How do Republicans Think About Income Inequality? How Should They? 5 Key Points

 

great_recession_inequality_shutterstock_022515It’s not just left-wing progressives and Occupy Wall Street remnants who think US income inequality is a problem. A large 2014 Pew poll found that about two-thirds of Americans think the income gap has gotten worse and that government has a role in reducing that difference. Even 45% of Republicans think government should do something.

But do what exactly? Noam Scheiber in The New York Times summarizes research that found just 13% of wealthy Americans said government should “reduce the differences in income between people with high incomes and those with low incomes.” And only 17% percent said the government should “redistribute wealth by heavy taxes on the rich.” (Also, according to a different study, the wealthy view the income gap as reflecting the results of individual choices and mistakes rather than larger forces.) The rest of America, on the other hand, finds more appealing the idea of tax-driven redistribution. Scheiber points to a 2013 Gallup poll that found by 52%-45% Americans think wealth should be more evenly distributed with 52%-45% favoring tax hikes on the wealthy.

How will the next US president see things? The same as their donors, according to Scheiber:

Appearing at a candidate forum in late January, three likely Republican presidential contenders — Senators Ted Cruz, Marco Rubio and Rand Paul — all made a striking confession: They considered “the increasing gap between rich and poor” to be a problem. But on the question of whether the government should intervene to solve it, Mr. Cruz and Mr. Paul rejected that approach, and Mr. Rubio appeared to agree with them. When “government takes over the economy,” Mr. Cruz said, “it freezes everything in place. And it exacerbates income inequality.” He proposed lowering taxes and loosening regulations instead. …

Jeb Bush, arguably the most outspoken potential Republican candidate on the subject, has struck much the same posture as his more conservative rivals. “We believe the income gap is real, but that only conservative principles can solve it by removing the barriers to upward mobility,” Mr. Bush wrote when announcing the formation of a political action committee this year. Mr. Bush vowed to “celebrate success and risk-taking, protect liberty, cherish free enterprise.” …  It’s not just right-wing presidential aspirants like Mr. Cruz and Mr. Paul whose statements on inequality diverge from public opinion. Hillary Rodham Clinton, though she has been more open to a government role in solving the problem, has yet to mention tax increases as a possible answer.

A few thoughts:

1.) The Gallup poll results on redistribution are roughly same as they were in back in 1985 and haven’t moved much except around the Financial Crisis and Internet stock bubble/bust. The numbers on tax hikes are also about the same as when that poll was first taken in 1999. So greater inequality has not been matched by a markedly greater desire for redistribution.

2.) Maybe one reason for the above results is that income inequality looks most severe when you look at the pre-tax, pre-transfer “market income” numbers of inequality researchers Thomas Piketty and Emmanuel Saez. But the 99% do a lot better – both in terms of inequality and income growth — when you factor in all the redistribution going on through the tax code and welfare state. Other recent research shows upward mobility has also deteriorated despite greater high-end inequality. It’s a complicated story.

3.) While Hillary Clinton has not proposed raising top tax rates, it is not hard to envision her, like President Obama, supporting a reduction in tax breaks favoring the rich and using that money for, say, universal preschool.

4.) How should Republican pols think about income inequality? This is my short version:

The big problem with high-end inequality is not that it necessarily reduces GDP growth. Instead, it increases the impact of barriers to income mobility such as poor schools, pricey colleges, weak public transit, and onerous occupational licensing schemes. If you can’t climb the ladder, then a top rung that’s ever further away becomes a bigger problem. While conservatives should applaud when an entrepreneur strikes it rich thanks to an innovative new idea, product, or service, they should freely criticize crony capitalist policies that benefit the powerful and politically connected, such as special tax breaks, strong intellectual property laws, or the safety net for Wall Street banks that are “too big to fail.”

5.) Let me also add that there is much to be said for limiting inefficient upper-end tax breaks — such as for healthcare and housing — and using some of that dough to expand tax credits that support work and increase take-home pay for working class Americans. At the same time, Republicans should continue to emphasize the need to increase the pace of economic growth as the greatest economic challenge facing America right now — even through polices such as reducing business taxes that may strike some as inegalitarian.

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  1. Frank Soto Contributor
    Frank Soto
    @FrankSoto

    I’m not impressed by this polling.  When asked what percentage the rich should pay, people consistently quote numbers lower than the actual tax rates of the rich.   This is an education problem, not a policy problem.

    • #1
  2. user_7742 Inactive
    user_7742
    @BrianWatt

    The 45% of Republicans who think that the federal government should do something about income inequality are just wrong and therein lies a fundamental problem that needs to be addressed by the party and its more prominent leaders and influencers. Rather than focusing on the diminishing or elimination of regulations that hamper small business or small business startups there are too many in the party that have bought into the entitlement mentality that the government owes them. This is the legacy of the hundred years of progressive governance and meddling to make the economy somehow more fair. What Republicans need to do is promote the elimination of agencies, regulations and taxation that constrains entrepreneurs and business in general. I would trust Rubio, Paul and Walker to do just that. Jeb not so much.

    • #2
  3. Ross C Member
    Ross C
    @RossC

    I am not surprised that a poll question that asks about raising taxes on a group other than the particular poll respondent’s group finds a positive response.  Who after all does not want to help the poor especially when it costs them nothing.

    I suspect if the solution involved raising taxes on filers with taxable incomes $60k or above the “NO” answers would rise accordingly.

    • #3
  4. Ross C Member
    Ross C
    @RossC

    BTW these are good policy prescriptions you have IMO.  When I want to gauge how free market Republicans really are, I like to launch the concept of reducing deductions especially the home mortgage deduction.

    I find that most conservatives will not support this even if it is joined with lower tax rates to help minimize the impact.

    • #4
  5. user_1152 Member
    user_1152
    @DonTillman

    James Pethokoukis: How should Republican pols think about income inequality?

    Embrace it.

    1. I don’t believe you can fight it if you’re willing to let Marxists set the language.  It’s not income inequality, it’s income spread or income diversity.

    2. Income spread has increased hugely under the Obama administration.  According to The New York Times:

    “The average income of the top 1 percent of earners increased about 31.4 percent from 2009 to 2012, while wages for the other 99 percent essentially stood still. The proportion of economic gains going to the very wealthy under the Obama administration is greater than it was under Mr. Bush.”

    NY Times: Let’s Talk About the Wealth Gap
    http://www.nytimes.com/2014/01/27/us/politics/lets-talk-about-the-wealth-gap.html

    Investor’s Business Daily:Obama Calls Income Gap Wrong After Widening It
    http://news.investors.com/ibd-editorials/073013-665705-income-gap-grew-sharply-under-obama.htm

    3. Thus, the best way to reduce the income spread is to do the opposite of the Obama administration.

    4. Likewise, the cities with the largest income spread are run by Democrats.  Like Chicago, Detroit.  The Democratic party itself probably has a significantly larger income spread than the Republicans.  Get some numbers on that.

    5. It’s infinitely better to reduce income spread by raising the poor out of poverty than by transferring wealth.  As history has shown conclusively.

    6. Redistributive programs will fail because they are aimed at the measurement of a system and not the system itself.   Thus any redistributive program will cover up a systemic problem and will surely include hooks for the wealthy and politically connected.

    Problem solved, man.

    • #5
  6. user_86050 Inactive
    user_86050
    @KCMulville

    Let’s try a parallel scenario. Suppose we examined the results of football games in which the home team started to win much more often than they “should.” These days, oddsmakers usually set the home field advantage at about three points. But what if, for some reason, the home team started winning 85% of the games, and usually by 10 points?

    Two possible approaches:

    • compensate for the disparity by gratuitously adding 10 points to the visitors
    • find out why the home victory rate went up in the first place

    You could either be lazy and add goodies after the fact, or you could do the hard work and find out why the inequality started changing in the first place. Suppose, after a little investigating, they discovered that home stadiums did a whole bunch of little things that made the home team have a much easier time (like Atlanta pumping in crowd noise). The proper response wouldn’t be to add goodies but to stop the stadiums from exploiting their advantage.

    When it comes to the economy, all of the remedies being proposed, especially redistribution, are of the same variety … they add goodies after the fact.

    A diligent and responsible government would first try to discover why things went so unequal in the first place – and fix that.

    • #6
  7. Ricochet Member
    Ricochet
    @ArizonaPatriot

    First, I have a question:  I’d be very interested to see statistics showing how much of the alleged increase in “income inequality” is due to changes in family structure over the past 40-50 years.  Does anyone know of a good source for such information?

    Second, as a political matter, my thought is this: Republicans ought to use the “income inequality” question to attack crony capitalism.  Say things like: “For someone to become rich by providing value is not a bad thing.  It is the essence of what makes America great, and is one of the principal sources of American prosperity.  Whether someone makes a new product, or finds a new and better way to provide a product or service, everyone gains.  What is a problem is when the rich use their influence to get special handouts, or special rules that favor them.  Almost every time you find this type of crony capitalism, you’ll find the Democrats behind it.  From ethanol subsidies that lead to the production of expensive, inefficient fuel, to sugar tariffs that raise the price of food for Americans for the benefit of a few wealthy farmers, to the Export-Import bank which is virtually a federally-funded Bank of Boeing, it is almost always the Democrats who are behind programs that favor a few, well-connected rich businesses at the expense of everyone else.  It’s time to end these special programs and put everyone on a level playing field.”

    • #7
  8. user_1008534 Member
    user_1008534
    @Ekosj

    What’s the quip? When robbing Peter to pay Paul, government can always count on the support of Paul.

    • #8
  9. Ricochet Member
    Ricochet
    @netrc

    Agree it’s an education problem; or rather, a propoganda problem. After decades being told that “income inequality” is bad and spoon-fed horror stories about RichPeople(tm) who are crazy/evil, no wonder the polls repeat that this is a problem.

    The nomenclature speaks to the ignorance of the issue: It’s not “income” that’s at issue but “wealth”. If we can’t even name this correctly, not much chance at solving it, whatever “it” is.

    And it’s interesting that the main practical problem is that either formulation makes people feel bad. The real problems have more to do with free market issues (e.g. monopolized educational system) than with the bogeyman of “income inequality”.

    • #9
  10. Johnny Dubya Inactive
    Johnny Dubya
    @JohnnyDubya
    • I am opposed to the tax code being used to effect policy aims of any kind, including wealth redistribution.  It is not the job of government to take an active role in redistributing income.  It is the job of government to remove certain obstacles to success and take appropriate measures to ensure a level playing field.
    • I am opposed to anything that adds to the tax code’s complexity and to the burden placed upon the taxpayer for tax preparation, record-keeping, and compliance.  Entirely aside from the monetary burden of taxes themselves, it is scandalous that the American people allow themselves to be forced to jump through the IRS’s absurd and innumerable hoops.  Before I die, I hope to see the introduction of the proverbial “tax return on a postcard”.
    • Discussion about “income inequality” tends to reinforce the idea that income is a finite “pie” that must be sliced up in a fairer manner, and that Americans’ collective income somehow belongs to the state, to be doled out as the state pleases.
    • One way to reduce income inequality would be to bring down the high end while the low end stays the same.  I get the sense that many liberals would be cool with that.
    • It strikes me as odd that there are concerns about income inequality in the US at the present time when there is a remarkable degree of equality with regard to quality of life, compared to any other time in history.  Yes, high-income people may have fancy cars and houses, but even low-income people have cars, flat-panel TVs, mobile phones, etc.
    • “Robbing Peter to pay Paul” does two things, neither of which is good:  It deprives Peter that which he has earned, and it provides Paul that which he has not earned.  Both consequences have the effect of reducing the person’s incentive to create wealth.  And if Peter’s brother Paul were working at a low-wage job and couldn’t afford to buy a car, and Peter was forced to give him $2,000 to buy one, then it wouldn’t be correct for someone to observe that Paul is therefore doing better.
    • If we were being honest with ourselves, any discussion of income inequality would lead to a discussion of talent inequality, intelligence inequality, ambition inequality, and grit inequality.  If the objective were to level the playing field at all costs, then that would lead ultimately to the world of “Harrison Bergeron“.
    • #10
  11. user_1008534 Member
    user_1008534
    @Ekosj

    Actually, there was an economist on Bloomberg Radio a few days ago talking about just this issue. His point was that when we think about these huge incomes at the very apex of the distribution we tend to think of them as returns to capital … People like Warren Buffet for example. But that digging deeply into the data reveals that most are “returns to talent” not returns to capital.

    Wish I could recall his name.

    • #11
  12. user_1008534 Member
    user_1008534
    @Ekosj

    Hi JohnnyDub

    Re: “One way to reduce income inequality would be to bring down the high end while the low end stays the same. I get the sense that many liberals would be cool with that.”

    There is an interesting result from behavioral economics. Given the following options:

    (1) Earning 100,000 a year and living in a neighborhood where most people earn 120,000
    Or
    (2) Earning 80,000 a year and living in a neighborhood where most people earn 66,500

    Most people choose (2) Even though they’d be worse off from an absolute point of view. Apparently relative position matters.

    • #12
  13. user_1030767 Inactive
    user_1030767
    @TheQuestion

    I think people assume that income inequality is basically the same as poverty.  That is, if income inequality is increasing, poverty must be increasing as well.  Of course, income equality and poverty are not the same thing at all.

    Due to this confusion, I think that the popular sentiment against income inequality is a mix of virtuous, but confused, concern about poverty, and sinful, but clear thinking, envy.

    • #13
  14. user_1030767 Inactive
    user_1030767
    @TheQuestion

    Ekosj:Hi JohnnyDub

    Re: “One way to reduce income inequality would be to bring down the high end while the low end stays the same.I get the sense that many liberals would be cool with that.”

    There is an interesting result from behavioral economics.Given the following options:

    (1) Earning 100,000 a year and living in a neighborhood where most people earn 120,000 Or (2) Earning 80,000 a year and living in a neighborhood where most people earn 66,500

    Most people choose (2)Even though they’d be worse off from an absolute point of view. Apparently relative position matters.

    This is helps why some people were so repulsed by Mitt Romney, because he’s rich, even when the Democrats are not doing anything substantial about poverty.

    The Republicans should take up the banner of defeating poverty, and really mean it, while beating to death the idea that fighting income inequality is not the same thing as fighting poverty.

    • #14
  15. Mario the Gator Inactive
    Mario the Gator
    @Pelayo

    Ekosj:Hi JohnnyDub

    Re: “One way to reduce income inequality would be to bring down the high end while the low end stays the same.I get the sense that many liberals would be cool with that.”

    There is an interesting result from behavioral economics.Given the following options:

    (1) Earning 100,000 a year and living in a neighborhood where most people earn 120,000 Or (2) Earning 80,000 a year and living in a neighborhood where most people earn 66,500

    Most people choose (2)Even though they’d be worse off from an absolute point of view. Apparently relative position matters.

    In other words most people are Envious according to these results.  This is what class warfare is all about.

    • #15
  16. user_137118 Member
    user_137118
    @DeanMurphy

    Asking a politician “how important is income inequality?” is like asking “do you like poor people?”

    What do you expect them to answer?

    • #16
  17. Johnny Dubya Inactive
    Johnny Dubya
    @JohnnyDubya

    Ekosj

    Hi JohnnyDub

    Re: “One way to reduce income inequality would be to bring down the high end while the low end stays the same. I get the sense that many liberals would be cool with that.”

    There is an interesting result from behavioral economics. Given the following options:

    (1) Earning 100,000 a year and living in a neighborhood where most people earn 120,000
    Or
    (2) Earning 80,000 a year and living in a neighborhood where most people earn 66,500

    Most people choose (2) Even though they’d be worse off from an absolute point of view. Apparently relative position matters.

    Crazy, isn’t it?  I would much rather live in a neighborhood surrounded by wealthier people.  Real estate experts always say the nicest house on the block is not the one to own.  The better situation is to own the “worst” house.  You can always make a house nicer, but you can’t make the neighborhood nicer.

    As a matter of fact, in my personal life and career, I have often been surrounded by people much wealthier than I.  In one case, a gentleman had a net worth in the nine figures.  It never mattered to me.  Perhaps I don’t have the envy gene.

    By the way, years later, I saw the wealthy gentleman in a hardware store.  He was wearing tattered khakis, a sweatshirt, and a fishing hat.  I introduced him to my wife and later said to her, “Can you believe he’s worth $XXX,XXX,XXX?  He wasn’t a Kardashian – put it that way.  And the stereo at his vacation home?  An 8-track player with an adapter that enabled him to play cassette tapes.

    • #17
  18. Tommy De Seno Contributor
    Tommy De Seno
    @TommyDeSeno

    To quote someone, “What difference, at this point, does it make?”

    I say that because the issue will spin against us no matter how we frame it.   Case in point:

    When Wall Street makes gains under a Republican like Bush, it’s evidence of income inequality and Bush helping out his Wall Street cronies.

    Wall Street has made huge gains under Obama, which is evidence of what a great President he is.

    Have you seen anyone on the left frame the DOW numbers as an argument against Obama for income inequality?

    Let’s not bow to the Marxist redistribution pressure.  It wouldn’t win them over even if we did.

    • #18
  19. user_88846 Member
    user_88846
    @MikeHubbard

    The problem with socialism is socialism; the problem with capitalism is capitalists—specifically, that we don’t have enough people with capital.  Having capital means that a financial set back is a speed bump rather than a catastrophic wreck.

    Like most if not all of us here on Ricochet, I don’t think government redistribution of income works.  But I do think that income inequality matters, if only because the poor have different interest than the rich, and there are necessarily going to be more of the poor than the rich.  When you don’t have much capital to tax, a program of tax and spend is appealing.

    Restricting low skill immigration is one thing that would help the poor: the last thing poor Americans need is more competition for low skill jobs.  Also, we need to crack down on companies like Southern California Edison:

    Southern California Edison, which recently got rid of 500 IT employees and replaced them with a smaller force of lower-paid workers brought in from overseas through the H-1B program. The original employees were making an average of about $110,000 a year, Hira testified; the replacements were brought to Southern California Edison by outsourcing firms that pay an average of between $65,000 and $75,000.

    “To add insult to injury,” Hira said, “SCE forced its American workers to train their H-1B replacements as a condition of receiving their severance packages.”

    The US is a high income country, which means that it’s nearly always possible for businesses to import cheaper labor.  I understand why businesses want to bring in cheap labor, but I don’t think we need to expand guest worker programs.

    • #19
  20. RushBabe49 Thatcher
    RushBabe49
    @RushBabe49

    The issue is not Income inequality, it is EARNING inequality.  We support assisting people to increase their EARNING power, so their wealth will increase.  Everyone is the USA has access to free public education.  Want more earnings?  Go to school (K-12, college or trade school, apprenticeship), learn a trade, get a job, and EARN your way.

    • #20
  21. user_1008534 Member
    user_1008534
    @Ekosj

    Hi Tommy De Seno

    Re: spin against us

    You are right. Can’t really give an inch or it looks like capitulation. I’d prefer saying “Look, we are proud to live in a country where, if you build a better mousetrap, you can get very rich. That opportunity doesn’t happen everywhere. But it is harder and harder to grab those opportunities. The heavy hand of regulation, cronyism etc. stifles many more businesses than it nurtures. ” Yadda yadda yadda … Insert any Reagan speech here (not ’cause its easy to cut and paste but ’cause he probably said it better than anybody else and its probably still true)

    • #21
  22. Artemis Fawkes Member
    Artemis Fawkes
    @SecondBite

    The terms “income inequality” and “wealth inequality” are atrocities.  Their only purpose is to provide some sort of quasi-metric justification for envy and the aggrandizement of institutional power.  The only reasonable response is righteous anger at the attempt to co-opt our support by dangling the possibility that we might get a cut of the spoils.

    On a practical level:  institutional barriers have the effect of protecting and preserving wealth and the principal erector of barriers is government.  This whole thing is a game of both ends against the middle.  Some fraction of the elite knows that whatever happens, they will be able to preserve what they have, while parceling out the substance of others to placate the masses.  The argument needs to be made consistently and constantly that tearing down the barriers will allow some of those benefiting from the barriers to fall and allow others held back by the barriers to rise.  It may or may not change the range between highest and lowest, but the system would be more just.

    • #22
  23. Ricochet Inactive
    Ricochet
    @RobertMcReynolds

    I think the notion of income inequality is a farce.  In the US, if you don’t like your job or the wages you make, you can find something else that will pay you what you are worth, or what you think you are worth.  I.I.E also stipulates that there is only a finite amount of money to divided up amongst the masses, so if someone makes 100K, that’s 100K taken out of the finite supply.  This is a fundamental misunderstanding of how free-market societies work.

    I don’t care if someone else who is 36 makes more than I do at this moment because I know in few years that could drastically change.  The current job I have right now I took at a pay cut because I was more interested in what the job was doing than what I was getting paid–don’t worry, my wife was on board because she wants me happy with my work.  Speaking of which, she is three years younger than I am and she makes more money, is that inequality or is that okay because she is a woman and I am an evil, white male?  It’s just, well, jealousy that makes people worry about what someone else is earning in wages, and the Left sure knows how to gin that up into outright hatred.  You don’t need 5 talking points to defeat this, you need to call the Left out for who they are and never let up.

    • #23
  24. user_1152 Member
    user_1152
    @DonTillman

    Robert McReynolds:I think the notion of income inequality if a farce.

    And, technically, Income Equality means that everybody is making minimum wage.

    • #24
  25. user_48342 Member
    user_48342
    @JosephEagar

    Is there any evidence that further government redistribution actually alleviates inequality (as opposed to poverty)?  The most effective programs at combating inequality—education and healthcare—are extremely well funded already; in fact, they get so much money that productivity in those sectors has plummeted.

    On the other hand, the law of supply and demand would seem to indicate that if we simply restricted immigration. . .

    • #25
  26. Ricochet Inactive
    Ricochet
    @RobertMcReynolds

    Don Tillman:

    Robert McReynolds:I think the notion of income inequality if a farce.

    And, technically, Income Equality means that everybody is making minimum wage.

    Yes, particularly under Leftist economic policy.

    • #26
  27. user_48342 Member
    user_48342
    @JosephEagar

    There’s another important point to be made here.  If the past fifty years have taught us anything, it’s that status-obsessed upper-middle-class people, when faced with a large (and heavily subsidized) influx of the middle and lower classes into their local communities, will tend to respond by actively restricting  market supply.   That’s why the housing markets in cities like New York and San Francisco are so insane.

    I don’t think this can work without cheap labor, though.  A sky-high cost of living effectively turns lower-status workers into second-class citizens, and people will only tolerate that in a slack labor market.

    • #27
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