July 07, 2016
In his Washington Post column this morning, E.J. Dionne warns of liberals who suffer from nostalgia in believing that we can just bring back and expand the New Deal agenda from the 1930s. He also complains about the amnesia of conservatives who forget all the ways in which government investments in infrastructure, education, and research and development paved the way for economic growth.
Although these points are well-taken, the piece suffers from myopia in failing to acknowledge how the elites have stacked the deck in ways that both redistribute income upward and slow growth. To take some of the most obvious examples, while trade deals like NAFTA have been quite explicitly designed to put our manufacturing workers in direct competition with low-paid workers in the developing world, with the predictable impact on wages, we have maintained protections for doctors, lawyers, and other highly paid professions.
No serious person can believe that the only way someone can become a competent doctor is to complete a residency program in the United States. Yet, this is the law. It costs us close to $100 billion a year in higher health care payments and allows U.S. doctors to have average earnings of more than $250,000 a year.
We also continually make patent and copyright protections longer and stronger redistributing a massive amount of income upward. We will spend close to $430 billion in 2016 on prescription drugs that would likely cost around one-tenth of this amount in a free market. (Drug patents are equivalent in their distortionary effects as tariffs in the range of 1,000 to 10,000 percent.)
And, we have an incredibly bloated financial sector that pulls away five times as much resources from the productive economy as it did forty years ago. If the sector were subject to the same sort of sales tax as the rest of us pay when we buy items in stores, it would likely shrink by more than 50 percent, saving the country over $100 billion a year in fees on useless trading.
Unfortunately, Dionne omits mentions of these and other items which are responsible for the massive upward redistribution of the last four decades. I suppose these are things that you are not allowed to say in the Washington Post.
Comments