Saturday, April 19, 2014

Steve Roth — Lane Kenworthy, Prosperity, and the Infinite Forms of “Redistribution”

Which brings me to another recent paper (prominently citing the previous one), that questions the Left’s rhetorical emphasis on (in)equality:
I fear the American left’s recent move to put income inequality reduction front and centre might be harmful rather than helpful. It may foster a conviction that the key to addressing America’s social, economic and political problems is to reduce the top 1 per cent’s share or the Gini coefficient. That could distract attention from more direct and effective efforts to address those problems.
Such efforts include fully universal health insurance; improvements in eligibility, duration and benefit level for various social-insurance and social-assistance programmes; wage insurance; early education; enhanced financial support for college; a minimum wage indexed to prices; an expanded earned-income tax credit indexed to average compensation; and monetary policy less tilted towards inflation avoidance.
Policy changes like these would go a long way towards improving economic security, enhancing opportunity (and mobility) and ensuring shared prosperity in the US. Inequality of political influence could be lessened via direct reforms, such as reversal of the Citizens United decision, introduction of a strong transparency rule and public funding for congressional election campaigns.
Asymptosis

Another approach to reducing inequality rather than the global wealth tax proposed by Piketty, which everyone already agrees is going nowhere.

4 comments:

Unknown said...

Steve Roth's suggestions, while good, and which address very real social concern's will do little to address wealth and income inequality.

The mechanism that increases income and wealth inequality is very different from the one that impoverishes the poor.

One should look at the literature in econo-physics to see how income and wealth inequality increases. The only way to reduce inequality is actually by taxation of the very wealthy, and to prevent inter-generational transfer of wealth.

Tom Hickey said...

Roth's proposal is really one of predistribution, that is, putting the emphasis on distributed prosperity up front, rather than addressing inequality as the objective. Inequality is then addressed using redistribution within the context of predistribution by "funding" the predistribution with progressive taxation. It's really a matter of emphasis, but that emphasis is key in selling it politically. Poling shows that redistribution is unpopular, but predistribution funded by progressive taxation is popular.

From the operational POV its not necessary to fund spending with taxation, but also from the operational POV taxation is needed to generate demand for the currency and address price stability through demand adjustment. Taxation is also a useful policy tool for discouraging behavior that results in dysfunction. So while taxation is unnecessary for funding government, it is also necessary and can be useful if applied pragmatically. If a case can be made that inequality is dysfunctional, then it's rational to address it with taxation.

But I don't see progressive taxation alone as sufficient, although it may be necessary as part of the solution. The solution must be based on institutional changes in order to reduce the possibility of inequality arising. That means either taxing economic rents or eliminating conditions that encourage rent-seeking in the first place.

Dan Lynch said...

You can't reduce gini without taking a chainsaw to the top 10%.

Polls show that even most Republican voters favor taxing the rich, so if we had a true democracy, progressive taxation would be a done deal.

The Scandinavian countries have demonstrated that it is possible to eliminate poverty and reduce the gini with a combination of progressive taxes and strong social programs. The mystery is how to transplant the Scandinavian system into our Ayn Rand culture.

Ryan Harris said...

Wage inflation is the best wealth tax ever invented. We've not near enough of it. Inflation works miracles.