New Book Offers Reform Agenda for a Working America

WASHINGTON, D.C., Sept. 6, 2006—Wage inequality in the United States is large and growing. At the same time, numerous federal policies discourage some people from working. A new book from the Urban Institute Press explains how government programs should be changed to encourage work and reduce economic inequality.

In Making America Work, Jon Forman develops a comprehensive national strategy for improving the economic benefits of employment and promoting greater economic justice. His recommendations follow crisp and thorough discussions on how market forces and government actions combine to determine the current rewards from work.

"America works because it has achieved a balance between our desire to reward work and our concerns about economic justice," writes Forman, a professor of law at the University of Oklahoma. "But America could work even better." Showing how, Forman sets forth a slate of recommendations to reform America's tax, welfare, Social Security, pension, and health care systems, along with its labor markets.

Rewards and inequality

In the first few chapters, Forman discusses who in the United States is working, how the compensation system operates, how government decisions affect this system, and how far legislators and policymakers should go to reduce the unequal distributions of income and wealth.

When the free market's "distribution of economic rewards is unfair, it falls to government to adopt policies that promote greater economic justice," Forman maintains. "Governments influence market outcomes through a combination of regulation, spending, and taxation." Current policies reduce economic inequality by about 20 percent, but that still leaves America with a high level of economic disparity.

Among Forman's ideas for reform:

• Making Taxes Work: Get rid of inefficient tax subsidies and reduce tax rates on earned income. Restructure the earned income tax credit. Replace personal exemptions and standard deductions with universal grants. Abolish the tax system's many marriage penalties. Simplify the tax system and reduce compliance costs. Ultimately, integrate the income and Social Security taxes into a comprehensive income tax system.
• Making Welfare Work: Reduce the high marginal tax rates on earned income for low-income Americans and eliminate the welfare system's many marriage penalties. Provide more child care assistance for low-income parents. Eventually, merge the tax and transfer systems into a single comprehensive system with low rates on earned income.
• Making Social Security Work: Reduce the progressivity of the Social Security benefit formula while expanding Supplemental Security Income. Raise the early and full retirement ages. Tax Social Security benefits like pensions. In due course, replace Social Security with a two-tiered system, combining basic Social Security benefits to all older Americans with earnings-related individual accounts.
• Making Pensions Work: Expand pension coverage and pay retirees in proportion to their productivity. Require pension plans to be age-neutral. Gradually make universal retirement savings accounts mandatory.
• Making Health Care Work: Expand health care coverage, strengthen the connection between health care and work effort, and restructure health care markets. Provide nearly universal health care coverage at a reasonable cost and with a minimum of work disincentives.
• Making Labor Markets Work: Vigorously enforce the laws against employment discrimination. Reduce incarceration levels. Expand education and training opportunities. Modestly raise the minimum wage and index it for inflation. Expand the unemployment insurance program. Strive to make full employment a reality.

"It is remarkable that Professor Forman has offered so many reform ideas in so many policy arenas," writes Yung-Ping Chen, Frank J. Manning Eminent Scholar's Chair at the Gerontology Institute of the University of Massachusetts Boston. "One hopes that the book will have an impact on agenda setting in the 2006 and 2008 elections, and beyond."

Forman is the Alfred P. Murrah Professor of Law at the University of Oklahoma and vice chair of the Oklahoma Public Employees Retirement System. Before entering academia, Forman worked in all three branches of the federal government, most recently as tax counsel to Senator Daniel Patrick Moynihan.

Making America Work, by Jonathan Barry Forman, is available from the Urban Institute Press for $29.50 (448 pages, ISBN 0-87766-731-4). Order online at http://www.uipress.org, call 202-261-5687, or dial 1-877-847-7377 toll-free.

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