Politics & Policy

Exposing Rich-versus-Poor Demagoguery

Dems in 2016 will replay de Blasio’s “inequality” theme — the GOP should stress income mobility.

New York City: If a campaign theme can make it there, it can it make it anywhere — or at least in the 2016 U.S. presidential election? Democrat Bill de Blasio won the Big Apple’s mayoralty last week in a historic landslide. His winning campaign was built around a rich vs. poor, “two cities” storyline. In his election-night victory speech, de Blasio described income inequality as “that feeling of a few doing very well, while so many slip further behind” and identified it as “the defining challenge of our time.”

Team Obama hung Mitt Romney’s “47 percent” comment around the Republican candidate’s neck, but the president didn’t go nearly as far as de Blasio did this year in making inequality his campaign’s raison d’être. Don’t be surprised, however, if a former U.S. senator from New York grabs the inequality baton from the incoming Gotham boss if she makes a White House run. A recent Time magazine analysis highlighted income inequality as one of six potential presidential campaign themes that “Hillary is test driving.” Reporter Zeke Miller noted that in a recent speech at Yale Law School, Clinton said the nation must “reverse this tide of inequality that is eating away at the social fabric of our country.”

Those words are similar to ones found in the mission statement of the Center for Equitable Growth, a new grouped hosted by the Center for American Progress, a think tank whose president was policy director for Hillary Clinton’s failed presidential campaign. Inequality, according to the CEG, “erodes our economy’s ability to function efficiently and at full potential.”

Any initiatives the group cooks up could be central to candidate Hillary’s presidential policy agenda. But would such an agenda be built upon a distorted premise? Income inequality between middle- and lower-income Americans has not grown for a couple of decades. And while much research suggests inequality between those at the highest end and others has risen sharply, these findings are hardly beyond dispute, and it’s mistaken to conclude the growing gap has led to stagnant incomes for everyone else.

As e21 economist Scott Winship notes in a new analysis, the real middle-class story over the past few decades is “one of strong improvement in living standards, driven in part by greater work and higher wages among women, but in part by continued gains in male earnings, declining family size, lower taxes, and more federal and employer benefits.” What’s more, the widely touted increase in inequality between those at opposite ends of the spectrum is probably the result mostly of market forces such as technology and globalization rather than corporate greed or crony capitalism. These are reality checks that conservatives should point out when progressives attempt to smear the pro-market reforms begun in the 1980s.

At the same time, conservatives shouldn’t wave away the possibility that a deep structural change is becoming more evident in the U.S. economy. There’s an increasing demand for high-skill and low-skill workers. But demand appears to be declining for middle-skill workers who perform, as economist David Autor puts it, “procedural, rule-based activities” — assembling Amazon book orders today, driving trucks tomorrow — that can be automated. It’s this “job polarization” phenomenon that leads economist Tyler Cowen to predict in his new book Average Is Over that the tech-savvy 15 percent will do extraordinarily well in the coming decades, while everyone else will suffer from stagnant wages in the growing number of personal-service jobs. If your kid can’t be Sergey Brin, maybe he could be his valet.

So when the 2016 Democratic nominee, whoever he or she is, puts forward a big-government agenda of higher taxes on the rich, universal preschool, and bigger Obamacare subsidies to reduce the scourge of inequality, what will be the GOP response? Business tax cuts? That’s a necessary policy response perhaps, but hardly a sufficient one.

Paul Ryan’s budget vision gave the 2012 Romney campaign a head start on Medicare reform. Congressional policy entrepreneurs should strive to do the same for the 2016 GOP nominee on issues such as pro-growth tax relief for families, specially targeted wage-subsidy programs to boost hiring of the long-term unemployed, and redirecting safety-net spending — including Social Security — toward the truly needy while also providing smarter incentives for lower-skill Americans to move from welfare to work via disability reform. At the same time, Republicans should hone their arguments against populist anti-growth proposals such as raising investment taxes to the same level as labor taxes.

Although the nation isn’t even through the congressional midterm elections, it’s not too early for the Washington GOP to begin fashioning a pro-economic-mobility, pro-middle-class agenda for 2016. The other side is already working on their alternative..

— James Pethokoukis, a columnist, blogs for the American Enterprise Institute.


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