Monday, September 04, 2006

Attacking Inequality: Redistributing wealth

When the NYT hid its main editorialists behind a $50/year paywall, I put the WaPo OpEd column on my news page. Mostly I've been disappointed, DeLong is all too correct in lambasting the decaying WaPo.

I was surprised then, to read something interesting by Sebastian Mallaby (emphases mine):
Attacking Inequality:

Economic growth no longer seems to help the majority of workers; the proceeds flow to the top fifth or so of the workforce, and the top within the top has done especially handsomely. But the tough debate is what to do about this trend. The surprising answer is: tax reform...

... if you eliminated just a quarter of the subsidies in the tax code, you would liberate about $180 billion a year -- enough to finance a big expansion in the earned-income tax credit plus a cut in the regressive payroll tax. And this sort of redistribution would not risk higher unemployment or compromise economic growth at all. Democrats on the left and right ought to be embracing it.
Hmmphh. This was such a surprisingly clear invitation to electoral disaster (touch the mortgage tax break?!) that I figured Mallaby must be an agent provocateur. There might be a bit of that, but his bio is interesting ...
Sebastian Mallaby grew up in Britain and has been a correspondent in Japan and Southern Africa. He joined the Washington Post editorial page in 1999 after 13 years with The Economist of London, and is the author of "The World's Banker: A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations," to be published in September 2004... [jf: Marginal Revolution loved the book]
Ok. Let's take him seriously then. This topic, of course, is the nitty gritty. It's the big problem, compared to which the rest of the culture wars are a side-show. It's the problem of the weak.

Sure our democracy is in an increasingly sorry state. Sure there are a lot of rigged games (CEO compensation, rampant insider trading). Sure the GOP program of financing education by local taxes is an unspeakably repulsive recipe for economic segregation and class stratification. Even so, the big problem is the one that made Marx (for better and worse) -- what duty do the strong owe the weak? Or, if you're a Libertarian, how much should the strong invest in the weak to avoid distasteful smells wafting over the walls? Even if our democracy is repaired, even if our regulatory bodies are restored, even if we finance education globally, still we will have the strong and the weak.

Mallaby's last sentence is telling. It's easy to miss it -- I almost did. As the strong accumulate more of society's economic output, the ranks of the unsettled weak grow. They are messy to dispose of -- eventually the prisons overflow, and other methods are tough on the squeamish. It won't work anyway, chop off the bottom 5% and there's a new bottom 5% -- that's the way statistics work. Ignoring mere compassion, if the Weak are not appeased we either grow an American version of Hugo Chavez (rather than the Teddy Roosevelt II we really need) -- or we will dispose of our democracy altogether.

Read the column. This is one of the significant challenges to our generation. (Global climate change and technological disruption are slightly bigger challenges -- perhaps too big for mere humans to manage.)

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