Wealth Inequality and Political Inequality


The New York Times
By: Bruce Bartlett
April 30, 2013

A crucial question in the debate over income and wealth inequality is whether its growth necessarily leads to a growth in the inequality of political power. If it does, then this is a powerful reason for the federal government to take active measures to reduce income and wealth inequality -- even if it comes at an economic cost to the nation.

Conservatives and libertarians generally do not believe that increased inequality is a political or economic problem. To a large extent, I think that is because they fear that acknowledging the problem would require the adoption of policies they find distasteful, immoral and economically counterproductive.

That is, income and wealth would have to be redistributed -- taken via taxation from the wealthy and given to the poor. The higher taxes will reduce the incentive to work, save and invest among the wealthy, conservatives and libertarians believe, which will reduce economic growth and lead to the expatriation of the wealthy from the United States, while fostering a culture of dependency among the poor that will reduce their incentive to better themselves and escape poverty.

Insofar as the political dynamics are concerned, conservatives and libertarians are generally fearful of democracy. That is because, in principle, there is essentially no constraint on the ability of the majority to take from the minority and reward themselves in a pure democracy. The founding fathers very much shared this concern and intentionally enacted numerous restraints on the majority to protect the rights of the minority to their wealth. Among these are the federal system, with relatively strong states and a weak national legislature, as compared to parliamentary systems, and a Senate where small, sparsely populated states, per capita, have more influence than large, populous states; a written constitution with strong protection for property rights; and an Electoral College instead of election of the president by pure popular vote.

One reason that conservatives and libertarians obsess over the large percentage of the population that pays no federal income taxes, often put at 47 percent, is the political concern that the nation is very close to a tipping point where the have-nots can take from the haves almost at will.

The simple solution to this problem, to the extent there is one, would be to extend the tax net to some of those now living free of federal income taxation. But this is practically impossible because Republicans, who mainly complain about the large numbers of nontaxpayers, enacted most of the tax policies that removed them from the tax rolls. These include the earned income tax credit and the refundable child credit.

Secondly, almost all Republican legislators have signed a tax pledge promising never to raise taxes for any reason. Most Republicans are also ideologically opposed to a value-added tax, which would be the simplest way of getting everyone to pay some federal taxes to cover the government's general operations. The payroll tax, which is more broadly based than the income tax, is earmarked to pay Social Security and Medicare benefits only.

Because the simple and obvious solution to their problem is off the table, conservatives and libertarians have concentrated on cutting benefits for the poor. They believe that programs such as unemployment compensation and food stamps subsidize laziness and undermine the work ethic. If such programs were cut, then those now benefiting would be forced into the labor force, where they would become taxpayers and cease being tempted by politicians promising them something for nothing.

The liberal view, by contrast, is that the poor are relatively powerless. They vote in lower percentages than the well-to-do and often suffer from policies to reduce their political influence, such as onerous voter registration requirements, demands for government identification at the polls and long waiting times to vote on Election Day. There is also evidence of growing pressure by employers to force their employees to vote against their own interest and for the employer's.

Liberals believe our political system is generally more responsive to the interests of the wealthy. The poor, after all, are not major sources of campaign contributions.

But that is only part of the story. The well-to-do are far more likely to be engaged in the political process and to bring their concerns to bear on their elected representatives through direct contact.

Thus we have seen that while the recent budget sequestration has brought hardship to both the poor and the wealthy, Congress has taken no action to relieve the burden on the poor but acted with amazing speed to relieve a key concern of the wealthy -- furloughs for Federal Aviation Administration personnel that created airline delays.

A new study by the political scientists Benjamin I. Page, Larry M. Bartels and Jason Seawright presents strong evidence that the wealthy are more aggressive and more successful than the poor at influencing the political system in their favor. This study is based on interviews with 83 wealthy people in Chicago.

The authors contrast the views of those in their survey with those of the general public based on national public opinion polls. They find that the wealthy are much more concerned than the general public about budget deficits, much more in favor of cutting social welfare programs, much less in favor of government jobs programs and much more opposed to government regulation, among other things.

Professors Page, Bartels and Seawright were unwilling to draw firm conclusions about whether the wealthy have disproportionate influence in American politics, owing to the small size of their survey sample. But it is at least obvious that the economic policy preferences of the wealthy strongly overlap with those of the Republican Party.

On the other hand, research by the political scientist Martin Gilens in his book "Affluence and Influence: Economic Inequality and Political Power in America" shows that the wealthy tend to be more liberal than the Republican Party on social issues. By and large, the wealthy are not religious, favor abortion rights and support gay rights.

The best hope for liberals in the future may be to emphasize social issues, which split the Republican Party between the interests of the wealthy and those of religious and social conservatives who dominate primary elections.


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This page contains a single entry by CFED published on April 30, 2013 4:00 PM.

Banks Have a Responsibility to Teach Financial Literacy was the previous entry in this blog.

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