Monday, January 13, 2014
The Democrats' Feckless Attacks on Income Inequality
As Barack Obama scrambles to eviscerate key sections of his own signature health care law, he and other Democrats are trying to shift voters' focus to another issue -- income inequality.
Unfortunately, the solutions they advocate are pitifully inadequate or painfully perverse.
Start with the minimum wage, which some Democrats see as an election-winning wedge issue in 2014.
True, raising the minimum wage polls well. But does anybody really care much about it? Few minimum wage earners are heads of households; many more are teenagers earning spare cash.
Most economists agree that a higher minimum wage costs some low-skilled workers their jobs. And the economic redistribution it produces, from fast-food consumers to fast-food employees, is pretty minimal.
Another Democratic policy is to continue extending unemployment benefits. The intellectual argument for this is stronger.
Ordinarily, extended benefits tend to discourage the unemployed from looking for work. Their skills atrophy, and finding a job later gets harder.
But in the current new-normal economy, with record long-term unemployment, there simply haven't been enough job openings for many of the unemployed. Many Republicans look open to a compromise on this issue.
In any case the redistributionist effect will be only minor and, if robust economic growth returns, temporary.
One Democrat who argues for greater change is University of Arizona political scientist Lane Kenworthy. He believes the nation is and should be headed to a European-style welfare state, with the government taxing and spending 10 percent more of gross domestic product than at present.
Kenworthy would transform unemployment benefits into wage insurance, would start early education at age 1 and would vastly expand the Earned Income Tax Credit.
That's progressive economic redistribution, but with a catch. For as Kenworthy admits, you can't get the money for this just by raising taxes on very high earners: "The math simply doesn't work."
So he looks to a federal consumption tax, like Europe's value-added taxes. That would mean shifting from the current progressive income tax toward a more regressive European-style tax regime, with middle-income workers subsidizing non-workers.
Other proposals floated by Democrats, such as Senator Elizabeth Warren's call for substantially increased Social Security benefits, would have similarly perverse effects.
Social Security is already on an unsustainable trajectory. Increased benefits would, in time, require higher taxes on the young, who have negative or minimal wealth, to finance payments to the elderly, who tend to have significant net worth.
This echoes the Obamacare provision that limits premiums on the old and sick to no more than three times the premiums on the young and healthy. Is it really progressive to have the young subsidize the old?
Another left-wing Democrat, incoming New York Mayor Bill de Blasio, wants to raise income tax rates on those earning $500,000 to pay for universal preschool for the city's children.
That would certainly amount to economic redistribution, but to whom? Research over the last 50 years shows that Head Start and other publicly financed pre-school programs have no lasting positive effect on learning.
What de Blasio's proposal would do is to put a lot more unionized teachers on the city payroll. The redistribution here goes from the very rich to the public employee unions and their allies in the Democratic Party.
Liberal pundits are hailing de Blasio and his politics as a harbinger of the political future and a return to the liberal tradition of Franklin Roosevelt and his political ally New York Mayor Fiorello La Guardia.
But in 1944, the heyday of FDR and La Guardia, the five boroughs of New York City cast 7 percent of the nation's votes. In 2012 they cast only 2 percent of the national vote.
It's interesting that New York, which has had more liberal and redistributionist public policies than almost anywhere else in the nation over those 68 years, also has one of the nation's highest rates of income inequality.
High tax rates and high housing costs (exacerbated for many years by rent control) have squeezed middle-class families out of New York. They have migrated in the millions to lower-tax, lower-housing-cost places such as Florida and Texas.
The Obama Democrats did reduce economic inequality somewhat by raising the top income tax rate back to 39.6 percent. The proposals they're talking about now are either small potatoes, or moves to have the working middle-class subsidize non-workers or the young to subsidize the old -- redistribution, but not very progressive.
Escaping the Rat Maze of the Welfare State
This week marks the 50th anniversary of Lyndon Johnson's "War on Poverty," and as the joke goes, "Poverty won." Five decades after a blizzard of programs began descending on the American people, the poverty rate remains essentially unchanged.
That's a little unfair. What counts as poverty today would not have seemed so impoverished 50 years ago, when many of the poor lived without electricity and were no strangers to hunger. Today, the biggest health problems of the poor are more likely to stem from obesity than anything approaching starvation. Defenders of the war on poverty -- and the massive bureaucracy that has built up around it -- insist that underfunding is to blame.
That's a tough sell. The Heritage Foundation's Robert Rector estimates that we've spent $20 trillion on these programs -- not counting Medicare and Social Security. We spend $1 trillion to $2 trillion more every year, depending on how you do the math. But apparently for liberals, that's still too stingy. Perhaps the problem isn't how much we're spending, but how we're spending it.
If you drew a Venn diagram of where the hard left and the libertarian right agreed, the overlapping shaded part would include a bunch of social issues -- gay marriage, drug legalization, etc. -- but almost no economic issues. Save one: the Universal Basic Income.
The UBI is a pretty simple idea. Everyone gets a check from the government. (Actually, it's a little more complicated than that depending on how you implement it, but you get the idea.)
Charles Murray, my colleague at the American Enterprise Institute and a legendary libertarian social scientist, wrote a wonderful book a few years ago, "In Our Hands," in which he proposed an annual grant from the federal government of $10,000 for every American over 21 who stayed out of jail and still had a pulse. He was building on arguments made by two titans of libertarianism, Friedrich Hayek and Milton Friedman, who also supported some version of a UBI.
On the left, the idea has been popular for generations as a way to instantaneously alleviate poverty and to defeat the ol' devil of income inequality.
So what's the catch? Why aren't we getting a fat check from Uncle Sam every month? Some cite the cost, which obviously would be hefty. But that's a secondary problem. The real sticking point is that the libertarian argument is largely an either/or proposition, while the left-wing version is a both/and deal. The libertarians want to liquidate much of the welfare state and convert it into cash payments. The left's version is that the money would, for the most part, augment the welfare state.
New York University professor Lawrence Mead identified the chief flaw with both the libertarian and left-wing approaches to fighting poverty, either through existing welfare programs or through a UBI: the "competence assumption." This is the presumption that the intended beneficiaries of government anti-poverty programs always "behave rationally enough to advance their own self-interest." We all know enough people in our own lives (never mind what we know about ourselves) to realize this isn't always the case. Lots of folks are determined to do things that aren't in their long-term self-interest.
The problems afflicting many poor people are often of their own making, at least in part. Having children before getting married, dropping out of high school, etc., are transparently bad choices that millions of people make. (Also, some anti-poverty programs create incentives that make bad decisions seem rational.) But many poor people have just had rotten luck. There's good reason to believe that, with a little help, they can work their way up the economic ladder. And for countless others, the truth probably lies somewhere in between.
For 50 years, we've run a massive experiment around one approach: that bureaucrats and social planners can fix the lives of others by telling them how to live. For some it's worked, for others it's been an abject failure. But few can claim it's all been a smashing success.
Perhaps a compromise can be worked out. Why not give poor people a choice? They can stay within the rat maze of the current welfare state, or they can cash out. According to Rector, 100 million Americans receive aid from the government at an average cost of $9,000 per recipient. Surely some of them are equipped to spend that money better than the government. Why not give them a shot at proving it? If they fail, they can always switch back to the old system. If they succeed, well, that'd be a real victory in the war on poverty.
The Left’s Necessary Lie
The debates over Obamacare seem to be, like Ben Franklin’s death & taxes, the only certainties in our lives. This has clearly been the case since Inauguration Day, 2009. Yes, President Obama called for an immediate “stimulus” of nearly $1 Trillion to prime the pump, to create shovel-ready jobs. We never heard that phrase shovel ready before Mr. Obama employed it. And, within the first two years after passage of the huge stimulus bill, the president himself acknowledged there was no such thing as shovel ready jobs.
But let’s move on, as the Left is forever urging us. Let’s not “re-litigate” the past.
You may have noticed that even when you are not meeting them in court, even when you are not having to sue them to defend your basic constitutional freedoms, the Left says you are trying to “re-litigate” the past every time you suggest that they might be held accountable for anything they said or did yesterday.
Here is something to talk about from today, right now. Noam Scheiber writes for the premier journal of the Left, The New Republic. In the current issue, Scheiber has penned “How Obamacare Actually Paves the Way Toward Single Payer.”
It’s a remarkable piece of journalism. Scheiber responds to the complaint of Michael Moore that Obamacare did not go far enough.
I happen to agree with Moore’s basic sentiment…And yet I am much more sympathetic to Obamacare than Moore. He thinks it’s awful. I consider it a deceptively sneaky way to get the health care system both of us really want.
Scheiber uses deceptively sneaky not as a conservative might use it. It’s not pejorative. He uses the term as a compliment. He likes the fact that it is deceptive and sneaky. He approves of the lie.
So, we should not expect to see Mr. Scheiber upset about the president’s false promise—echoed by dozens of Mr. Obama’s fellow liberals in Congress—that “if you like your health insurance, you can keep it.”
This, too, is doubtless part of the deceptively sneaky aspect of the federal takeover of health care that Mr. Scheiber and the Left want to see.
We can, of course, debate and differ on whether or not a single payer health system would be a good thing for America. Canada has a single payer system and Canada has not ceased to exist. (But you are not supposed to notice when Canadian premiers get sick, they make a bee-line for the Mayo Clinic in the U.S.A.)
We could have had that debate in 2008 or 2012. But that is not the debate we had.
Obamacare was the law they passed. That was the program they imposed on us. And now, this leading journalist of the Left lets the single payer cat out of the Obamacare bag.
President Obama is on record saying he would have preferred a single payer system. But only now, with this New Republic column, do we see this candid confession that deceit is the order of the day.
He, they, all of them wanted all along to force Americans into a single payer system, but they didn’t have the votes—in Congress, or in the nation—to get what they wanted.
So they had to employ a deceptively sneaky ruse. They had to lie about our being able to keep our own insurance if we preferred it. They had to lie about where Obamacare might eventually lead.
This article by Noam Scheiber goes beyond any Republican talking points or any conservative critiques. It is candid, but candid about lies. And about the need to lie.
How can we react expect to denounce it? It not just the measure we oppose, although oppose it we must. It is the deceptively sneaky way they went about imposing Obamacare on the nation that we must oppose. From the Cornhusker Kickback and the Louisiana Purchase, to the Christmas Eve sooty slide down the Senate chimney, to the absurd Supreme Court ruling that it must be a tax if it looks like a tax—even if it failed to originate in the House of Representatives—as the Constitution plainly commands: all of this we must oppose.
And we must oppose lying as a political practice. If we condone lying as Noam Scheiber condones it, our political life will end. We cannot expect to survive if the consent of the governed is fraudulently obtained. We may someday agree to adopt a single payer system. The British have accepted it. But in their defense (defence), the Socialists in Britain were honest and straightforward about what they wanted to achieve. They never deceived the British people at the polls about what they would do.
This move toward socialism by stealth will always de-legitimize the goals of the Left. Worse, it will de-legitimize government itself, even as it poisons the well of our political life.
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Posted by JR at 1:39 AM