I disagree with almost everything in this post by my friend Mike Konczal, but I think it’s a good illustration of how many smart people on the left think about class relations and the future of the state:
One working definition of an approach to liberalism is “It’s best to just maximize growth rates, pre-tax distribution be damned, and then fund wicked-good social insurance with huge revenues from an optimal tax scheme” (Karl Smith, Wilkinson). I’d ask where are all these increasingly wickedly-well funded programs? We just had to bribe the top 3% with massive tax cuts for the next two years in order to keep unemployment insurance extensions in place for another year. Unemployment benefit extension are a net job creator and should have been a no-brainer, but it couldn’t pass without a massive bribe. This doesn’t include the brutal battle for extending health care to an additional 30 million+ people. This is even after the Federal Reserve created an alphabet soup of wicked-good safety net for the top 3% of the financial system, it’s difficult to get extra benefits for working-people in the largest post-war downturn.
A few quick thoughts:
(1) Is the top 3% a coherent group with a coherent class interest? Many of its members, I assume, favored rolling back the high-income rate reductions, for a variety of reasons relating to sources of income, ideological affiliations and preferences, etc. I believe that marginal tax rates and average tax rates are different, and that raising average tax rates for the rich is a more effective way of generating revenue while limiting the excess burden of taxation.
I’ll happily acknowledge that I could be wrong about this, but rather than see the debate over higher MTRs vs. higher ATRs as a proxy war between social classes, I actually see it as a “framing war.” We have two big political coalitions in this country that have a realistic shot at controlling the regulatory apparatus that distributes rewards and burdens. Both include many rich people, but the rich people tend to come from different economic sectors and they tend to have different cultural sensibilities that shape their preferences regarding the kind of built environment they’d like to see, etc. Both also include middle-earners who again have very different interests even at the same level of cash income, due to where and how they live, the extent to which they emphasize psychic vs. market income, etc.
Rich people in the left-of-center coalition, for example, are clustered in high-cost metropolitan areas, where the highly regressive mortgage interest deduction and state and local tax deduction are particularly valuable. My guess is that this is a big part of why we hear much more about the vital (symbolic) importance of MTRs over ATRs.
And what does a “strong middle and working class” mean if we’re dealing with a great deal of real heterogeneity within this group? Indeed, it’s worth thinking through what constitutes a coherent definition of “middle and working class,” given the large number of Americans in the low end of the income distribution who are non-working and who rely heavily on transfers. I’d suggest that the public sector and private sector middle class have meaningfully different interests in many instances.
Eliding this distinction is part of what we might call the framing war. Champions of the public sector middle class will characterize those who want to weaken some of its expensive privileges as enemies of the middle class, despite the fact that they may well be seeking to craft policies that will benefit the larger private sector middle class, a group that is more stressed in a variety of ways thanks to lower expectations of job security, heavy total effective tax burdens, etc. Moreover, creating new labor protections increases the danger of creating a privileged labor caste that excludes young workers, migrants, and others who find themselves on the edges of a more heavily regulated labor market, as we’ve seen in market democracies ranging from France to Spain to Brazil.
(2) Mike goes on to talk about public universities:
Public universities are being defunded at exactly the moment when people are most focused on a “polarized” job market and a lack of supply of high-skills. Jeffrey Williams asks us to consider student debt as a modern equivalent of indentured servitude, and I think the comparison is correct.
What does it mean to suggest that public universities are being defunded when, as in the health sector, U.S. higher ed spending is far higher than “estimated spending according to wealth.” Is it working and middle class students who benefit from current spending levels, or is it incumbent educational providers that are effectively collecting rents by presenting themselves as the only legitimate instructional providers for working and middle class students?
I’ve been pleased to learn that James Kvaal in the Obama administration believes that a key issue in the higher education sector is improving funding formulas for all instructional providers, not-for-profit and for-profit, by including more value-added measures. Anyone who has spent time around a modern U.S. research university is aware of the extraordinary administrative waste that defines this institutions, thanks to a lack of transparency and comparatively easy money flowing from public sources. So yes, we can talk about defunding education. Or we can talk about fixing education by increasing transparency and fighting rent-seeking, without placing an ideological premium on quasi-public over quasi-private providers for the heck of it.
(3) The very smart left-wing sociologist Lane Kenworthy believes that there is a great deal of scope to expand the U.S. welfare state. I’ve added numbers below as a point of reference:
(1) The 2010 health care reform, even if fully implemented, likely will leave millions of Americans uninsured.
(2) Early education (preschool, child care), beginning at age one, is a very good idea. Not all states have full-day kindergarten; few have preschool for four-year-olds; none have much in the way of public funding of education for kids age one to three.
(3) Paid parental leave is available in only a few states and covers a relatively short period.
(4) Sickness insurance: ditto.
(5) Unemployment insurance covers too few of us.
(6) Unemployment insurance should be supplemented by or folded into a new wage insurance program.
(7) Social assistance benefits have been decreasing steadily over the past generation.
(8) If markets are now structured in such a way as to severely limit real earnings growth for those in the bottom half of the distribution, we may need to massively expand the EITC.
(9) We ought to do more for children, working-age adults, and elderly persons with assorted physical, cognitive, emotional, and social disabilities.
Regular readers are familiar with my views on (1). I think that protection against income shocks should be the focus of the safety net in all domains, including access to medical care. I don’t think that PPACA was the right way to get there. I see (2) and (5) as matters best handled by state governments, though I do think that states should be allowed to receive advances against future transfers from the federal government to manage the problem of countercyclical tax and spend during downturns. I’d much rather see something like a universal savings allowance supplemented by generous matching funds for poor and near-poor households than anything like (3) and (4), and I think such an approach is a much better, smarter way of meeting the social needs noted in (7). I’m sympathetic to (8), though I imagine Kenworthy and I disagree regarding what constitutes a massive expansion and I see a real danger in this approach. Massive increases in transfers in the UK under New Labour didn’t tackle many serious problems and may have exacerbated the implicit marginal tax problem at the low end. As for (9), I do wonder if existing public sector agencies are doing a good job on this front and I’d be open to experimenting with alternative providers.
Suffice it to say, I believe that my approach would be much, much cheaper. (Does anyone want me to write a Kindle single on all of this?)
We can talk about this stuff. But our conversations are structured by this “framing war” that makes it hard to build mutual trust. I see a real good vs. evil framework coming from lots of people who think of themselves as lefties and righties, and it’s not helpful.