The desire to prevent such a spiral of decline lies behind the today’s low official interest rates, high government borrowing and generous support for banks.

These policies are supposed to spur enough GDP growth to reduce debts without economic pain. That sound like wishful thinking. As long as debts remain high overall, the whole financial structure will remain vulnerable and full recovery elusive. The euro zone crisis shows just how little it takes – a few small weak governments and some political wavering – to frighten lenders and deeply disrupt developed economies. With so much leverage about, other crises will be almost unavoidable.

What is needed is a large and fast decline in borrowing – a systemic deleveraging – to give over-indebted rich nations a fresh start. Sadly, there is no easy way to proceed. A gigantic debt write-down would do the trick, but creditors would be furious. Think of how the Chinese government would feel about being told that its $2 trillion dollars of U.S. government debt is now worth half as much, or how current and future pensioners would react to big losses in portfolios they thought were safe.

Mandatory inflation – say a law which doubled all wages tomorrow – would also reduce the ratio of debt to GDP, and would also infuriate savers and creditors. Alternatively, newly minted money could be used to stimulate economic activity through the creation of new jobs and the repayment of old debts. However, when governments feel free to create rather than to borrow money, they rarely stop before the rate of inflation rises dangerously high.

All of these techniques for deleveraging are risky. But I believe a clever and internationally coordinated combination of debt write-downs, inflation and controlled money creation is the best way to engineer a durable decline in leverage without destroying financial trust. Such radical techniques could work, given enough political support and sufficiently imaginative regulation.

The alternative to daring action along these lines is the continuation of something like the current policies. That amounts to persisting with the “nearly free debt” experiment, which will only lead to years of depressed economic activity and outbreaks of unpredictable financial losses. It’s worth trying something new and different to put debt back in its rightful place.

From a narrow economic perspective, the art world is working brilliantly. But the success shows just how narrow that perspective really is.  

Start at the very top end of the art market: last week’s sale of Edvard Munch’s “The Scream” for $120 million, a record for any artwork sold at auction. It may seem bizarre for an icon of cultural despair to become a token of financial exuberance, but the transaction reinforced the social meaning of art among the elite.  

Sociologists talk of positional goods: possessions and activities which express social standing. A normal skiing holiday is like a sign saying, “I’m solidly middle class”. A mansion states, “I’m rich.” A multi-million dollar painting tells the story of money to burn. And a $120 million pastel screams out, “I’m at the top of the heap, and cultured besides.”  

The industrial economy has changed and developed, but it has consistently supported the positional value of artworks and other so-called collectibles. Demand has expanded along with the number of wealthy people. Prices have risen along with the quantity of money available for ostentatious spending. The recent increase in the share of global income and wealth taken by the very rich has accelerated that trend.  

Prices would be even higher if the supply of positional art had not also expanded. That growth is puzzling. The number of worthy artworks from the past available for purchase is actually decreasing, as museums expand their collections. Contemporary art isn’t an obvious substitute, because there’s no scarcity and no way to know what’s really good. The possession of something of uncertain quality that is readily available should bring little social status.  

But collectors have overcome this supply problem with a tacit agreement to assign high values to just enough stuff to keep prices up. I can’t explain how this arrangement is made – the formation of social consensus is always a mysterious business – but for some reason a preserved shark by Damien Hirst is deemed worthy of a high price, while a stuffed tuna signed by his cousin probably would not be.  

High priced art gets most of the headlines, but the industrial economy has also successfully turned artistic production into a mass product, much like food, clothing and medicine. From the normal economic perspective, art looks like another consumer success story.  

Sure, paintings aren’t really suitable to modern economic treatment (although high-quality digital photographs of Munch’s works can be sent anywhere for about $200). But other art forms, both new and old, do fit in. The technology needed for mass production does no harm to the quality of books, recordings, photographs, cinema and anything on the Internet. Copies are identical to the original.  

The result of mixing art with industrial production is much like applying industrial techniques to agriculture or sewing: finished products that are readily available in a wide variety at reasonable prices. The gains are impressive. The pre-industrial peasant who might never read a book or see a professional work of visual art has been replaced by a jaded internet surfer who can choose among millions of books and images. Mass production has been complimented by mass distribution, so even people with unpopular tastes can find the art they like.  

Most economists would stop the discussion there, but I think something more needs to be said. Art should be different from food and clothing. Works of art are supposed to offer something more valuable than social status or pleasing entertainment. They are supposed to strive for the beautiful, to make manifest something greater than the petty comforts and regrets of everyday life. For all its cleverness, efficiency and popularity, the modern art market does not serve this higher master well.  

That claim is controversial; contemporary art, both elite and popular, has articulate defenders. Still, even champions of the new rarely claim that the modern search for greater material prosperity has been accompanied by an equally intense search for beauty.  

The failure is not precisely economic. The social decision to make art either exclusive or popular, but not necessarily beautiful, is not motivated by any sort of economic shortage.  There’s certainly enough wealth around to fund another Renaissance. If the production of beautiful works of art were deemed an important social goal – like education or sexual equality – who knows what masterpieces could be produced?  

The money is available, but the will is missing. For that, the industrial economy might bear some blame. Perhaps a culture which is dedicated to efficient mass production cannot also give beautiful art its due.  

In 1802, William Wordsworth complained about the coarsening effect of the Industrial Revolution: “getting and spending, we lay waste our powers”. “The Scream”, painted almost a century later, is almost a picture of that despair over the modern world. Perhaps it is fitting that after another century the work should attract such a high price.

President Barack Obama thinks taxes can help the government achieve a precise policy objective. In last week’s State of the Union address he outlined a complex set of tax adjustments  to discourage companies from moving American jobs to foreign parts.  In the same speech, Obama also suggested that taxes can be made simple and clear:  “No side issues.  No drama”, he said. He applied that description to the extension of the cut in the U.S. payroll tax rate. It was followed by pushing for “common sense” on a minimum tax rate for the rich. “Washington should stop subsidizing millionaires”, the president said.

The rhetoric may not be entirely contradictory, but it points in quite different directions. If the tax code is written to reflect particular concerns, whether of the government or of influential taxpayers (and non-payers), it will never be simple. And if simplicity is the guiding principle, it is hard to understand why the president wants to add to a U.S. law which already has 9834 sections. 

The current president is not the first person to dream of improving a complex, arbitrary, inefficient and unjust tax system. On the contrary, the history of taxes in every country is replete with efforts at reform, although they come along far less often than desperate measures to squeeze more money out of unwilling subjects. Governments’ consistent need for more revenue and the governed’s equally consistent reluctance to pay helps explain why reformers find progress so difficult.

Obama’s inability to support simple tax principles for even the length of a single speech suggests another reason: irresistible temptation. Politicians love to give favours, to redress particular wrongs, to promote special rights. Obama and other would-be tax-reformers are more likely to succeed if they base their proposals on principles which are both idealistic and pragmatic.

First, the primary goal of tax systems should be justice. In one sense, that’s obvious; injustice has few defenders. But in discussion of taxes, justice is often sacrificed for expediency or the pursuit of efficiency.  This results in exemptions for important cases or special measures that promote  good causes — say home ownership or American jobs.

How does this fit with the principle of tax justice? In our social market economies, taxes should primarily serve the social side of the system. A just tax system will follow what Pope Benedict XVI called the “logic of public obligation”. He says that the compulsion of the law should be used to support the social fabric by making people do what they would want to do voluntarily — if they were perfectly good. Taxes should help but not pamper the poor and discipline but not break the rich.

This principle of justice will not end all arguments about tax policy. It can be used to argue for flat or rising tax rates; for levying taxes predominantly on wages or on prices; and for countless other arrangements. But if those who write the tax rules keep to this principle, the tax system is more likely to be just.

A second goal of tax systems should be to prefer imperfection to complexity. In this convoluted world, even a basically fair tax system will be unjust to some people. But additional rules designed to help the maltreated almost inevitably have unintended consequences. A common effect is the creation of loopholes through which the privileged quickly move, managing to pay less tax than they would otherwise. If a Save American Jobs tax benefit becomes law, companies will undoubtedly go through contortions to show they qualify. Obama would be more likely to do good if he dropped his own tax contortions to focus on simplicity. 

Third, taxes should not be used to guide social policy. Taxes are too crude and indirect to be effective for that. If bosses are paid too much, it is better to pay them less than to tax them more. If ordinary wages are too low to support families, raise the pay rather than cut the taxes. If governments want to subsidise investment, culture or some other public good, they should do so with grants rather than tax breaks.

Fourth, vigilance. From the tax exemptions of monasteries in medieval Europe and 11th century China to the “carried interest” of today’s private equity managers, the powerful have always twisted tax rules to their advantage. They should be held in check. More pertinently, since lawmakers are usually representatives of the elite, they should hold themselves in check.

In that respect, President Obama deserves praise for admitting that it’s “not right” when “I get a tax break I don’t need”. If his Democratic followers and Republican opponents showed some of the same humility, a better U.S. tax system might become more than an idle dream.