December 23, 2011
It is more than a little bizarre to read a column on public attitudes to inequality in the NYT which completely equates reducing inequality with raising taxes. In fact, the main reason that inequality has risen so much over the last three decades has been the increase in the inequality of before-tax income.
This increase is attributable to policies like a trade policy that subjects manufacturing workers to competition with low-paid workers in the developing world, while largely protecting doctors, lawyers, and other highly paid professionals from similar competition. Inequality stems in part from the government’s too big to fail insurance for large banks that allows them to take large risks with taxpayers bearing the downside.
Inequality is due to the enormous extension of patents and copyright monopolies over the last three decades. The country currently pays close to $300 billion a year for prescription drugs that would sell for around $30 billion in a free market. The difference of $270 billion a year is five times the amount of money at stake with the Bush tax cuts for the rich.
It is likely that the public would reject most of the policies that have allowed the wealthy to seize a much larger share of income over the last three decades if any politician ever had the courage to raise them. Instead, Gelman and many others would like to restrict debate to “Loser Liberalism,” where the question is exclusively whether we want to tax the winners to help the losers.
Addendum:
Andrew Gelman has added to his earlier note and indicated that he was only referring to the particular pieces being discussed. He did not intend to restrict a discussion of inequality to tax rates.
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