TIMOTHY NOAH NOVEMBER 18, 2011
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When last we heard from Rep. Paul Ryan (R., Wisc.) on the topic of income inequality, he was claiming, incorrectly, that the United States redeems its disproportionate income inequality, relative to western Europe, by offering greater equality of opportunity. Whoops! Now he's back for round two in an op-ed for Investor's Business Daily, claiming that the trouble with redistributive policies is that they don't favor the poor.
Ryan is right that the federal government's direct income redistribution (i.e., the combined effect of taxes and transfer payments) has become less progressive since 1979, as noted in the Congressional Budget Office's recent inequality report. In 1979 the government reduced inequality by 23 percent (as measured by the Gini index). Today (or rather, as of 2007, the most recent year for which data are available) it reduces inequality by 17 percent. Please note, as Ryan does not, that the net effect of federal taxes and benefits remains significantly progressive. It just isn't as progressive as it used to be. Government remains an effective tool for reducing income inequality.
But that isn't the main problem with Ryan's argument. The main problem is that Ryan wants to absolve taxation of any responsibility for this diminishment of progressivity and instead blame the inherently self-defeating nature of entitlement programs. To make this argument (parroted credulously by Washington Post blogger Jennifer Rubin), Ryan willfully distorts the truth.
"Over the period studied," Ryan writes, "federal income taxes actually became more progressive — including a spike in the progressivity of the tax code after 1986, which was the last time Congress enacted fundamental tax reform." The CBO report does indeed say that federal income taxes are "slightly more progressive" than they were in 1979. It doesn't credit the 1986 tax reform for the change. The 1986 tax reform did indeed, for a time, achieve greater progressivity with lower rates by eliminating tax breaks favoring the rich. But I don't see how you can argue (as Ryan does) that this progressive effect from 1986 has endured while simultaneously arguing that the tax code is once again so polluted with tax breaks for the rich that you could, today, again lower rates, eliminate special breaks, and achieve greater progressivity. In fact, the federal income tax is a smidgen more progressive not because effective tax rates are higher on the rich than they were in 1979--they're actually lower, just like you thought they were--but because effective tax rates are also lower for the middle class and the poor, including the "lucky duckies" (as the Wall Street Journal editpage charmingly dubbed them) deemed too poor to pay any income tax at all. The GOP (including, possibly, Ryan himself) would like to raise taxes on these freeloaders to larn 'em that guv'mint don't come free. The CBO has documented the relevant changes in effective taxes at different income levels elsewhere, and I'd be very surprised if Ryan were unaware of them.
Ryan says that federal income taxes are more progressive than they used to be, but he doesn't say that all federal taxes are more progressive than they used to be. He doesn't because he can't. When you combine all federal taxes, including the payroll tax (which started out regressive and has become more so), the capital gains tax, the corporate tax, etc., etc., then the federal tax system has become more regressive ... just like you thought it had. And that's before you also factor in the effects of state and local taxes, which also tend to be regressive.
On benefits, I'll take Ryan at his word that over time Social Security and Medicare have failed to make the totality of government benefits more progressive, because I don't know whether they have or not. I would merely point out that these programs don't exist to redistribute income but to provide security to people in old age, when they no longer have jobs and are much more likely to get sick. I would favor making beneficiaries at higher incomes pay more for these benefits through higher taxes (this already happens to some extent), but I don't think the supposedly non-progressive effect of Social Security and Medicare as currently configured is the devastating critique of the welfare state that Ryan imagine it to be. I do find myself wondering how Ryan neglected to mention that during this same 1979-2007 period the federal government "ended welfare as we know it," as Bill Clinton liked to say. Surely that had some impact on the redistributive effect of government benefits. Is Ryan saying that he opposes the 1996 welfare-reform law? I kind of doubt it.
Ryan also doesn't address the indirect impact of government on redistribution, but it hardly seems accidental that, as Vanderbilt political scientist Larry Bartels has pointed out, under Democratic presidents since 1948 the greatest income gains have been at the bottom of the income scale and tapered off as you went up, while under Republican presidents since 1948 the greatest income gains have been at the top and tapered off as you went down the income scale. This appears to be the result of a whole host of policies, including not only the distribution of taxes and benefits but also the government's stance toward unions, whether the minimum wage rises, the extent to which the government frets about inflation versus too-high interest rates, etc., etc.
To summarize: Government attempts to redistribute income are not futile. What's futile is Ryan's attempt to engage the topic of income inequality in a way that favors his antigovernment ideology. I'm surprised he's still at it.
12 comments
Why, oh why, Mr. Noah, are you surprised that he's still at it? This is what he does. He has no other reason for existing than to distort basic facts to buttress the political mantras of a favored few.
- cspencef
November 18, 2011 at 1:47pm
I think he has to. If he doesn't make his case, at the very least he's confusing the issue enough that conservatives and Tea-Partiers can continue believing whatever the hell they want to believe.
- AllanL5
November 18, 2011 at 1:48pm
Mr. Ryan is full of baloney. As long as a married couple whose income is only capital gains and dividends (and the standard deduction) is in a zero tax bracket up to $86,700, and a working married couple pays $16,001.00 in taxes (with Fica and Medicare), the tax law is regressive (try this on any tax software that caclulates the Fica and Medicare on a W-2). And when the top 400 pay income taxes at 18% in 2008 because of capital gains and dividends, while the top rate on earned income is over 35%, you can't argue that the Internal Revenue Code is progressive.
- Nusholtz
November 18, 2011 at 2:00pm
But he's cited by respected Professors of Harvard and you can't argue with that ethos, right?
- IggyPop
November 18, 2011 at 2:14pm
I am not surprised, either. When you are in an epistemic bubble, and you are having a good run, you just keep at it. I suspect that Timothy's "surprise" is merely rhetorical.
- liberalrefl
November 18, 2011 at 2:54pm
If at first they don't believe, lie, lie again.
- GSpinks
November 18, 2011 at 5:13pm
Noah-nothing -- are you really this stupid?? Or heartless?? "Government remains an effective tool for reducing income inequality"... ... yet the Government has failed on reducing poverty in America. Poverty is essentially unchanged (around 14.5%) the last 45 years. After a 13 fold increase in funding (adjusted for inflation) Isn't the goal of reducing income inequality to help the poor? I repeat, isn't he goal of reducing income inequality to help the poor? Given the Gov has failed by any objective measure in helping the poor, why do liberals still believe in it. In reality, parasitic public sector liberals have no desire to reduce poverty: - the wasteful welfare programs employ brethren parasites - they leave it to conservatives to actually contribute to charity in meaningful way - they laugh at the hard-working private sector types who fund their corrupt lifestyles Liberalism, an exercise in self-centered futility
- mr_rationale
November 18, 2011 at 6:45pm
Oh for crying out loud Rat... Would you and your fellow hacks or fellow travelers at the Heritage Foundation make up your bleedin' minds already? First the talking point from the right is the poor in this country are not really poor because they have refrigerators, courtesy of Heritage Foundation report. Now, the government attempts to help the poor have failed. Pretty much have your bases covered. Oceania has always been at war with Eurasia and all that!
- MikeB.
November 18, 2011 at 9:21pm
But in a larger sense...Fraud Boy Ryan is playing a game here. His arguments are not meant to stand up to any real scrutiny like Noah is showing them. They inevitably collapse. What he does is offer comfort the way an apologist of any cult offers comfort to the followers. Their arguments are not convincing really to anyone outside the cult, but to the members they provide the comfort that there are answers to these troubling questions.
- MikeB.
November 18, 2011 at 9:26pm
If Timothy Noah's view of the world is correct why are the Noahite countries such as Greece, Italy, Spain, Ireland, Portugal, and France in varying stages of economic collapse? Roughly speaking, the countries of the world are economically successful just to the extent that they have in place fiscally and monetarily conservative policies. Countries fail when they take the opposite path.
- bulbman1066
November 20, 2011 at 1:20am
Oh baloney Bulbman. What's happened in Europe is complex but a great deal of it has to do with the obviously difficult attempt to link the currencies of some poor but sustainable economies directly to rich powerhouses - also of course a global recession. But, what we're seeing also shows the fact that rich investors can destroy entire nations if they decide not to lend them money. Italy is a case in point, perfectly viable economy, being dragged down by "contagion," as in "Asian flu," not through any fault of the nation or its people. PS please define "conservative." Would that be as in Hoover? Because if so, kaboom. Your whole theory is a complete crock.
- Sophia
November 20, 2011 at 2:14am
What Noah et al need to find is an economy that is achieving what they claim to want. We already spend more per capita than Finland, UK, Germany, Canada. Sweden somewhat out spends us on a per-capita basis. But all of these countries tax the living daylights out of the working poor. We do not. They also have similar levels of income and wealth distribution. Hell, Sweden leads the world in wealth (mal)distribution. So, what is he arguing for? Oppressive taxes on the working poor? Who can tell. He cites Ryan's comment that our taxes are very progressive, he cites the CBO saying the same thing, he ignores the OECD saying the same...and then he invents is own fantasy of why they aren't in fact progressive. Noah does hit the nail on the head that tax progressiveness is defined as what the rich pay versus what the poor don't pay. But then he attempts to re-define it, ignoring that the poor get every dime back they pay into medicare and SS.
- seattleeng
November 20, 2011 at 2:06pm