Should Government Address Inequality Directly?

 

Wall Street Journal columnist William Galston suggests in “Where Right and Left Agree on Inequality”, that both sides of the political spectrum agree that economic inequality is increasing in America and that government needs to address this problem.  “Poverty is part of the explanation, as liberals insist.  But so are parenting and family structure, as conservatives believe.”
CaptureIt so happens that we have a broadly supported federal program which simultaneously addresses both poverty and family structure.  It is the Earned Income Tax Credit program.  It provides $3,305 a year to low-income working families with one child and up to $6,143 for families with three or more children.  The U.S. spends $61 billion a year on this program and it has proven to be very successful in encouraging low-income people to find and keep jobs.  In fact, the economist, Gregory Mankiw, recommends the EITC over a higher minimum wage as a better way to increase the earnings of the working poor.
The New York Times’ Eduardo Porter reports in “Seeking Ways to Help the Poor and Childless”, that New York City is conducting an experiment to see if a locally run program similar to the EITC  will have the same positive effect in increasing employment of childless adults.  It is understood that many of the jobs being created in today’s economy are low paying service jobs.  As Mr. Porter says, “for the American market economy to remain viable, being employed must, one way or another, provide for workers’ needs.”
Conclusion:  as important as it is for Congress and the President to adopt measures to increase economic growth (e.g. tax reform, fiscal stability, expanded foreign trade, immigration reform), in order to create more and better paying jobs, government also has a responsibility to provide direct help to the needy who are trying to help themselves.  The EITC program is an excellent way to do this!

5 thoughts on “Should Government Address Inequality Directly?

  1. Economic inequality is a natural consequence of differences between people in abilities, aptitudes, attitudes toward personal productivity and goals that can be changed only by each individual. These natural differences are exacerbated by Government interference in the form of Rule of Law preference violations that go disproportionally to those with the most influence driven by political offers of these constitution-violating preferences in exchange for votes.

    The best way to minimize natural economic inequality is re-establishing a healthy economy by eliminating all government offered preferences and restoring the principle of the separation of state and economics. The poor and middle classes were the greatest beneficiaries of our free and healthy economy between the 1770s and the 1950s in spite of occasional interference by the federal government. Today, however, our economy is stagnating and disproportionately benefiting the elite with the most influence through crony capitalism preferences. Creating a healthy economy by eliminating government economic interference is the best and only way to minimize natural economic inequality.

  2. I agree with you almost entirely! Crony capitalism is a huge problem which is retarding our economy. The way to combat it is with broad based tax reform which eliminates most, if not all, deductions and loopholes, in return for lower tax rates.
    Yes, economic inequality is caused by differences between people in abilities and attitudes. The problem is that these differences are exacerbated by modern trends in globalization and technological progress which put an ever higher premium on educational attainment and skill acquisition. Government can effectively step in here and make sure that low-income people have every possible opportunity to acquire the education and skills they need to advance.
    Finally, as modern society becomes more and more technologically sophisticated, more and more people will fail to acquire the higher level skills they need to succeed. We can give such people an extra boost of encouragement to keep going by supplementing their wages with programs like the Earned Income Tax Credit.

    • Government is the primary cause of unjust inequalities above and beyond natural economic inequalities. More government in the form of more preferential tax credits and regulations is NOT the solution.

      Once you open the door by allowing one preference or regulation, no matter how well intended, the battle is over. All that is left is the unintended consequence of the “food fight” over who gets the preferences, who gets regulated, which politicians get to stay in office by offering the biggest preferences to influential elites in exchange for campaign donations and votes and which civil servants get to keep their cushy government jobs by creating and enforcing regulations.

      Encouraging the government “STEP IN” with more preferences, taxes, tax credits and regulations will only further exacerbate natural economic inequalities. A tax credit is a preference for some at the expense of others that violates our Rule of Law foundation principle of no preferences for anyone.

      The best and only effective means of minimizing natural economic inequalities is for government to “STEP OUT”! We must take government responsibilities back into our hands by eliminating the preferences and regulations that are the primary cause of unjust and unnatural economic inequalities and the real obstacle to a healthy economy without huge deficits and unfunded liabilities.

  3. Again, I agree with much of what you say. Huge deficits and unfunded liabilities (which will become future deficits) are an enormous drain on our economy and therefore on our entire way of life. However I see the Earned Income Tax Credit as part of the safety net that we provide for citizens on the lower rungs of society. And the EITC is only paid to people who hold jobs and therefore encourages a strong work ethic. But I emphasize that it is absolutely critical to pay for the safety net which we provide for our most vulnerable citizens.
    Essentially I’m willing to have as much government as we’re willing to pay for, and only that much. Since people in general are resistant to higher taxes, this places a practical limit on the size of government which is much too large right now.
    We have philosophical differences but I think not so much on the practical operating level.

  4. I concur that our differences are philosophical in nature but we unequivocally agree that eliminating the deficit and unfunded liabilities is absolutely essential if we seriously intend to achieve a healthy economy and in the process maximize the well-being of all people. Keep up the good work!

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