As I point out over at the Upshot, there’s a conservative meme I keep hearing, post-Piketty: Sure, let’s help those at the bottom. But let’s not hurt those at the top.
As you see, I don’t think it can be done, but a few more points here to flesh out some of my own themes a bit.
First, some e.g.’s of the meme in action:
David Brooks: “…the historically proven way to reduce inequality is lifting people from the bottom with human capital reform, not pushing down the top.”
Greg Mankiw: “The question is how do we help people at the bottom, rather than thwart people at the t.”
Veronique de Rugy: “…why not try to increase access to capital for more people, especially for those in the bottom, rather than try to hammer the ones at the top?”
Marty Feldstein: “To reduce that persistent poverty we need stronger economic growth and a different approach to education and training, not the confiscatory taxes on income and wealth that Mr. Piketty recommends.”
Pushing down, thwarting, hammering, confiscating…it all sounds awfully harsh.
I suspect that the writers cited above as well as others will take issue with that claim of no free lunch—that actions to lift the poor require more revenue. Here is my pre-emptive typology of such a view, and to be clear, there’s merit to some of these ideas:
—Rising Tiders: If we just achieve more macroeconomic growth, we can lift the rowboats without sinking the yachts. But that, of course, ignores the precise problem we’re facing: economic inequality, wherein growth eludes the poor and even the middle class. See the recent numbers re growth and distribution I cite in the piece. I’ve been a huge and unceasing advocate for stronger overall growth policies but in terms of lifting the poor, like I said: necessary but insufficient. Also, there’s a lot of rising tiders who’ve advocated austere fiscal measures in recent years, which is antithetical to growth in demand constrained economies.
—Free Lunchers: Simply unleashing the entrepreneurial spirit of the poor (de Rugy advocates “getting rid of occupational-licensing laws”), freeing them the clutches of unions and minimum wage laws, firing bad teachers, adding more charter schools will lift the bottom at no cost to the top. The evidence actually suggests that less union power and lower minimum wages would hurt low-income, working families. On the other hand, significantly improving public education is of course essential. Reviewing the evidence on charters is beyond my scope here, but the idea that we can significantly improve the quality of publicly-funded education for free is surely wrong.
—Behaviorists: If the poor would make better decisions in terms of staying in school and not becoming young, single parents, they’d be less likely to be poor. No disagreement there, but while we’ve made real progress in reducing the number of teen births, social policy has proven to be ineffective when it comes to incentivizing marriage. More importantly, unless more economic growth reaches the bottom, better family structure choices just mean more struggling two-parent families instead of struggling one-parent families.
—Shufflers: We already spend $1 trillion a year on the poor; if we divided that up per poor person, we could lift them much higher without lifting a finger.
The idea that we could just reshuffle the deck on poverty spending and get a lot more poverty reduction sounds great…except that it’s totally wrong.
About half of that cool trillion consists of payments to hospitals, nursing homes, and other health providers through Medicaid, CHIP, and such. And many of the beneficiaries, e.g., those in long-term nursing care, are not counted among the poor. Medicaid accounts for about 40% of spending for end-of-life care, and many of those recipients were formerly middle class.
The big number also counts the value of benefits that go to non-poor (as well as poor) households, like the EITC, CHIP, and Pell grants. In other words, we don’t spend anything like a trillion bucks a year on subsidies and cash transfers that raise the living standards of poor people.
To be clear, there’s no question that many of our programs that actually do target the poor lift millions of them out of poverty, but the implication of the quotes above, and I agree with them, is that we need to do more. I list three areas in the Upshot post, including increased income/work supports, educational investments, and direct job creation.
We should of course keep working on bending the health care cost curve to reduce public (and private) health expenditures. But that doesn’t mean we’ll spend less; it means the rate of growth will slow.
As I say in the piece, it would be nice if we could find the resources to further lift the poor under a plate at the free lunch counter. But I don’t think they’re there.