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If Hillary Clinton wants to fix income inequality, here’s how to do it

Rick Newman
Columnist

She has identified the right problem. The question is whether she’ll be any better at solving it than, say, President Obama, who has tried and struggled.

Hillary Clinton has begun to articulate the issues she’ll campaign on as she aims for the White House, focusing above all on the patchy prosperity that has left some Americans richer than ever while millions of others fall behind. “Prosperity can’t be just for CEOs and hedge fund managers,” she said during a recent speech her campaign managers characterized as a sort of coming-out party for the Democratic candidate. “The middle class needs more growth and more fairness.”

While leaving specific proposals till later, Clinton vowed to boost middle-class incomes and reduce income inequality, which has been worsening for roughly 35 years. Expect that to be a familiar theme among all the 2016 presidential candidates, from Jeb Bush to Bernie Sanders, since Americans continue to say economic issues such as unemployment and stagnant wages are the nation's biggest problem. The growing gap between rich and poor obviously isn’t new. But it now seems apparent that much of the middle class remains worse off than before the recession that began in 2007. That could become a decade-long decline in middle-class living standards by the time the next president takes office -- an unprecedented economic slump.

There are many ideas for how to reduce income inequality, and while none is exactly proven, there is a form of consensus on measures likely to be most effective. They include:

* Education and training programs that help people develop the skills most needed by employers.

* Tax reform that would lower rates on businesses, close loopholes and make the tax system leaner and more efficient.

* Public-private infrastructure programs that would invest more in roads and bridges while leveraging private-sector know-how to prioritize projects and assure they run efficiently.

* Better access to education, especially for underprivileged kids, including programs to make college more affordable.

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* Streamlined regulations for businesses and especially for startups, which would make it easier for companies to expand, hire and thrive.

* Trade deals that open more foreign markets to U.S. products and services while protecting Americans who might be harmed if jobs move overseas.

* Any policy that helps the economy grow, since widespread growth is the best way to lift all incomes.

Other ideas are more partisan, which could bedevil Clinton just as it has Obama, since whoever wins the White House in 2016 will probably have to work with a Republican-controlled House and possibly Senate. Liberal Democrats, for instance, want to raise taxes on the wealthy and transfer more money to those who might be struggling. Conservatives, by contrast, want to slash regulation, cut taxes and encourage the wealthy to spend more. For any president who wants to tackle income inequality, coming up with political compromises that include ideas appealing to both parties is at least as important as crafting an economic strategy, maybe more.

Obama has been vowing to combat income inequality for much of his time in office, with little to show for it. The economy has improved significantly since bottoming out in 2009, but it’s been the slowest recovery since World War II. The Federal Reserve, which the White House doesn’t control, has done more to stimulate the economy than any policy passed by Congress or driven by the White House. Obama has a detailed plan he calls “middle class economics” that would cut regulatory red tape, boost manufacturing, provide work retraining, improve access to education and do many other things to reduce the wealth gap. But Congress won’t approve any of it and has even shot down bills to promote free trade, traditionally a Republican, not a Democratic, priority.

If Clinton basically adopts the Obama agenda, there’s no reason to think she’ll have any more success reducing income inequality than Obama has had. Instead, she might want to start by finding ways to give Republicans some of what they want, in order to get some of what she wants. If she doesn’t, income inequality may continue to get worse, no matter how many speeches she gives on it.

Rick Newman’s latest book is Liberty for All: A Manifesto for Reclaiming Financial and Political Freedom. Follow him on Twitter: @rickjnewman.