Inequality issues are gaining traction in the American presidential campaign, but populist solutions threaten to make income and wealth extremes even worse.
Political conservatives have expressed their strong support for controversial businessman Donald Trump, whereas on the other side we have Bernie Sanders who had, in the northern American states, been waging a highly effective campaign undermining the Democratic Party establishment favourite Hillary Clinton.
Perhaps the hallmark of the Sanders campaign has been his preparedness to elevate the issue of inequality for his own political gain at every opportunity, and to be sure the distinctiveness of his anti-inequality message has resonated particularly strongly among American Millennials.
In these days of economic underperformance dashing the ambitions of millions of Americans, Sanders's narrative favouring massive government redistribution to fix inequality is a very far cry from stresses upon broad-based economic growth by even former Democrat presidents.
Bernie Sanders has shown he is certainly no tax-cutting Kennedy or welfare-reformist Bill Clinton when using his bully pulpit to foment feelings of angst and envy amongst the electorate about what is now being described as the "rigged" American economy.
Speaking to an audience at the private educational institution Liberty University in September last year, Sanders characterised the US economic scene as one "designed by the wealthiest people in this country [that is, the United States] to benefit the wealthiest people in this country at the expense of everybody else".
Sanders has been highlighting that the top 1 per cent of earners in the income distribution have amassed aggregate incomes vastly exceeding those earned by Americans towards the bottom of the economic heap, especially minority groups enduring above-average unemployment rates.
But to understand what Bernie Sanders means by the rigged economy, and why his proposed solutions are deeply problematic we need to take a back step.
Most people would probably accept some degree of inequality between people, or groups of people, arising from voluntary, win-win exchanges of valuable goods or services, where typically a successful seller earns more income relative to everybody else but the buyer gets the benefit of a bigger consumption bundle.
As a number of economists have pointed out, inequality trends should be interpreted in light of, among other things, a massive improvement in the availability and affordability of a wide range of products becoming more easily within reach of even someone earning a very modest income.
But as the American economist Richard Wagner points out, there is a great deal of difference between a win-win connection between people engaging in a market transaction and the nature of any political intervention in the economy.
In a political deal we have, first, the politician doling out a subsidy, tax break or regulatory holiday, and, then, a dependent voter or crony capitalist who receives the benefit.
But then there are the rest of us, who lose out as a result of the political connections being made.
The rest of us happen to get slugged with a tax impost to pay for somebody else's benefits, or we are being prevented from easily climbing up the economic ladder for ourselves because of punitive regulations.
It is this win-win-lose political triadic that Sanders refers to when decrying the corrupting effects of the likes of bank bailouts, corporate welfare, and political donations, a message even receiving support from American businessman, philanthropist and self-described classical liberal Charles Koch.
Concurring with Sanders' concern about a rigged economy Koch recently said, "Democrats and Republicans have too often favoured policies and regulations that pick winners and losers. This helps perpetuate a cycle of control, dependency, cronyism and poverty in the United States".
Classical liberals and left-progressives can generally agree that vastly winding back the rigged economy, favouring the few at the expense of the many, is an important matter, but they sharply differ between each other on the most desirable means to achieve that end.
Figures within the political left nowadays, including Bernie Sanders, support even more political intervention to suppress inequality, advocating progressive tax hikes hitting the top combined with free social services and pay rises favouring the bottom, and Sanders is certainly no exception in this regard.
In the scenario, now looking far less likely, that Sanders wins the presidency, the big winner from his program would happen to be Sanders himself, who gains a big pay rise and massive political power at the expense of American citizens and taxpayers.
The US federal bureaucracy would also win large under a Sanders presidency, with estimates that implementing single-payer health care, free tuition at public universities and other "freebies" to targeted political constituencies would cost at least $18 trillion over 10 years.
Such a massive boost in concentrated political power would, in itself, aggravate inequality outcomes in the United States and thus be highly counterproductive in the quest to rid America of its rigged economy.
Estimates produced by the Brookings Institution show increasing top income tax rates would make little dent in statistically evening out the income distribution, whereas the tax costs of specific programs such as single-payer health care would fall primarily upon the middle class.
The economic effects of minimum wages remains the subject of debate, but the weight of the evidence indicates the Sanders proposal to raise US minimum wages will lead to considerable job losses among the young, the unskilled, and others with only a fleeting connection to the job market.
All in all, it is difficult to escape the conclusion that the ultimate beneficiaries of the Bernie Sanders agenda would be high-wealth individuals and incumbent corporations who can already afford to pay high levels of tax and bear the brunt of prescriptive regulations.
In other words, Sanders would rig the American economy even more at the expense of politically disconnected innovators aspiring to undercut the featherbedded crony capitalists, and the poor looking to get their break to earn more income and attain more wealth for themselves and their families.
When all is said and done, Sanders may not win the Democratic nomination, but Hillary Clinton and Western leftists everywhere else will be keen to embrace Sanders's populist campaign of envy as their own.
Before that shift in rhetorical strategy becomes entrenched one can only hope that voters will appreciate that trying to eliminate inequality by making government bigger will make matters only worse.
No comments:
Post a Comment