Over at The Fiscal Times, Mark Thoma wrote a really interesting article, The Politics of Income Inequality. He noted that, “The calls to cut government spending to avoid disastrous, though largely imagined consequences, and the push to cut taxes to avoid harmful economic distortions that supposedly lower economic growth are, in the end, about the desire to reclaim income lost to taxes.” In other words, all the claims about improving the economy and balancing the budget are just about the rich wanting to lower their taxes. That should come as no surprise to anyone around here. By and large, the rich are rich because they don’t care about anyone but themselves.
But a really big question remains, “Why do so many non-rich people go along with this?” After all, there are very few people who are rich. Clearly they are not supporting these policies out of a sense of greed. One big way that we are seeing in the Republican presidential nomination is immigration. More immigration is certainly to the benefit of the rich. But it isn’t that big a deal. They can easily bypass it if they can use immigrants as the reason why this generation of American workers is not doing as well as the last. “It’s not that the rich are taking all the productivity gains; it’s that immigrants are mowing laws for cheap!”
Thoma put it well:
So people blame the poor and the immigrants. Of course, it is nonsense. The truth is that the middle class and the rich get huge largess from the government. It is just, as I have discussed many, many times before, that our system is set up so that the richer you are, the less the help you get looks like welfare. The poor get special cards that they use in public so that their government assistance comes with a big dose shaming. The rich get billions in bank bailouts, set up so that they can say they were forced to take them and didn’t actually need them. The middle class, of course, don’t see the thousands of dollars they get from the government to pay their mortgages as welfare — it is just a tax deduction! (Uber-conservative Milton Friedman would disagree.)
The question is whether conservative policy would actually improve the lots of the working class. “Republicans will close the borders, slash spending that requires the redistribution of income to the undeserving, and when all is said and done the belief is that there will be more income and opportunity available to hard-working, upstanding, moral households.” I think the answer to that should be obvious. This isn’t an ideological conclusion of mine. It is empirical. The Republicans made this claim under Reagan, and not only did the working class do no better — they ended up paying higher taxes. The same policies were pushed under George W Bush and again, the working class got nothing. It’s kind of funny, actually, because the Republicans run around saying the Democrats have no new ideas, but the Republicans are pushing the exact same policies they’ve been pushing for 40 years. But there is an extra irony: those policies clearly haven’t worked, but they still push them.
Thoma’s argument is that we must do something about income inequality. Currently, it is just getting worse. And the worse it gets, the more pressure builds to do something about it. It would be nice to think that the economists are busy working on solutions. And I know that the so called liberal economists are working on it. The conservative economists are too busy giving well paid talks to groups of hedge fund managers. But ultimately, I think we will need to reevaluate the entire idea of capitalism.