the national interest

The Ideological Fantasies of Inequality Deniers

Rising income inequality, like climate change, is an ideologically inconvenient issue for conservatives. They would prefer not to discuss it altogether. If forced to discuss it, they will generally either deny its existence or simply carry on as if it doesn’t exist.

The underlying facts, like the facts of climate change, are stark. Over the last few decades, income growth for most Americans has slowed to a crawl, while income for the very rich has exploded. That’s a reversal of the three decades following World War II, when all income groups got richer, with the poor and middle class rising at a faster rate than the rich. Crucially, the Congressional Budget Office’s new analysis shows that changes in government policy over this period have made inequality worse. (In CBO-speak: “The equalizing effect of transfers and taxes on household income was smaller in 2007 than it had been in 1979.”)

We’re not having a debate about how to reverse or even stop the growth of inequality. Nobody has a real plan to do that. The Democratic plan is to slightly arrest the growth of inequality by hiking taxes on the rich a few percentage points, so as to minimize the need to cut the social safety net. The Republican plan is to slash taxes for the rich and programs for the poor, thereby massively increasing inequality.

That is a hard position to defend in the context of exploding inequality, and conservatives would rather not defend it. Instead the right’s response has been to persistently deny or ignore the facts. Rick Perry, pressed by a reporter to explain why he was proposing a tax plan that would widen income inequality further, replied, “I don’t care about that.” The Wall Street Journal editorial page today dismissed the Tax Policy Center, whose calculations persistently show the ways in which various Republican tax proposals would widen inequality, as “liberal.” It didn’t even pretend to dispute the substance of the calculations. Eric Cantor gave a speech about income inequality centering on stories about how his grandmother worked hard and pulled herself up by the bootstraps in the old days. It was a nice speech if you like stories about plucky grandmothers. It failed to grasp the central dilemma, which is that it was a lot easier for poor people to move up sixty years ago, when tax rates on the rich happened to be far higher, than it is today.

Ah, but here comes Paul Ryan, fawned over in the media as “the GOP’s strongest policy wonk,” to take the issue head on in a speech before the Heritage Foundation, hyped in advance by conservatives as a definitive statement of right-wing thought. Ryan’s speech is the portrait of a mind in the grips of an ideological fantasy, refusing to confront inconvenient facts.

Ryan establishes the tone of his argument by accusing President Obama of attacking “straw men,” and then proceeds to build a series of his own straw men, beginning in the very same sentence:

[Obama] is going from town to town, impugning the motives of Republicans, setting up straw men and scapegoats, and engaging in intellectually lazy arguments, as he tries to build support for punitive tax hikes on job creators. … he has launched his second campaign by preying on the emotions of fear, envy, and resentment. …

Right, so Obama favors “punitive” tax rates, he promotes resentment of the rich, and he opposes any spending restraint whatsoever. Ryan produces no evidence to support these statements, because none exists. In reality, Obama never attacks the rich, he constantly insists that he respects economic success and merely wants to lessen the burden of budget cuts on the most vulnerable, and he agreed to reduce spending by more than a trillion dollars just this last summer. Ryan repeatedly accuses Obama of favoring “equality of outcome,” which is absurd.

Here is the closest Ryan comes to addressing Obama’s actual argument, which is that requiring somewhat higher taxes on the rich will reduce the scale of cuts required on programs for the poor and middle class:

The President has been talking a lot about math lately. He’s been saying that “If we’re not willing to ask those who’ve done extraordinarily well to help America close the deficit… the math says… we’ve got to put the entire burden on the middle class and the poor.”
This is really a stunning assertion from the President. When you look at the actual math, you quickly realize that the way out of this mess is to combine economic growth with reasonable, responsible spending restraint. Yet neither of these things factors into the President’s zero-sum logic.

It’s “stunning,” says Ryan, because it relies on zero-sum math. More tax hikes on the rich means less spending cuts. Ryan finds this stunning because he believes in supply-side fairy tales in which cutting taxes for the rich will produce enormous growth. Never mind that the last two presidential administrations have disproved the supply-side theory about as conclusively as a real world experiment can do. (Bill Clinton raised taxes on the rich, conservatives predicted disaster, and instead we experienced a long boom; George W. Bush lowered taxes on the rich, conservatives predicted a huge boom, and instead we got an weak recovery with no income growth for anybody save the very rich.)

Ryan likewise assails Obama’s calculations by trying to persuade his audience that there’s really not much money to be raised by taxing the rich:

And his math is no better on the tax side. Let’s say we took all the income from those the President calls “rich” — those making $250,000 or more. A 100 percent tax rate on their total annual income would only fund the government for six months. Just six months!

Uh, has anybody told Ryan that there are only twelve months in a year? Because six of twelve months is not a trivial percentage. Another way to put this is that the richest 1 percent of taxpayers earn 17 percent of the nation’s income, and federal spending accounts for a little over 20 percent. Obviously, taking all the income from the top 1 percent would be a terrible idea, but taxing a decent chunk of their income clearly can get you pretty far.

Ryan likewise insists that the debate over rich investors who pay lower tax rates than the middle class is contrived:

Obama quotes Reagan as saying that bus drivers shouldn’t pay a higher effective tax rate than millionaires. Well, that’s a no-brainer. Nobody disagrees with that.

Nobody disagrees with that? How about Paul Ryan? His tax plan from 2010 would exempt all investment income from taxes, meaning that large segments of the rich would pay nothing at all. The average federal tax rate on households earning more than a million dollars a year, under Ryan’s plan, would be well under 13 percent, compared with a 19.5 percent average federal tax rate for households earning $50,000 to $75,000 a year.

Ryan concludes his speech with a ringing endorsement of equality of opportunity, which he contrasts with the stagnant, European-style class-bound society that Democrats crave to replicate:

Telling Americans they are stuck in their current station in life, that they are victims of circumstances beyond their control, and that government’s role is to help them cope with it — well, that’s not who we are. That’s not what we do.

Our Founding Fathers rejected this mentality. In societies marked by class structure, an elite class made up of rich and powerful patrons supplies the needs of a large client underclass that toils, but cannot own. The unfairness of closed societies is the kindling for class warfare, where the interests of “capital” and “labor” are perpetually in conflict. What one class wins, the other loses.
The legacy of this tradition can still be seen in Europe today: Top-heavy welfare states have replaced the traditional aristocracies, and masses of the long-term unemployed are locked into the new lower class. 

It’s a compelling vision. Unfortunately, Ryan’s understanding of reality is a complete inversion of actual reality. “Equality of opportunity” bears no relation to the reality of the American economy or any economy. Parents can benefit their children by giving them money, better schools, better home environments, tutoring, camp, and other advantages. Opportunity is overwhelmingly unequal. One result is that rich kids perform far better in school than poor kids. But that is not the only result. Poor kids who beat the odds and get high test scores are less likely to complete college than rich kids with middling or even low test scores. Poor kids who beat those odds and graduate from college are still less likely to grow up to be rich than rich kids who did not graduate from college. I’m not sure if there’s a perfect solution, but pretty sure Ryan’s plan to slash Pell Grants is not going to help.

Ryan’s decision to cite Europe as a place where people can’t move beyond their birth station is especially unfortunate. In fact, social mobility in Europe is higher than in the United States, a fact even Rick Santorum has acknowledged.

The way to understand Ryan is that he’s deeply influenced by the theories of Ayn Rand, who believed that the root of all evil lay in attempts to alter the wealth distribution created by the free marketplace. Rand may have been a deranged cult leader, but she did live at a time when the fear of the poor devouring the rich had an actual real-world basis. She escaped communist Russia for the United States, Franklin Roosevelt — while not a reprise of the communists, as she mistakenly believed — really did denounce the rich and impose confiscatory tax rates. The world of Rand’s imagination bore a slight resemblance to the world she inhabited, but it bears no resemblance to the contemporary United States.

Ryan cannot process the realities of this world because they are so at odds with the imagined world of his ideology. After his speech, he was asked about the CBO’s report on inequality, and he brushed it off, falling back on Rand-esque lingo the virtuous rich (“takers”) and parasitic poor (“makers”):

Let’s not focus on redistribution, let’s focus on upward mobility,” he said. “If these studies are used as justification for erecting new and more barriers for making it harder for people to rise, all that will do is reduce our prosperity in this country.”

Don’t confuse Paul Ryan with the facts. If studies run up against Ryan’s ideology, then the studies must give way.

The Ideological Fantasies of Inequality Deniers