Wealth redistribution is a term that represents either a desirable ideal or a socialist plot depending on the political leanings of who is discussing it.
Redistribution of wealth is the transfer of income, wealth or property from some individuals to others caused by a social mechanism “such as tax laws, monetary policies, or tort law”. Most often it refers to progressive redistribution, from the rich to the poor, although it may also refer to regressive redistribution, from the poor to the rich. The desirability and effects of redistribution are actively debated on ethical and economic grounds.
In legend Robin Hood was the epitome of wealth redistribution, robbing the rich to give to the poor. Then again, in his day, it wasn’t worth robbing the poor, no matter the ultimate destination of the loot.Today, that does not appear to be a problem.
This notion of moving wealth from one segment of society to another through government manipulation has remained a hot button issue and was truly manifested in the 2008 Presidential contest by Barack Obama’s encounter with “Joe The Plumber” on the campaign trail in Ohio. There, Joe Wurzelbacher, purportedly a plumber on the verge of buying his own plumbing firm complained that he was going to face higher taxes. Obama’s response was that if Joe had income above a certain level he would be paying a higher marginal rate under Obama’a tax proposals, but the people under that income threshold would be paying less in taxes and thus better able to afford Joe’s services. And the candidate said his method would “spread the wealth around”. Those words got contorted to “wealth redistribution”. Here’s a video of the exchange:
The fact that Joe was neither a licensed plumber nor capable of buyingb his own firm seemed not to matter to those who loved the sound bite.
Now Obama has used the precise term in other contexts. My fellow blogger here noted his language during the signing of the new health care law earlier this year.
The New York Post viewed the conversation with Joe and Obama’s statement as if he were “firing a Robin Hood shot”.
Reality, as is the norm, trumps perception. That reality is that there has been and continues to be wealth redistribution on an unprecented scale in the United States and there’s no Robin Hood taking money from the rich and giving to the poor or even the middle class. The truth is that those with the highest, narrowest percentage of income control more wealth than ever and the disparity keeps growing, with relatively little growth in incomes or wealth at the lower parts of the spectrum in real terms.
Timothy Noah of Slate.com terms this “The Great Divergence”, the title of his ten part exposition of this phenomenon in September of this year.
In that series Noah explores the statistical data exhibiting this inequality, as well as a number of possible causes for it. In one part he presents data which shows the difference in income growth across various percentile segments of our population under both Democrat and Republican presidents since 1945.
These percentiles were 20 %, 40 %, 60 % 80 % and 95% of the levels of income. That is, the lowest represents those in the lowest 20% of income and the top is those in the highest 95% of incomes. Interestingly, under Democrat presidents, average income growth for each segment was higher than it was for Republican presidents, even for the richest. This growth for the segments in ascending order was
2.64 % 0.43%
What this means is that while income grew in all segments under either party, the over all growth was greater under Democrats for each segment while the greatest disparity between the segments was under Republicans.
I offer this as an example of Noah’s findings and interesting in itself, but nowhere totally conclusive. There are other factors at play than merely the party in charge. But it is instructive in at least a minor way to show that even the rich have done better under Democrats than under Republicans.
One notion that is constantly advanced by Republicans is that tax cuts, particularly among the wealthy, stimulates job growth. Job growth presumably translates into increased wealth for those gaining those jobs. However, such thougfht flies in the face of reality again when you consider that since job growth under each presidential administration has been tracked since 1945, the eight years of George W, Bush’s presidency produced fewer jobs than under any other president, measured by the number of jobs created per year. His total job creation was only slightly better than his father who only served one term and not quite twice as many as Gerald Ford who served about 2 1/2 years. Even the often reviled Jimmy Carter had over three times as many jobs created during his one term as W. did in two.
Why is this significant? There were two huge rounds of tax cuts under George W., in 2001 and 2003. By contrast, Bill Clinton had more jobs created under his watch than any other president while raising taxes. The second best record was under Ronald Reagan who, despite much rhetoric opposing tax hikes, ushered in several rounds of hikes during his eight years.
Here is the full record courtesy of that ultra-liberal publication, The Wall Street Journal.
A very telling study finds that Americans underestimate the current wealth disparity. Further, the vast majority accept that some disparity is ok but favor a distribution scheme such as found in Sweden to ameliorate much of the disparity.
The party truly seeking wealth redistribution to the detriment of the vast majority of Americans are the Republicans. Nowhere will you find them using that term but simply looking to their public proclamations of policies they advocate or intend to push in the new Congress is revelatory.
The noted liberal economist Paul Krugman who can be somewhat over the top at times, makes some salient points here :
His take is that any GOP efforts to balance the budget by 2020 with their stated objectives of permanent tax cuts for the wealthy among others essentially means eliminating most of the rest of what our federal government does, including such benign things as National Parks.
But one need not explore in depth to find the Republican agenda for the continued wealth redistribution to the haves. They are putting up a united front against extending unemployment benefits for those who effectively lost that lifeline this week. They reason that the cost is not covered by a corresponding cut in spending elsewhere. And they are tying reversing this opposition to renewing the Bush tax cuts for the wealthiest 1 or 2 % of taxpayers, most of whom are millionaires. Yet they don’t have any plans to cover the cost to the U.S. Treasury.
I have received unemployment a couple of times. Generally one is in survivor mode and welcomes a return to work which results in much higher income. Few recipients have the luxury of twiddling their thumbs while collecting their checks and being able to maintain their fully employed lifestyle. They do tend to spend almost all of their unemployment pay out of sheer necessity.
On the other hand the GOP, while resisting keeping the tax cuts only for those earning below a fairly high threshold, ignore the fact that even if the upper income marginal tax bracket is restored to its pre-2001 level, that top tax rate is still quite a bit lower than it historically was in this country until it began to be lowered under Reagan.
My counsel is to pay attention to talk of wealth redistribution by any politician, look past the rhetoric, learn the details of any proposals concerning taxes or other finance matters that will affect you, and determine what will hurt or harm you. I guarantee the vast majority of you will ascertain that Republican policies will truly benefit only those already holding an irrational portion of the nation’s wealth.
I don’t believe we should steal from the rich to help the poor or anyone. I do believe we should end the thievery the rich are perpetrating against the rest of us.