Conservatives and Inequality

I’m not in the habit of paying a lot of attention to writers who are in the business of telling conservatives to do things they won’t in a million years do. Sure, American politics would be more productive and less apocalyptic if we could bring back the days of tony, mandarin moderate Republicanism, or finally drive a stake through the heart of supply-side economics, or reach a tolerant consensus on “fringe” cultural issues that embarrass urbane secular folk on the Right. But we need to understand the total conquest of the Republican Party by the conservative movement is a recent enough development that it will take quite a few years more of electoral defeats for the GOP or dysfunctional governance in Washington before a return to RINOism is practicable, particularly since most conservatives continue to believe RINOism is their party’s real problem.

Still, Josh Barro’s despairing advice to conservatives continues to fascinate because of its analytical clarity and power. His latest Bloomberg column on conservatives and income inequality perfectly explains why the GOP is in danger of forfeiting a competitive status with middle-class voters unless it concedes there’s a problem and accepts the responsibility of finding solutions that don’t make the problem worse. The headline–“Why Conservatives Must Surrender on ‘Redistribution'”–is provocative enough. But if you go through his reasoning, it’s very compelling.

Liberals talk about booming incomes at the top while lower-income households barely see benefits from economic growth. Conservatives talk about a rising share of the population that depends on government benefits and a shrinking share that pays income tax.

Though the frames are different, these are descriptions of the same economic phenomenon: rising inequality of pre-tax incomes. But only liberals are advancing a semblance of an agenda to address it.

The main liberal reaction to this phenomenon is to call for more progressive fiscal policy: higher taxes on the rich people who have benefited most from the last 30 years’ gains in gross domestic product to pay for programs that raise low- and middle-income people’s after-tax incomes. Obamacare, which raised taxes on the rich to fund a new health-care entitlement for the poor and middle class, is a key example of this agenda.

Liberals also advocate policies that are aimed at reducing pre-tax inequality: more subsidies for education, trade protection, industrial policy to support medium-skill jobs in manufacturing, easier unionization, minimum-wage increases, rent control….

One conservative message on inequality is to say that it doesn’t matter, and we should accept rises in both pre-tax and post-tax inequality. This is the implication of studies periodically put out by the Heritage Foundation, arguing that poor people aren’t really poor if they have microwave ovens.

This isn’t an appealing argument. The problem with rising inequality is not that lower-income families can’t afford ever-cheaper electronics; it’s that they can’t keep pace with the rising costs of health care, education and (in certain parts of the country) housing. There’s also 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.

Then there is the argument that government benefits reduce the productivity of people at the bottom, who would go out and earn more money if we made their entitlements less generous. When Mitt Romney says this he ends up more or less calling the bottom half of the income distribution moochers; people such as Paul Ryan manage to say the same thing more artfully.

The main problem with this position is the lack of evidence to support it: Lower taxes and a smaller government might raise GDP growth, but there’s no particular reason to assume that growth would accrue in a more equal manner than we have experienced recently. The main effect of Ryan-style fiscal policy, which makes taxes both lower and less progressive and while shrinking benefits, would be a rise in after-tax inequality.

Barro goes on to discuss some potentially fruitful strategies for dealing with pre-tax inequality that conservatives ought to be able to embrace but currently won’t, including aggressive government-managed health care cost containment and a big expansion of skills-based immigration. But he concludes no strategy will work if it does not include an acknowledgment of post-tax inequality–and the need for more progressive taxation–as an element.

Some redistributive policies are more economically damaging than others. If conservatives made peace with the need for more redistributive economic policy, they could fight to make sure it is pro-growth. For example, they could focus on minimizing poverty traps created by means-tested entitlements, and making sure the tax base is broad so progressivity can be achieved with relatively low tax rates.

Roughly, this is what right-of-center political parties in Europe do.

Obviously, it’s not something conservatives in the U.S. are interested in doing.

Barro does not in this column close the loop by saying exactly where this leaves conservatives, but you’d have to figure the GOP’s prospects remain confined to an ever-narrowing window of opportunity that can be occasionally exploited via some combination of luck, money, Democratic mistakes, and emotional appeals to declining segments of middle-class voters who can be persuaded by cultural arguments or resentment of those further down the income ladder. That’s pretty much the status quo, and for now, conservatives would much rather fight a losing battle than switch strategies.

Ed Kilgore

Ed Kilgore, a Monthly contributing editor, is a columnist for the Daily Intelligencer, New York magazine’s politics blog, and the managing editor for the Democratic Strategist.