Amid all of the loud political arguments about taxes, inequality, and the size of government, it is important to keep in mind this overarching fact: having our government push wealth from the rich to the poor is a very good idea.
Capitalism brings a lot of benefits—feel free to listen to any starry-eyed tech guru drone on about entrepreneurship and innovation to acquaint yourself with them—but capitalism as it currently functions in America also comes with a political system thoroughly corrupted by money and great concentrations of wealth in the hands of a tinier and tinier elite, while the majority of people struggle to lay claim to the fruits of economic growth.
The mainstream left and right wings of America’s political system have differing views about how to address this inequality. The right tends to claim that cutting taxes will stimulate economic growth which will, in turn, mean more money for everyone. Thirty years of deregulation and thorough testing of this hypothesis has created our current inequality crisis, so it is not too partisan to say that this view is bullshit. Still, this view is accepted by much of the country. The alternate view, that of the mainstream left, is that the government should take more from high earners and create a social safety net for the poor. Many Democrats are shy about embracing this philosophy with fervor. But the fact is, it works.
Elizabeth Warren, who is right about everything, often says as part of her stump speech that since the Reagan era, the top 10% of earners have captured 100% of the wage growth, and the bottom 90% have not seen their wages grow at all. Today, the Washington Post runs a nuanced fact check of her claim—read it all. In short, her claim is based on a set of data that includes wages and taxable income, but not government benefits like Social Security and welfare payments. So it is true that the rich have captured the gains in wages, but if you include government transfer payments to the poor and middle class, their picture improves. The question of whether or not you call Warren’s claim “true” is actually much less interesting than the implications of what the data says about the effects of these government programs that serve the non-rich: they are very effective at remedying inequality! The story cites multiple studies showing that if you include an array of government benefits, the poor and middle class have actually seen their incomes increase substantially over the past four decades—not as much as the rich have seen their incomes increase, but much more than nothing. The difference between “no income gains” and incomes climbing by close to 50% among the lowest earners? Government transfer payments. Which means that government programs transferring money down the economic ladder are high quality and proven mechanisms for counteracting the huge levels of inequality that seem to be inherent to our system. Says one economist:
In a more recent paper, Burkhauser and his colleagues concluded that during the Great Recession, government tax and transfer programs dramatically cushioned the decline in market income of the middle and bottom part of the income distribution. “When you measure properly the role of government, you get the fullest measure of income distribution,” he said. “Government is doing its job. That’s the story. I don’t understand why the liberals don’t celebrate this.”
Government works. Government welfare programs work. Until you can fix capitalism to make it perfectly fair and equitable (and good luck with that), tax the upper classes and create a social safety net. It works.
Embrace that shit, Democrats.