“Attacking” Inequality

A few days ago in discussing the issue of inequality we said:

Why would we want to reduce inequality and how would we do it?  Isn’t it better to double everyone’s income rather than “improve” the Gini coefficient?  If you decide to reduce inequality how do you do it?

Today, Lawrence Lindsey at the WSJ gives a review of the difficulties.  Historically, inequality improvement doesn’t coincide with Democrat presidents.  Then he looks at the research including:

A recent Brookings Institution study—whose authors include Peter Orszag, President Obama’s director of the Office of Management and Budget—found that boosting the top tax rates even more, as Sen. Sanders suggests, would have little or no effect on inequality.

This study starts by assuming that the government can transfer income without costs and behavioral effects from the top earners to the bottom 20 percent of earners.  At first it had a tiny effect on the Gini Coefficient but when they considered the impact on behavior the rich got poorer and the poor got fewer benefits.  Government actions have an impact on behavior and government action is not cost-free.  Part of Lindsey’s conclusion is:

Attacking the rich and running against inequality may be a sensible political strategy. But in the end the programs to implement this strategy make the problem worse. Yet advocates come back and demand the same programs.

We agree with the first part, envy has been a sensible political strategy.  We disagree that the folks campaigning on envy want to reduce inequality.  Envy will always be a good play even (especially?) if others try to educate folks.  These campaigners have other goals such as expanding government and creating voting pockets financed by the government.

We are not sure if we can reduce the effectiveness of envy as a political strategy.  We need to discuss these things directly.  Why do you want to reduce inequality?  How do you propose to reduce it?  What are we giving up to reduce inequality?  These are serious questions that the promoters of envy need to address.

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