Income and Wealth Distribution, or, Watching Professional Republicans Sell Their Souls Back in 1992: Hoisted from the Archives

Clayton Yuetter (March 24, 1992): When 'Fairness' Isn't Fair "Class warfare, discredited throughout the former Communist world, seems to have found new life in American political circles. A front-page article in the March 5 New York Times described one example: an allegation that the recovery of the 1980's—and hence the conservative philosophy of the Bush Administration—helped the rich and hurt the poor. This analysis, a reprise of the so-called fairness argument, rests on a Congressional Budget Office study and an analysis by a Massachusetts Institute of Technology economist, Paul Krugman. The C.B.O. and Mr. Krugman have played prominent roles in shaping the liberal version of the fairness debate, and their allegations have become a staple in the speeches of Democratic politicians. But the analysis suffers from grievous flaws. I will cite just a few. First, the claim that the top 1 percent of taxpayers raked in 60 percent of the benefits of the Reagan-Bush boom rests on a statistical sleight of hand. The C.B.O.-Krugman analysis masks the progress of the Reagan-Bush expansion by throwing in data from the Carter era, when the poor got poorer and the rich got poorer. During the Reagan-Bush boom, by contrast, the rich paid more in taxes and the poor made more in income. Minorities enjoyed a greater leap in wealth, employment and mobility than whites. The middle class shrank because more people became 'rich'. That's the Reagan-Bush record...

...Second, the analysis gives the impression that American society consists of stationary social classes—a sort of human layer cake in which a haughty, unchanging upper class rests atop an oppressed, unchanging underclass. That is pure fiction: Our greatness as a nation arises from the fact that people rise and fall on the strength of their abilities. Many children of the rich fall below the national average income level in their lifetimes, and many poor children rise to riches. Third, the C.B.O. study creates the impression of an increasingly divided America by overstating the "wealth" of the top 1 percent and understating the wealth of everyone else. It lumps retirees who have sold their homes into the ranks of tycoons. It overlooks the incredible increase in the values of investments in the Reagan-Bush years. At the same time, the study understates middle-class wealth by overlooking the value of unsold assets like homes, stocks and pension funds. If you count everybody's capital gains, you find that the poor and middle class got the vast majority of benefits of the Reagan-Bush expansion.

But the fairness story involves far more than statistics. It involves values. Many advocates of the "fairness" critique want to stoke middle-class resentment by implying that the rich take from the poor. They never seem to realize that a dynamic, entrepreneurial economy can create a bigger pie for everyone. American workers understand how an economy works, however, and so do voters. They don't like the Robin Hood politics of class warfare, and never have. When societies exalt the corrosive instinct of envy they condemn themselves to a poverty of goods and spirit. Moses delivered a commandment that began: "Thou shalt not covet." He and his wanderers understood that an economy runs not just on profits, but on values. The "fairness" argument ignores the way the market works. It twists the meaning to advocate a Government powerful enough to transfer money from rich to poor. But no one equates fairness with a Government that grows and raises taxes, regardless of its performance, or that transfers money from the rich and middle class into programs that lure the poor into permanent dependency. Most Americans think about fairness in practical terms. You work hard, and you keep what you earn: That's fair. If you save and invest and take risks, and produce something that fulfills the needs of others, you make a profit. That's fair.

The politics of redistribution are as dead as Leninism. Today, people in former Communist lands beg for copies of the Federalist Papers and "The Wealth of Nations"—not for "The Greening of America." They don't seek a sleeker socialism. They seek something like what President Bush calls the Good Society—one built on hard work, decency, thrift, service, family—one that places the individual before government. The C.B.O.-Krugman assault on the Reagan-Bush recovery avoids all these factual and moral subtleties, and muddles a debate that matters to most of us. That's a shame because the fairness debate will shape our destiny. As we take on the tangled issues that arise from it, we will need all the facts and all the real fairness we can get.

#noted #2019-10-07