Timothy Noah

An Honest Conservative Take on Income Inequality

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The most honest conservative commentary I've seen lately on the topic of income inequality was Matthew Continetti's "About Inequality" in the Nov. 14 Weekly Standard. The usual conservative approach to income inequality (besides simply ignoring it) is to try to argue that it doesn't really exist, or to argue that if it does exist, it's mooted by upward mobility, or to argue that it's good for you. The trouble with these responses is that they're in conflict with the facts. Income inequality has been growing for 32 years, upward mobility in the U.S. lags behind upward mobility in western Europe, and while a certain amount of income inequality is necessary to make a capitalist economy work, no sensible person thinks that a continual and unceasing increase in income inequality is good for anybody.

Continetti takes a different tack. He concedes that the inequality trend is probably real, and that it's a nasty business. He just doesn't think it's the government's place to do anything about it:

"The way out is to reject the assumption that government’s purpose is to redress inequalities of income. Inequalities of condition are a fact of life. Some people will always be poorer than others. So too, human altruism will always seek to alleviate the suffering of the destitute. There is a place for reasonable and prudent actions to improve well-being. But that does not mean the entire structure of our polity should be designed to achieve an egalitarian ideal. Such a goal is fantastic, utopian even, and one would think that the trillions of dollars the United States has spent in vain over the last 50 years to promote 'equality as a fact and equality as a result' would give the egalitarians pause."

What's admirable about Continetti's piece is that it states what I suspect most conservatives, deep down, really think about income inequality. Yes, it exists. Yes, it's a problem. But it's a problem I don't feel like trying to address.

Of course "the entire structure of our policy" shouldn't be "designed to achieve an egalitarian ideal." But in the non-utopian world it is possible to experience ever-greater income equality rather than ever-greater inequality. For instance, while it's certainly true that many industrialized democracies have, like the U.S., seen a growth in income inequality over the past three decades, some have not. France, Austria, Greece, Ireland, Spain and Turkey have all seen income inequality decline since the mid-1980s. Greece, Ireland, and Spain's economies are in rotten shape at the moment, but that isn't because these countries have too little income inequality. It's because they have too much debt. Another counterexample to the current income inequality trend is the U.S. during the five decades from the early 1930s to the late 1970s. During this period incomes either became more equal or remained stable even as the economy boomed.

Continetti seems to think that past attempts by the U.S. government to reduce income inequality came to naught. But according to the recent Congressional Budget Office report on income inequality, the combined impact of all federal taxes and transfer payments is to reduce income inequality (as measured by the Gini index) by about 17 percent, which isn't too shabby. The combined impact of all federal taxes and transfer payments in 1979 was to reduce income inequality by 23 percent, which is even better. The decline in the relative progressivity of federal taxation and benefits didn't create the inequality boom. We know that because before-tax incomes are much more unequal today than in 1979. But what can't be disputed is that the government is doing less than it did three decades ago to reduce income inequality. Which I guess Continetti would say is as it should be.

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