December 16, 2010


Left Out (Francis Fukuyama, January - February 2011, Francis Fukuyama)

Scandalous as it may sound to the ears of Republicans schooled in Reaganomics, one critical measure of the health of a modern democracy is its ability to legitimately extract taxes from its own elites. The most dysfunctional societies in the developing world are those whose elites succeed either in legally exempting themselves from taxation, or in taking advantage of lax enforcement to evade them, thereby shifting the burden of public expenditure onto the rest of society.

We therefore raise a different and more interesting set of questions regarding the relationship between money and power in contemporary America. All these questions come together, however, in a paramount puzzle: Why has a significant increase in income inequality in recent decades failed to generate political pressure from the left for redistributional redress, as similar trends did in earlier times? Instead, insofar as there is any populism bubbling from below in America today it comes from the Right, and its target is not just the “undeserving rich”—Wall Street “flip-it” shysters and their ilk—but, even more so, government policies intended to protect Americans from their predations. How do we explain this? [...]

This, then, is the contemporary context in which we raise the question of plutocracy in America: Why, given the economic history of the past thirty years, have we not seen the emergence of a powerful left-wing political movement seeking fairer distribution of growth? Why was Obama pilloried during the 2008 campaign for even using the word “redistribution”, when all modern democracies (including the United States) already engage in a substantial degree of redistribution? Why has anti-elite populism taken a right-wing form, one that sees vast conspiracies not among private-sector actors like bankers and hedge-fund operators, but among government officials who were arguably trying to do no more than protect the public against real collusions if not outright conspiracies? Why have there been so few demands for a rethinking of the basic American social contract, when the present one has been revealed to be so flawed? How can it be that large numbers of congressional Democrats and arguably the most socially liberal President in American history are now seriously considering extending, and even making permanent, the Bush tax cuts of 2001 and 2003? Is this not prima facie evidence of plutocracy?

There are several possible answers to these questions. [...]

A second explanation has to do with American exceptionalism. Many observers through the years have noted that Americans are much less bothered than Europeans by unequal economic outcomes, being far more concerned about equality of opportunity. The classic explanation for this has to do with the fact that America was (for recent immigrants, at least) a land of new settlement with few inherited status privileges, imbued with a Lockean liberal belief in individual opportunity. Americans tend to think that individuals are responsible for their own life outcomes; they often distinguish between the “deserving” and “undeserving” poor, the latter of whom are poor as a result of their being, in Locke’s phrase, “quarrelsome and contentious.” Americans care less about equality of outcomes than the possibility of social mobility, even if such mobility takes generations to achieve.

This Lockean emphasis on individual responsibility manifests itself in several distinctive ways. Large numbers of Americans, for example, favor abolishing all inheritance taxes (commonly denounced by the Right as the “death tax”), even though only a very small minority of them can ever hope to leave the world with sufficient assets to be subject to it. It also explains why Congress, with the support of President Clinton, abolished the New Deal program Aid to Families with Dependent Children as part of a broad welfare reform, under the rubric of legislation tellingly labeled the “Personal Responsibility and Work Opportunity Reconciliation Act of 1996.”

This aspect of American political culture is insufficient, however, to explain why there has been so little left-wing populism in the early 21st century. For despite their Lockean beliefs, Americans of past generations have supported substantial redistribution, not just during the New Deal and Great Society eras, but when the nation first imposed a highly progressive national income tax around the time of the First World War.

Perhaps the answer eludes because it is so obvious.

Why do Americans not support substantial redistribution now? Well, we have a tax code wherein very nearly half of us pay no income tax while the top 5% of wage-earners pay 60% of those taxes. We have exactly the sort of substantial redistribution that the Left thinks we should have. They can, of course, argue that it should be even greater, but that starting point is so high that we can hardly be surprised when most Americans just aren't much moved by the issue.

Posted by Orrin Judd at December 16, 2010 6:01 AM
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