Republicans Are Wrong on Redistribution

Josh Barro has a good article up at Bloomberg about why Republicans should rethink their fierce opposition to what they call government “redistribution” programs:

Liberals talk about booming incomes at the top while lower-income households barely see benefits from economic growth. Conservatives talk about a rising share of the population that depends on government benefits and a shrinking share that pays income tax.

Though the frames are different, these are descriptions of the same economic phenomenon: rising inequality of pre-tax incomes. But only liberals are advancing a semblance of an agenda to address it.

The main liberal reaction to this phenomenon is to call for progressive fiscal policy: higher taxes on the rich people who have benefited most from the last 30 years’ gains in gross domestic product to pay for programs that raise low- and middle-income people’s after-tax incomes. Obamacare, which raised taxes on the rich to fund a new health-care entitlement for the poor and middle class, is a key example of this agenda.

Liberals also advocate policies that are aimed at reducing pre-tax inequality: more subsidies for education, trade protection, industrial policy to support medium-skill jobs in manufacturing, easier unionization, minimum-wage increases, rent control.

All of these policies have a trade-off: in exchange for reducing income inequality, they are likely to reduce GDP growth. But some are better than others. Minimum-wage increases in the range being discussed in today’s political debates don’t seem to have significant negative impacts on employment or output. There is room for a significant increase in tax progressivity without (much of) a negative impact on GDP growth, especially if the reform is well-designed.

But the key problem in this debate isn’t’ that liberals’ ideas are bad, though many of them (especially on trade) are. It’s that conservatives have no serious proposals of their own on rising inequality.


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Kathy Kattenburg

4 CommentsLeave a comment

  • What the stigmatization of economic redistribution ignores is this: When the distribution of resources in your society has become so skewed that it not only causes great suffering among the people, but threatens to tear apart the social fabric that allows us to treat each other as allies, then redistribution becomes not only desirable, but necessary.

    We don’t need to grow our GDP. What we need to do is remedy the grossest inequalities so that the median income rises even if per capita GDP shrinks.

    It’s up to the rich and powerful to do something about the problem, because they have usurped all the mechanisms by which it can be peacefully resolved. This can be easy for them, or it can be very, very hard.

    I have a feeling they’re going to choose the hard way. It’s just the nature of those whose greed won’t respect any limits. They’ll wait, like a monkey with its fist caught in a trap, unwilling to let go of the loot while harsh reality draws nearer with its cudgel and game bag.

  • All government taxing and spending results in redistribution of money. Same for all unregulated economic activity. It’s just a question of to whom and how much.
    For the last 30 years plutocrats and oligarchs in the US have used their powers to suck up a large amount of the wealth of the country into their hands. Today’s gross maldistribution of wealth is the result. This will not last.
    It will change through reform or by torches and pitchforks in the streets, as history repeatedly shows. Even the Romans understood this until they didn’t anymore, their Empire collapsed and the Dark Ages began.
    And the deficit terrors are a total scam. With a sovereign fiat currency, the US government is not constrained in spending. A government deficit is not a private debt. The government does not need to tax or sell bonds to spend money. That is what fiat means.

  • JT is exactly right. All governments, even and especially right-wing fascist governments, redistribute wealth. The only thing is that now most wealth in the U.S. is redistributed upward, through corporate welfare, preferential tax advantages and supporting an out-of-control military-industrial cabal. The amounts of true “welfare” such as TANF and food stamps pale when compared to corporate welfare.

  • If tax policy did a better job of discouraging owners and executives from simply extracting as much income as they can from firms, then maybe owners and executives would take better care of the long-term health of firms.

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