Why Americans Oppose Economic Redistribution Despite Income Inequality

Michael Barone
|
Posted: May 07, 2015 4:28 PM
Why Americans Oppose Economic Redistribution Despite Income Inequality

Skeptics about democracy in the 18th and 19th centuries argued that the enfranchised masses would use their votes to seize the property of the relatively few rich. What could be more natural?

But it hasn't happened, in this country or abroad, to anything like the extent that those would-be Cassandras feared. Nonetheless, we continue to hear calls for economic redistribution, the clinical term for public policies transferring money from the relatively few rich to the much more numerous non-rich.

We also hear cries of frustration from advocates of such polices. The latest example is Thomas Edsall, the longtime Washington Post reporter now writing for the New York Times. Unlike most other liberal reporters, who are optimistic cheerleaders for their team, Edsall has long been alert to signs of liberalism's weakness.

In a long blog post, Edsall notes "a steady decline in support for redistributive government." He cites a study by Berkeley economist Emmanuel Saez, another ardent redistributionist, that "as inequality increases, so does ideological conservatism in the electorate."

Edsall cites evidence that support for health care "as a government-protected right" has fallen off from 69 percent in a 2006 Gallup poll, replaced by a 52 percent majority for the proposition that health care is not a federal responsibility.

Those poll numbers should not be taken too literally. Many respondents were surely hazy about what it means to say that a service like health care is a "right." And after passage of Obamacare, talk of a federal responsibility tends to evoke partisan responses in a country split just about evenly between two ideologically distinct parties.

That said, Edsall is right to conclude that there has been a diminution of faith in government as an instrumentality. The reasons are not hard to find. Atop the list: the Obamacare mess. The rollout of healthcare.gov -- which the government had 42 months to prepare for -- was a disaster. In contrast, there were 42 months between Pearl Harbor and V-E Day. Government performed a lot better then.

Things will get even messier if the Supreme Court reads the Obamacare statute as written in the King v. Burwell case expected to be decided in June. In Edsall's words, "public and private health care would be disrupted, to put it mildly."

It's hard to avoid the conclusion that Yale Law Professor Peter Schuck highlights in the title of his 2014 book, "Why Government Fails So Often." As I put it in a column then, gummint don't work good.

But can't government at least shuffle money around? After all, it does something like that in taxing payroll earnings and paying Social Security benefits to the elderly. Yes, the checks go out, but the program is on an unsustainable trajectory.

And when you look at the policies redistributionists advance, you see either things with trivial effects or things that are politically inconceivable.

Consider some redistributive policies often advocated. Increasing the minimum wage and expanding the Earned Income Tax Credit -- the latter supported by some Republicans -- would redistribute income, a little. Rewriting labor laws to show more favor to private sector unions is a political nonstarter and likely wouldn't restore unions to anywhere near their 1950s peak.

What about higher taxes on the rich, the recommendation of French economist Thomas Piketty in his ballyhooed book, "Capital in the Twenty-First Century"? When actor Will Smith was interviewed on French television, he supported the idea in general. But when told that France's top rate was 75 percent, he exclaimed, "Seventy-five! That's different. Well, God bless America." France's socialist government has since lowered the rate.

British Labour party leader Ed Miliband is calling for higher taxes on high earners and "mansions" and might enact them after the May 7 election. But again, the redistributive effect looks marginal -- unless these measures choke economic growth. You do get more income equality when you destroy wealth. Everyone is worse off.

The fact is, America already has a redistributionist income tax: the top 20 percent of earners pay 84 percent of income tax revenues, and the top 1 percent, with 17 percent of income, pay 46 percent.

Americans have an innate sense that it's a mistake to kill the goose that lays the golden eggs. They seem to understand that, if taxes are too high, the affluent will figure out ways to shelter income. In other words, they doubt that a government incapable of building a working website can effectively redistribute income and wealth.