The policy goal whose name must not be spoken

February 5th, 2015 at 8:39 am

Back in my White House daze, while helping out with an economics speech to be given by a top senior official, I suggested a sentence that had the word “distribution” in it in the context of income or tax policy or something. Not even “redistribution.” Needless to say, editors went ballistic—they didn’t just cross it out, but that warned me to go through and make sure no such socialistic language was anywhere to seen.

I totally saw and see their point, by the way. The word’s a dog whistle that releases the hounds, if not the Foxes. And yet, one of my rules of thumb in this work is that when policy does a lot of something and that something cannot be spoken of, we’re courting dysfunction and distortion.

E.J. Dionne nicely captures all this in an oped this AM, wherein he points out that there’s of course there’s ton of redistribution afoot in government policy, and it is by no means in one direction, i.e., there’s a lot of policy which redistributes upwards. (I cited this same point yesterday in a tax debate.)

In fact, other than naming post offices and such, you’d be hard pressed to name a policy that doesn’t redistribute resources, tax dollars, or power either up or down the income scale. Of course, when it’s down the scale, it’s often derided as class warfare; when it’s up the scale, it’s giving the job creators their due.

However, as far as I can tell, there’s a huge gap in our knowledge here. We don’t know nearly enough, or at least I don’t, about the distribution of government spending. Propose a tax plan, and quant shops all over this town will have distribution tables up (showing tax changes by income class) before you can say “marginal rate.” But what’s the distribution of infrastructure or defense spending? We can easily imagine who gets helped by say a training program or an early Head Start program, but such information would be useful to see.

I recall back in 2013 seeing anecdotes of this sort when sequestration was cutting Head Start slots; I found them very powerful. So go forth, public-policy-school types, and crunch these numbers!

E.J. makes another point I’d like to highlight:

In fact, we need to pay far more attention to “pre-distribution,” the wages and benefits people get before government taxes or transfers money. It’s why we should increase the minimum wage, strengthen unions and find other ways of enhancing workers’ bargaining power. Funnily enough, progressives are more insistent than conservatives on increasing the market rewards for work so government doesn’t have to redistribute so much. In the meantime, the tax code and the various credits ought to be tilted toward those who have been lagging behind.

The inequality problem is largely a pretax phenomenon, and while we should enact the types of ideas in the President’s budget to help ameliorate the problem, this deep bargaining power deficit cannot be solved through the tax code alone. To be very clear, that’s not to be taken as downplaying at all the importance of the redistribution (I said it!) that Dionne highlights.

But it’s critical to get to the source, which, btw, is a key motivator for the full employment agenda I’m forever going on about. In an economy where union membership sits at a meager 11%, truly tight labor markets are one big way the average (and the median, and the 10th percentile, and so on) worker can glean some bargaining power. That’s also the punchline of this Baker/Bernstein book.

I leave it as an exercise to the reader as to whether we’d be better off if politicians could speak more forthrightly about the redistributive goals of their policies. As a straightforward guy strongly in favor of plain and crisp speech (and no, I don’t always meet that goal—we are, all of us, works in progress!), I’m certain the answer is “yes.”

What do you think?

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8 comments in reply to "The policy goal whose name must not be spoken"

  1. Smith says:

    No.
    But just so there isn’t any confusion about how I really feel, let me clarify that statement with a more elaborate but direct answer, No…
    Politicians should never the mention the r word, redistribution. In fact, it is a distortion and slander leveled against progressive policies, that their favored solution or hidden agenda is redistribution. It’s like saying we’re going to solve inequality by taking from hardworking Jones to give to less successful Smith. Even the less offensive ‘rob from the rich to give to the poor’ is unnecessary and unduly burdensome.
    Winning slogans? End corporate welfare. Close tax loopholes. Restore the Reagan capital gains tax rates. Bring back Eisenhower marginal rates. Break up the banks and Wall Street. Stop the too big to fail and too big to jail bankers from crashing the economy again. Curb the high speed traders who feed off speculation and add nothing to the economy. Make the 1% pay the same social security tax rates everyone else pays.

    Provide child care and educational opportunities for all, the same way public education, social security, and medicare are universal benefits. This is just the opposite of proposals that more aid should be targeted and means tested. Read “Age in the Welfare State” Julia Lynch for a comparative study of social programs.

    More points:
    We raise taxes on the rich because “that’s where the money is” (hence not for redistribution).
    We raise taxes on the rich to create market conditions where excessive salaries are unrewarded, and hence are curtailed (vs communist like government control of wages)
    We raise taxes on the rich simply because the economy seemed to function better when their taxes were higher.

    Targeted tax credits and deductions are highly wasteful, speculative, and conservative, a form of privatizing public functions, as if it was a good idea ending public education with school vouchers, or medicare with health vouchers.

    No one seems to be talking about debt overhang either, and the toll it takes on the middle class and the economy (except Elizabeth Warren’s book “Fighting Chance”). Someone else can look up the present rate of underwater mortgages and near underwater, and student debt that continues to pile up while graduation rates among lower incomes lag.

    See also Thomas Geoghegan’s “Were You Born on the Wrong Continent” (which I read) and newer “Only One Thing Can Save Us: Why America Needs a New Kind of Labor Movement” which I haven’t yet.

    Fairness and equal opportunity, benefits for all, are good. Raising the minimum wage maybe redistributive, but that’s not the way to sell it. Free universal public education may be one of the Communist Manifesto’s 10 points, but that’s not how it gained support in the U.S., nor the second point, passing a progressive income tax. So two key aspects of government in the U.S. are highly Marist (public education and a progressive income tax), but that’s not what’s taught or a way to expand them.


  2. Smith says:

    errata (second sentence)
    …should never the mention the …
    should read
    … should never mention the…
    Marist (last sentence)
    obviously
    Marxist


  3. readerOfTeaLeaves says:

    It seems to me that the ‘r’ conversation leads mostly to a moralistic No Man’s Land. We need an entirely different conversation, IMVHO.

    One of the things that Piketty pointed out in the Intro to his book is that economics is going to change, due to the emerging potential of large databases. The quality of the data is going to be critical, as well as database design. Nevertheless, there should be much better information within the next five years on which to make clear, better informed arguments about policies.

    At the same time, it seems to me we are in the midst of some strange sea-change with respect to the larger conversation about: what actually creates wealth. That has implications for ‘the r word’.

    In the US, we live in a largely spreadsheet-driven, Biz School shaped culture – and in this culture, amassing capital is next to Godliness. It is a sign of Genius. Nevertheless, having spent portions of the past 30 years around people who actually innovate and create new things, I’ve observed that ‘capital’ has never, ever been the key generator of their ideas, nor their wealth. Also, not all of them were/are ‘geniuses’. Every single one of them was focused and hard-working.

    In every case that I’ve observed, the people who have developed ideas or products have these traits in common: they were provided reasonable education (mostly public, some private) from at least the age of 5 through 18 – at a minimum. And often, through age 24.

    In addition, they were able to flourish in what might be called ‘civil society’, including (but not limited to): communities with water treatment, sewers, newspapers and/or Internet-broadband, libraries, medicines, public parks, a system of laws and courts, *safe* public spaces (coffee shops, restaurants, churches, community gathering places), public transportation (or some cheap means of transport), public education, and reasonable housing costs.

    This leads me to believe – with increasing conviction – that civil society is a necessary precursor for new wealth creation. Unfortunately, it has been overlooked in our public conversations most of the past 30 years.

    Capital is certainly one element of civil society, but it is far from the critical component: capital is only one factor among many. [Notably, it happens to be easily discussed and manipulated on spreadsheets and Biz School curricula. Ditto Econ departments. Hence, it is simpler to talk about that say, the importance of good Urban Planning.]

    Our tax code appears to be structured on the spreadsheet-driven belief that ‘capital’ is the key factor in creating new wealth. if life were actually that simple, we’d all be living the high life on Easy Street. Tragically, in a culture shaped by ‘bottom line’ thinking about ‘productivity’ and ‘efficiency’ the notion of people ‘getting money for nothing’ [unless they are Wall Street banisters] is anathema. Hence, policy-makers wisely panic at the very notion that someone might use ‘the r word’: redistribution (eeeek!).

    From what I’ve observed, the argument about ‘redistribution’ seems to suck people into judgements about who is good, who is bad, who is worthy, and who is not. I know perfectly nice, reasonable, delightful, witty people who turn into scrooges at the very notion of ‘redistribution’ because for them it evokes a moralistic ‘giving [my hard earned] money to The Undeserving’.
    The whole conversation devolves into a Doom Loop.
    Having heard this endlessly since at least 1980, I find it suffocating.

    What is more interesting to me at this point is: what are the actual processes and critical factors that underlie new wealth creation?
    [HINT: It’s not ‘capital formation’.]

    If civil society is a critical underlying factor in the process of new wealth creation, then the notion that taxes need to be structured in order to concentrate wealth for ‘investment’ to ‘produce wealth’ is exposed as a dangerous fiction. It works for a few people, but it does not make society as a whole more prosperous.

    I’m not sure it’s all that smart for politicians to talk about inequality, per se. I think they need to pick up copies of “The Gardens of Democracy” (Hanauer, Liu) and “The Origin of Wealth” (Beinhocker) and focus on what factors underlie wealth creation — and how difficult it actually is to foresee the economic future. (I don’t mean to be completely snarky, but I suspect that both books would make Paul Ryan’s head explode. Ergo, people who are NOT economic ideologues should read those books; neoclassical ideologues should avoid them like plague 😉

    Given the problems of economic forecasting, the best strategy going forward is to create a system that is more ‘stable’, and less prone to wild gyrations. Building civil society strikes me as the best approach toward that goal. With a robust civil society, even if things bog down a bit, the social structures would be resilient enough to get us through tough times.

    The ‘r word’ politicians ought to focus on is: resilience.
    We need a create a tax structure than enables us to increase social resilience, which in turn then maximizes our chances of creating new forms of wealth. Arguably, that requires a tax structure that enables, promotes, and supports civil society.

    Focusing on ‘redistribution’ is probably not as important as focusing on ‘resilience’, and on how resilience lays the basis for new wealth creation – the one thing that, historically, the US has been pretty good at achieving.


    • Smith says:

      I’ll take that as a no.


    • Smith says:

      What Piketty does say is “It was war that gave rise to progressive taxation, …” p 514 meaning a national emergency was necessary. In fact the first U.S. federal income tax was imposed during the Civil War (well, according to wikipedia at least). The message then in the historical sweep is that redistribution when it was most successfully implemented was not sold as redistribution, nor was it even purposed for redistribution. So I’ll repeat myself, at the risk of seeming crude, there must be fifty ways to promote higher taxes, for the dire needs of crumbling infrastructure, global competition in education (Obama citing our Sputnik moment) government research and development, healthcare, childcare, saving social security, national security, combating global warming, war on cancer, war on crime, war on terror, war on poverty, and what should be the easiest sell to embarrass erstwhile conservatives, reducing the deficit. Framing is all important. But too often what we get instead of liberal policies sold with conservative rhetoric (Lincoln and Roosevelt) is conservative policies sold with liberal rhetoric (Clinton and too often in the past, Obama) See also
      http://www.nytimes.com/2015/01/04/opinion/sunday/the-paradox-of-the-free-market-liberal.html


  4. The Raven says:

    I wrote two blog posts, a few weeks back, about the removal of subjects from rational discourse. I’ll have to add that one.

    Links:
    http://adviceunasked.blogspot.com/2015/01/the-things-we-cant-say.html
    http://adviceunasked.blogspot.com/2015/01/moderation.html


  5. Fred Brack says:

    Jared asks whether “we’d be better off if politicians could speak more forthrightly about the redistributive goals of their policies,” and then makes haste to answer, yes!

    Wouldn’t all our public-policy discussions and our politics (defined as contests among interest groups) be better if politicians spoke more forthrightly?

    Still, remember when Barack Obama Met Joe the Plumber?


  6. mitakeet says:

    I wrote a little bit describing what I feel is the greatest good for the greatest number. It is here if anyone would like to take a look:

    http://sol-system.com/koxenrider/bok/GGGN.html


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