The slide really started more than three decades ago with so-called “tax revolts” by a middle class whose earnings had stopped advancing even though the economy continued to grow. Most families still wanted good public services and institutions but could no longer afford the tab.
Since the late 1970s, almost all the gains from growth have gone to the top. But as the upper-middle class and the rich began shifting to private institutions, they withdrew political support for public ones.
In consequence, their marginal tax rates dropped — setting off a vicious cycle of diminishing revenues and deteriorating quality, spurring more flight from public institutions.
Tax revenues from corporations also dropped as big companies went global — keeping their profits overseas and their tax bills to a minimum.
But that’s not the whole story. America no longer values public goods as we did decades ago.
The great expansion of public institutions in America began in the early years of 20th century, when progressive reformers championed the idea that we all benefit from public goods. Excellent schools, roads, parks, playgrounds and transit systems would knit the new industrial society together, create better citizens and generate widespread prosperity.
Education, for example, was less a personal investment than a public good — improving the entire community and ultimately the nation.
In subsequent decades — through the Great Depression, World War II and the Cold War — this logic was expanded upon. Strong public institutions were seen as bulwarks against, in turn, mass poverty, fascism and then Soviet communism.