Heterodox conservative Josh Barro argued after the election that the increase in economic inequality in recent decades, along with the election results, show the need for conservatives to make peace with redistribution.
“There’s…no reason to think that, whatever standard of living we start from, an economy where nearly all the improvements accrue to a small fraction of families is either politically sustainable or morally acceptable.” For him, inequality can be a problem even if the poor do not suffer from dire material deprivation. It might be acceptable if everyone’s incomes were rising, but those of the rich were rising fastest; but when most income levels stagnate and upper-levels rise, this is a problem for him.
Part of what makes conservatives who they are, though, is that they see fairness as based on procedures, not on outcomes. Barro doesn’t engage this debate, merely asserting a position on one side of it. Yet the question of where conservatives should make concessions depends partly on what they prioritize most highly. Embracing top-down health care cost controls, working to make Obamacare “less costly and less economically distorting” while accepting its basic framework, and working to make redistributive policy more pro-growth by “minimizing poverty traps…and making sure the tax base is broad so progressivity can be achieved with relatively low tax rates” makes sense if growth, lower health care costs are higher priorities than those conservatives have been pursuing; but if not, maybe not.
If there is really political demand for greater redistribution, we may have a different matter. Yet it isn’t obvious that the election results reveal this. Unlike 2010, it was largely free of policy and ideological content, being fought instead over which candidate could best manage government to produce economic growth rather than over what direction we should take government.
More broadly, during the three-decade period of growing economic inequality that Barro cites, we have cut top marginal taxes, attached work requirements to welfare, and even (if it matters) elected plenty of Republicans. In the 60s, amid an economic boom, we expanded redistribution. The rise in income inequality culminating in the 1920s did not bring about the New Deal; Depression did. The response to perceived Gilded Age inequities was anti-trust laws, not redistribution; procedural fairness, rather than outcome-based fairness, was the goal.
William Jennings Bryan and the free silver populists did advocate redistributive inflation, but this was to combat a deflationary depression. According to an educational lesson plan by the St. Louis branch of the Federal Reserve, “Farmers were having financial difficulty because the money they received for their crops was decreasing but their farm debts remained fixed, which means that because of deflation, running their farms became more expensive over time.” So it’s a specific set of conditions that triggered demand for specific redistributive policies; it wasn’t just a matter of “you have more money than I do, I think I’ll take some.”
Today, I think the equivalent is the trade issue. People don’t want explicit “hand-outs”, but on the other hand they don’t want to see massive job losses and wage reductions through no fault of their own. They hit on protectionism as a solution. Pro-trade elites tend to counter with proposals like job retraining. Probably as Barro suggests none of these things will make much of a difference, and pre-tax inequality is here to stay. That doesn’t mean we can divert people from opposition to free trade by just taxing the rich and giving them handouts from the government.
Mitt Romney’s 47% comments offended people precisely because most people don’t want to be thought of as dependent on handouts. Barro himself argued at the time that the comments would cost Romney the election.
Barro writes that conservatives “fought as hard as they could to stop [Obamacare], rejecting the whole idea of a more progressive fiscal policy. (If you think conservatives’ objection is to spending rather than spending specifically on poor people, note how protective Republicans are of Medicare, a relatively non-progressive entitlement program.)
“And they lost, because the rise in pre-tax inequality (and the related rise in health care costs) is making the electorate’s demand for progressive fiscal policy stronger and stronger.”
But Republicans didn’t lose the public debate on health care; they lost the vote, because Democrats had the power, because they were strongly committed to passing a bill, because they had spent so much time on the issue that they thought the public would punish them for a lack of results as much as it would punish them for a bill it didn’t like.
Nor was increase in redistribution the main objection. That would be a change in degree, but not kind, from the status quo ante, and compromise could probably be reached. The goal behind Obamacare, from the point of view of the wonks who brought it about, was to bribe the public into accepting cost controls for health care. They wouldn’t accept cost controls from greedy HMOs in the 90s, but perhaps they would accept restrictions imposed by wise, benevolent government. This proved not to be very far from the case, to the point where pro-Obamacare propagandists were forced to deny the law represented anything like a “government takeover” of health care, or in any way threatened the existence of the private insurance industry.
Inside the Beltway, the debate was about whether Obamacare would successfully control costs, but outside it was about opposition to cost controls, at least as imposed from the top-down. It’s true that the public might be equally hostile to conservative cost-control measures designed to encourage people to pay for care directly rather than through insurance. But in that case the choice is between competing, popularly unappealing reform options. It is not primarily a choice between more and less redistribution.
Given rising health costs and the aging population, the money just isn’t there for more redistribution. If you make that problem, rather than inequality, your starting point for analysis, you will better describe the actual contemporary policy choices.
As for Barro’s remark that Republicans protect Medicare spending, proving they are okay with spending money as long as it’s not directed at the poor, that only means they’re trying to appeal to an electorate that loves Medicare spending, suggesting they’re not out of step after all.* This highlights a bit of an equivocation by Barro: is the problem the state of the middle class, or the state of the poor? He says incomes have increased for the very rich while stagnating for everybody else, so why does this call, in his mind, for an increase in welfare for the poor, as opposed to more middle class entitlements?
*Even there, the House GOP embrace of the Ryan budget weakens Barro’s claim considerably, supporting my above claim that the real debate is about how, not whether, to control costs.