Can Domestic Policy Affect Income Distribution?
"Can Domestic Policy Affect Income Distribution?" Why, yes, yes it can.
Tim Noah buries the lede: Arguing that government policy can too affect income distribution, TNR’s Tim Noah writes:
If you omit government redistribution from the calculations in the previous paragraph then four countries that previously were more equal in incomes than the U.S.—Portugal, Italy, Israel, and Germany—become less equal than the U.S.
Wait. You mean that social-democratic, union-heavy, solidaristic Germany has worse income inequality, before taxes and transfers, than the cowboy capitalistic U.S., with its large underclass and out-of-control Wall Street greedheads? Don’t tell the narrative.
Bruce McQuain dubs this Quote of the Day and says, “Say it ain’t so!”
Well, okay. But the titular question of Noah’s piece was “Can Domestic Policy Affect Income Distribution?” And, well, it apparently can! Left to its own device, the economies of Portugal, Italy, Israel, and Germany would be less equal than our own. Enter domestic policy and — POOF! — more equal! QED, no?
I think he means can policies other than redistribution affect income inequality. That is, public education, labor rights, social services, etc. are traditionally justified under a theory that they will make people more inherently equal and would thus reduce inequality even without the need to redistribute money around. This data would suggest that direct transfer payments is really the only thing that works.
@ Stormy…
But key to this conversation is that higher taxes on the wealthy…a progressive tax rate…is required to fund public education and social services and the construction of infrastructure in order to reduce inequality. The last time this nation was “equal” the top marginal tax rate was 70%. Now it is 35% and we are told it’s too high and any higher will cause economic meltdown.
Today all we hear is that we can’t afford to fund public education and social services and the construction of infrastructure. Indeed, Romney’s economic plan will require gutting all those things to pay for additional tax cuts and humungous increases to military spending. But why can’t we afford those things?
We can’t afford those things because we pursued supply-side economics and it failed. Tax policy must now change to reflect that abject failure. For 30 years one group has reaped all the rewards of that failure…in order to regain income equality that same group must now pay the burden of those rewards.
Republicans won’t tell you the truth about this…and certainly a hack like Mickey Kaus won’t.
One of the choices in November is between funding things that benefit the mddle class…or continuing to pursue the failure of Republican economic policy.
Hey Norm,
We spend about 3 times as much per student on public education than we did in the 1960’s. How is that explained by supply-side economics?
That’s a high school education…what about college and or vocational training?
Seen what’s happened to those costs?
@Hey Norm:
Yeah, they’ve gone through the roof too. How can marginal tax rates explain that?
Here’s a handy chart on college costs
Education, like healthcare, has fallen victim to Gammon’s Law. Increased inputs are actually accompanied by reduced outputs.
@Andy: Can you point to some statistics on state-funding? I think Norm is talking about government funding of schools, not overall cost.
@Trumwill: I’m not Andy, so here’s some figures from the US Department of Education’s Projection of Education Statistics report.
However to the main point, for all the talk about income distribution, etc, not hearing any of the elected talking minimum wage increases, work hour rules, benefit increases, etc. However, the campaign season is still young.
@Trumwill:
Well, primary and secondary education is pretty much all government money. Again, we’re spending about 3x what we spent in the 1960’s per student.
For higher education I didn’t know the break-out, so after a bit of research I found this paper which indicates that state funding for higher education decreased by 10% between 1990 and 2008 on a per student basis in constant dollars for 4-year institutions (see figure 4 on page 7). I couldn’t find anything in the research time I had which included all government funding for all post-secondary education, nor could I find information going back to the 1970’s.
@ Andy…
Marginal tax rates don’t explain that. Marginal tax rates explains why we do less to help the middle class deal with this explosion in costs. Pell Grants get cut to pay for Tax Cuts.
You note how funding for primary and secondary school is up. Well the current Defense budget is about equal to the ENTIRE first Reagan budget. If only Education had kept pace like that.
Good observation and critical reading, James. Sure, redistribution (as defined there) mattered.
As regards comments and tangents, inequality is just one metric. It matters whether it is set in a context of increasing or falling poverty, etc. On that, some data suggesting that increased food stamp usage is indeed a result of increased poverty, here.
On education, I’m sure we all agree it’s a good thing. The proper conversation should be on how to buy it cheaply … and not imply that if it’s expensive we should just buy less.
@walt moffett: I was referring to college. Yes, K-12 spending has skyrocketed. It’s just that, on the college level, my understanding is that while costs have gone up, most of the burden is going towards students and parents rather than states.