Issue #29, Summer 2013

Fairness Doctrine

Economic policy isn’t just another front in the culture war: We must champion both fairness and efficiency regardless of popular whim.

In his essay “Of Freedom and Fairness” [Issue #28], Jonathan Haidt writes that the left is winning the culture war in the “Social Theater” (sexuality, drugs, religion, family life, and patriotism) and will likely soon shift some divisions over to the “Economic Theater.” I agree that the left is winning on social issues (with the significant caveat that state legislatures have lately been narrowing, to an alarming degree, women’s right to choose abortion). I also agree that this approaching victory frees up the left—which in Haidt’s formulation seems to include centrist liberals—to put more emphasis on economic issues. Indeed, I think that shift has already begun: Witness the Democratic Party’s recently acquired emphasis on the problem of income inequality.

But I gag a little at Haidt’s conceit that the disagreement over matters like taxation, regulation, and income distribution is simply another front in America’s culture war. While there is certainly a moral dimension to economic policy—just as there is to every other kind of government policy, including foreign policy—economic policy is no mere expression of evolving American values. There are also morally neutral questions of efficiency and how best to promote economic growth and security. I don’t know anybody who believes the U.S. government bore a moral duty to bail out America’s biggest banks when their collective recklessness created the financial crisis of 2008. But I know plenty of people who believe that bailing them out was a practical necessity to prevent an even larger economic catastrophe than the Great Recession that followed.

Even when economic policy is directly related to moral questions, I find it trivializing to characterize it as simply another front in the culture war. Consider the concept of economic justice (if I may be permitted to use an old-fashioned term). Should it be entirely determined by whatever cultural preference the majority happens to embrace at any given moment? I don’t think so. Like other conceptions of justice, economic justice ought to serve, in a disinterested fashion, larger principles applied consistently over time even when they’re unpopular in certain applications. If, for example, a conservative mob cheers when Wolf Blitzer asks Ron Paul at a GOP presidential primary debate whether the uninsured should be left to die, that mob’s political representatives bear no obligation to heed this barbaric cultural preference. In a civilized society, we do not—we have never—let people die simply because we deem them too poor and/or irresponsible. (Not consciously and deliberately, at any rate.) The decision to provide medical care to an uninsured person bleeding from a gunshot wound is not like the decision to let somebody smoke marijuana. The first is a matter of long-established values, the second a matter of values that change over time.

Setting aside Haidt’s procrustean definition of “culture war,” which could easily encompass everything the government does, I don’t particularly agree with his advice to Democrats.

Republicans, Haidt writes, believe mainly in “negative liberty,” i.e., the leave-me-alone kind. Democrats believe more in “positive liberty,” i.e., the kind that cares about achieving greater equality in outcomes. Negative liberty, Haidt observes, is more popular with Americans than positive liberty. So the trick for Democrats is to “make the argument for how and why government programs should be used to create positive liberty for the poor, in ways that violate neither proportionality [the idea that equal effort and skill should produce equal reward] nor the negative liberty of others.”

The problem is…you can’t. For a generation, Republicans have been selling the lie that you can cut taxes and keep as much government as you want. It worked as an electoral strategy, but was disastrous as a governing principle. Haidt seems to be recommending that Democrats propound a lie of their own: that you can redistribute income to the poor and middle class without limiting in any way the freedom of the rich. But you can’t. It’s self-evident that progressive taxation impinges on the negative liberty of the rich by taking away some of their earnings. Taxing the rich also impinges on to-each-according-to-his-contribution proportionality.

I don’t dispute that the outrageous gains of the top 1 percent—which has doubled its share of the nation’s income since 1979—beggar economic sense. Today’s rich aren’t twice as deserving as the rich of 34 years ago. Raising taxes on such people would, collectively, bring their income more in line with the value of their effort and skill. That’s especially true when you realize that the economy’s large productivity gains have not, over the last generation, been shared with workers earning at the median level. What about their effort and skill? According to Sentier Research, a private firm that crunches population statistics a bit ahead of the Census Bureau, median pretax income as of January 2013 was 7.3 percent lower, in real terms, than in January 2000. It was also 4.5 percent lower than it was in June 2009, when the so-called “recovery” began. The Berkeley economist Emmanuel Saez recently observed that through the end of 2011, the top 1 percent captured 121 percent of the income gains in the economic recovery—that is, accounting for inflation, incomes increased for the 1 percent and decreased for the bottom 99 percent. Our economy is currently experiencing a “members only” recovery. Ninety-nine percenters needn’t apply.

But it would be wrong to paint the 1 percent with too broad a moralizing brush. Not every rich person out there is an economic parasite (or “rentier,” to use the economist’s term). Some really do create wealth for others. Consider a tech billionaire like the late Steve Jobs, whose compensation appears to have reflected his actual value to Apple and, arguably, to the economy at large. Should entrepreneurial geniuses be exempted from higher taxes? A slavish devotion to the proportionality principle would require that we answer in the affirmative. But that makes no practical sense. Even for a Steve Jobs, proportionality—the idea that people ought to be paid in a manner proportionate to the value of their work—must to some extent bow to the principle of equality.

The best argument for raising taxes on the rich is not that it redistributes income to those less well off (though of course it does do that). The growth in income inequality during the past three decades wasn’t really driven by tax policy; the most you can say is that tax policy made it worse. (The main contributors to income inequality in the tax code weren’t changes to the income tax so much as changes to the capital gains tax, the corporate tax, and the inheritance tax.) Progressive changes to tax policy would reduce growth in income inequality but would not come close to reversing the trend.

Why, then, is it necessary to raise taxes on the rich? Because the level of government that the public demands is expensive, and the rich need to pay their fair share, which in this instance is a percentage of income not equal to that paid by the less well-off, but greater. We tax income progressively because the more income you have the smaller is the proportion you need to secure the necessities of life. Richer people can spare more, so they pay more. It’s a sound principle, one most Americans understand and accept. But it can’t easily be reconciled with proportionality unless we decide to believe that the rich don’t actually deserve all they have. That may be true in many (okay, probably most) cases, but it isn’t true in all cases. Deciding that all rich people are undeserving of their wealth (as many on the left have done) leads quickly to demonization: The rich shouldn’t keep all their money because they’re evil! But demonizing the rich, in addition to being unfair, isn’t really necessary to support more progressive taxation. We don’t tax the rich because they’re evil. We tax them because the government needs money, and rich people happen to have more money than anybody else. They’ll do just fine with a bit less.

Perhaps I’m too much of an idealist, but I don’t think the idea of positive liberty, when expressed in nontheoretical terms, is as hard a sell as Haidt makes it out to be. It’s not too difficult for most of us to grasp what Anatole France meant when he mocked “the majestic equality of the law, which forbids both rich and poor from sleeping under bridges, begging in the streets, and stealing bread.” Most of us feel, instinctually, uncomfortable with the widening income disparities that plague the United States. Most of us recognize, instinctually, that everybody deserves equal access to clean air and water, decent health care, public parks, free education, political representation, and a host of other societal goods that aren’t (or shouldn’t be) distributed according to perceived merit. Everybody deserves these things, and not only because equal access gives everyone a more equal shot at lifetime success. People who aren’t going to succeed in life deserve these things, too. (The late Jonathan Rowe’s posthumously published recent book, Our Common Wealth: The Hidden Economy That Makes Everything Else Work, is an eloquent elaboration of this point.)

I don’t imagine Democrats’ future path to success is to rub voters’ noses in the sometimes unpleasant trade-offs between entrepreneurial reward and striving to provide every American with the basic necessities of life. But neither should Democrats try to con voters into thinking no trade-off exists at all, which is what Haidt, as I understand him, would have them do. The public grasps that the principles we all live by come into conflict more often than we’d like. Politicians shouldn’t pretend otherwise.

 

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Jim Senter:

Inequality is inefficient. Overworked workers, working 2 full time jobs to pay the rent- make mistakes. Workers worried about sick kids left at home are distracted workers. Sick workers miss work, or work more slowly. Inequality is not solely a moral issue, tho it is that. It is also a question of efficiency.

This whole argument is bogus. Rich people don't have to give up anything except a bit of their control. Addressing this inefficiency is good for them as well. They benefit from being part of a prosperous society as much as, if not more than, poor and middle class folks. It's just that they are too stupid, too isolated in their country club bubble, to realize it.

Jun 18, 2013, 7:37 AM
Austin W. Spencer :

The claim that Republicans sought to reduce taxation without also reducing the size of government might be true to their official position in Reagan's time, but that is not the official position of today's Republicans. In public, many of them do emphasize the goal of shrinking the government, using budget reform and the failure of the budget process as means to this end. And they are not above appropriating Reagan's name and legacy to this kind of agenda. With this in view, it simply does not follow, in Republican thinking, that the people OUGHT to demand as much government, nor OUGHT the government need as much money, as they do. Of course, the prevalence of corporate welfare in addition to trickle-down tax policy regularly blows all sorts of holes into this argument, because they highlight the degree to which even the right's natural allies demand the good offices of a powerful state. Still, it does no good to Noah and his readers to underestimate its popularity among Republicans now.

Jul 21, 2013, 4:42 PM

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