Redistribution Is a 14-Letter Word, But It Shouldn't Be
September 26th, 2012
September 26th, 2012
Redistribution is a dirty word. It’s become something of a catch phrase for the Tea Party and Libertarians. In 2008 the McCain campaign sought to unfavorably label Obama a “redistributor” in speeches and attack ads. But perhaps this is not a recent development. Libertarians point out that many of our early presidents were also suspicious of redistributionist policies. President Grover Cleveland, for example, vetoed a bill in 1887 that would have given $10,000 in aid to Texas farmers struggling with a drought. He rationalized that he did not believe it is the duty of the government to relieve “individual suffering which is in no manner properly related to the public service or benefit.”
Most recently, it’s come up in the presidential campaign. To take some heat off of their candidate’s own “47 percent” comments, the Romney campaign last week circulated a video of Barack Obama from 1998 in which he seems to favor “redistribution” of wealth. In the clip—which is abruptly truncated so harshly out of context—then State Senator Obama says: “I actually believe in redistribution, at least at a certain level, to make sure that everybody’s got a shot.”
In a campaign speech, Romney attacked the statement, saying: “He really believes in what I’ll call a government-centered society. I know there are some who believe that if you simply take from some and give to others, then we’ll all be better off. It’s known as redistribution.”
Romney’s characterization of the quote is a bit misleading. Obama does go on to explain that he is interested in pooling resources while decentralizing delivery systems in order to foster competition and innovation at the local level. But the campaign’s—albeit misleading—use of this buzz word is the perfect example of just how toxic the word has become.
So what does the word really mean? The most simple definition is to “alter the distribution of wealth.”
You’ll see that this concept is not limited to unemployment benefits, welfare, food stamps and Cleveland’s “individual suffering”—which are examples of direct redistribution of wealth and income from the richer to the poorer. The word also encompasses a more general and indirect concept, one which is tightly interwoven with the concept of income inequality. That is, that government policies can both alter the distribution of income and wealth in a nation through, for example, through a progressive tax code or education.
There are stark differences between the idea of redistribution to level income inequality and Romney’s depiction of taking from some to give to others.
Some of Obama’s policies are, indeed, redistributionist. For example, the New York Times noted the Affordable Care Act, “which levies new taxes on the wealthy to expand access to health care for the near poor seems on track to be the biggest increase in government redistribution since the Johnson administration.”
But if President Obama’s policies have had an affect on income distribution in the last four years, we haven’t seen it. In fact, while the economy is—albeit slowly—growing and recovering from the recent recession, according to the U.S. Census Bureau, the overwhelming majority of Americans have seen no gains in terms of incomes. Meanwhile, incomes for the top fifth of American households rose by 1.6 percent in 2011 and by even larger increases for the top 5 percent. All households in the middle actually saw declines, while those at the bottom remained unchanged.
This brings me to my third point: upward redistribution. The income statistics from the last two years are not unique. For decades, the country has been witnessing a remarkable shift in income inequality—the middle class’ share of the nation’s wealth has actually been declining for decades. And while incomes among the top earners have skyrocketed, incomes among the middle class have basically stagnated in inflation-adjusted terms.
As Washington Post columnist Harold Meyerson points out “markets have redistributed wealth from Main Street to Wall Street, from workers to shareholders.” In some ways, this is the market’s fault. But the government has a complex, tightly interwoven relationship with the economy and the distribution of wealth and its policies do affect and enable these shifts. We have a responsibility, though government policy, to stop—and even reverse—this upward redistribution of wealth. Short term fixes like unemployment benefits and welfare are just that—short term and generally undesirable. It is the long-term policies—regulations, taxation policy and education, for example—that will halt this worrying trend. There’s nothing dirty about that.