POLITICS FEBRUARY 19, 2014
The GOP’s response to widening inequality has long been similar to Sinclair Lewis’s Babbitt: “The sooner a man learns he isn't going to be coddled, and he needn't expect a lot of free grub and, uh, all these free classes and flipflop and doodads for his kids unless he earns 'em, why, the sooner he'll get on the job and produce—produce—produce!” But between the fallout over Mitt Romney's "47 percent" remark and a resurgence of progressive populism, Republicans realize they need a new, softer approach. It appears they've finally found one.
Paul Ryan recently appeared at the Brookings Institute’s “Social Mobility Summit” to announce, “We’re losing not only mobility, we understand that, but whole generations of Americans don’t know what this is.” Eric Cantor told Bloomberg, "All of us want to grow the economy … that means more jobs, upward mobility." Mike Lee warned last year of an “opportunity crisis.” Cathy McMorris Rodgers’s response to the State of the Union included the line, “The president talks a lot about income inequality. But the real gap we face today is one of opportunity inequality…” And in a speech on the anniversary of LBJ's "War on Poverty" address, Marco Rubio said that "it is this lack of mobility, not just income inequality, that we should be focused on."
"Mobility" is the party's new mantra—but it's based on a familiar delusion.
Mobility in many parts of America is abysmal. In some cities, children born in the poorest quintile have a less than 3 percent chance of reaching the top quintile. Across the country, a child born in the poorest quintile has a 60 percent chance of staying in the bottom two quintiles.
It's a two-part problem. First, there is opportunity hoarding at the top, wherein the wealthy invest heavily in their children’s education and job prospects, while also passing their wealth on to their children. Then there is stagnation at the bottom, caused largely by reverse trends, economic and racial segregation, awful schools, and poor parents without much money to invest in children.
Why does the "land of opportunity" have such low mobility? Laissez-faire economic policies—massive tax breaks, untrammeled free markets, unregulated free trade, deep cuts to the safety net—have widened the income gap. While Republicans have tried to sever the link between mobility and inequality, research shows that the two issues are intimately connected: Societies and communities with high inequality have low levels of upward mobility. Josh Bivens of the Economic Policy Institute estimates that had income growth risen proportionally between 1979 and 2007, the median income would be $19,000 higher.
Republican pundits have their own theories on these problems, of course. They like to point to the disintegrating family and other social factors, even though a large swath of research suggests this is to mistake an effect for its cause. As for solutions, Ari Fleischer has argued for more (straight) marriage, Ross Douthat prefers chastising single mothers, Charles Murray wants the poor to emulate the values of the rich, and David Brooks wants… well, it's not clear exactly. None of these proposals are serious about the problem, because being serious about the problem will require doing the one thing that Republicans hate: government spending.
Several Republican politicians have put forward specific policy proposals. Rubio’s big idea, supported by Ryan, is to make the Earned Income Tax Credit (a tax break for low income workers) a monthly, rather than yearly, program. With the median income of American households $19,000 dollars below what it should be, students struggling under piles of debt, and millions trying to pay off underwater mortgages, such a plan, while welcome, is wholly inadequate. Lee and Rubio have both proposed modifying the EITC for married couples, to eliminate the “marriage tax” (whereby two single people who become married become ineligible for the program or take a benefit cut). However, if they increase the benefit, they’ll have to increase deficits. The only other option is to reduce the EITC for single mothers.
Rubio's other idea (again supported by Ryan) is revenue-neutral block grants to the states, which means that states would have more leeway in how to spend the funds. "Revenue-neutral" is the key phrase here; if you’re not increasing spending, you're just shifting around authority at best and sneaking in cuts at worst.
This is the catch-22 the Republicans are facing: The only way to increase upward mobility is more government spending. Schools need more money, unemployed workers need extended benefits, poor mothers need daycare, kids need Pre-K. The best way to be upwardly mobile is to get a job, which is a lot harder to do when Republicans are still criticizing the 2009 stimulus that created millions of jobs. It’s easier to move up if you have health care, but Republicans are cutting Medicaid. Paul Ryan wants to talk education, but Republican governors across the country are cutting education budgets to fund tax cuts.
Ryan argues that the real thing hurting the poor is big government: “Government is a very powerful tool. Too powerful, you might say. Just as it can build and encourage, it can frustrate and deter.” The actual data show that higher government expenditures increase upward mobility. That’s why countries like Denmark have much higher levels of mobility. We find the same correlation at the local level within the U.S.: Higher government spending leads to more mobility.
The right has to wrestle with a very tricky counterfactual: There has never been a society with a strong and sustained middle class that did not also have a strong government maintaining that middle class. In the U.S., the middle class has been strengthened by what political scientist Christopher Howard calls the “hidden welfare state.” While programs that help the poor, like TANF, are explicit, aid for the middle class is hidden in arcane programs like the Home Mortgage Interest Deduction, the employer-provided healthcare tax exclusion, and the Family Medical Leave Act. Programs like Social Security and Medicare, which are no longer considered “welfare” but represent huge government interventions in the market (that primarily help the white middle class) are taken for granted.
It is no surprise that the period with the most equal growth and upward mobility was the post-war era, when marginal income taxes on the wealthy topped 90 percent, the government invested heavily in infrastructure and education, and the social safety net was being strengthened, not vitiated. Today, booming countries like China and India are discovering that the government must bolster their middle class with a pension and safety net.
In his book, Social Democratic America, Lane Kenworthy argues that social democracy—a fully-developed, European-style welfare state—will require the U.S. government to increase revenues by 10 percent of the national GDP, and he proposes a series of tax boosts to get us there. But most Republicans have signed a no-tax pledge, so social democracy is out of the question. If we can’t spend more on poverty, the only other method is lowering taxes on the poor (who, according to Republicans, already pay too little in taxes).
Republicans want a strong, upwardly mobile middle class and a weak government, but the two cannot coexist. Instead, Republicans will have to choose between social mobility and low deficits. Given the party's obsession with cutting government spending, "mobility" will remain a hollow mantra, nothing more.