The usually great Matt Yglesias engaged in a bit of false equivalence earlier this week, The Problem With Now More Than Ever Politics. That doesn’t mean that he’s completely wrong, but it’s still a bit annoying. He noted that in response to stagnating working class wages, the two parties have new policy ideas. And those policy ideas are — Surprise! — exactly what they’ve always been. The Republicans want to decrease regulation and “reform” the tax code. The Democrats want to invest in infrastructure and education. There are a few problems here. One is that although that is pretty much the only thing that the Republicans want to do, the Democrats actually believe in a whole lot more. But let’s leave that aside for now and look at these programs.
The basic idea behind the Republican policies is that it will help the economy grow. That’s debatable. But what if it did cause the economy to grow? As Yglesias pointed out, the economy has grown over the last several decades. And all that growth has gone to the rich. There is no reason to think that even more growth would be better shared. In fact, if the Republicans have their way, it will not be shared. Their ideas about reducing regulations go right along with their ideas for tort “reform” — the idea is to let the rich do whatever they want and then when they harm working people to disallow any kind of just judicial settlement. So the Republican plan has nothing to do with improving the lot of the working class. It is disingenuous to suggest that it does.
The idea behind the Democratic policies is the long refuted idea that economic inequality is all about education and “opportunity.” But at least it is a good faith effort to respond to the problem at hand. Well, maybe “good faith” is a going too far. The reason that politicians push the whole “education is the source of inequality” canard is because it doesn’t threaten the power elite. Nonetheless, spending on education and infrastructure will make a positive impact on income inequality. But Yglesias is right: it isn’t the best route.
Yglesias’ main point is the one he’s been making for years: if you want to get the poor out of poverty, give them money. It’s such an obvious insight that it seems silly when stated so bluntly. He provided a graph of poverty rates in most of the advanced economies and it shows that poverty without government interference is roughly the same level across the board. But post-tax-and-transfer poverty in Sweden is less than a third what it is in the US, even though pre-tax-and-transfer poverty is actually slightly higher in Sweden.
But which party is it that wants to cut food stamps and other kind of aid to the poor? Which party is it that wants to make sure that even the poorest people pay some federal income tax so they have skin in the game? Which party is it that has slashed taxes on the rich and still thinks they are taxed too high? Oh, that’s right: the Republican Party! They are also against raising the minimum wage and in many cases in favor of eliminating it altogether. The Democratic Party is broadly in favor of raising the minimum wage. If Washington were controlled by the Democrats, the minimum wage would be raised. Since the Republicans control Congress, we know that the minimum wage will not be increased.
Yglesias noted that there are ideas that are “out of the box” — although the ideas listed in the original article are mostly pathetic. The good ideas for reducing income inequality are almost exclusively liberal ideas. How about a financial transaction tax? How about a guaranteed minimum income? How about a higher inflation target? But all these ideas are anathema to the Republican Party because they don’t fit into the only two categories of acceptable policy: lower taxes on the rich and fewer regulations that affect the rich.
The mainstream Democrats may only offer weak tea for addressing our most important economic problems, but Republicans only offer poison: policies that will make the problem worse. Matt Yglesias knows this. But he’s trying to maintain a certain amount of centrist credibility. But history will scoff at the centrists who tried to find balance in modern American economic policy.