This One Paper Explains Why Republicans Are Losing On Economics

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(Credit: AP)

Have conservatives learned their lesson from the 47 percent debacle? A new paper from arguably the most influential conservative economist in the country, titled “In Defense Of The One Percent,” suggests no. Even worse, the paper shows how dividing America into Randian producers and naturally subordinate moochers is the only way to resolve a central contradiction in modern conservative economic thinking — meaning that the GOP will be stuck making a losing argument until it conducts a total rethink of its economic philosophy.

Harvard Economics Professor N. Gregory Mankiw, the author of “In Defense,” was the chairman of George W. Bush’s Council of Economic Advisers and counseled Mitt Romney on economic issues in 2006 and 2012. Despite his occasional heresies (Mankiw famously supports a carbon tax to fight global warming), Mankiw is one of the most-respected and most-representative conservative economist active in public life today.

Mankiw’s defense of the one percent proceeds from a fairly conventional script. He argues that structural transformations in the economy, principally caused by the advent of new technology like computers, “have allowed a small number of highly educated and exceptionally talented individuals to command superstar incomes in ways that were not possible a generation ago.” The recent spike in inequality, for Mankiw, is then largely caused by the smart and talented being able to express their talents freely. Much of Mankiw’s paper is devoted to arguing that punishing these talented individuals through more progressive taxation would be unfair because they earned it fair and square.*

This argument doesn’t work if you think, like many Americans, the economic game is rigged in favor of the already-rich. As Mankiw concedes, the evidence that inequality persists over generations — that is, people with rich parents tend to end up rich too — is overwhelming. If this reflected structural disadvantage like unequal access to health care and education, then it would be hard to argue that the best and brightest, rather than richest and whitest, were being rewarded by rising inequality.

Instead of trying to argue away the facts on inequality, Mankiw attempts to reexplain them. He proceeds in part by personal anecdote: “I do not see my children as having significantly better opportunities than I had at their age,” he writes, despite growing up wealthier than their middle-class father. Recognizing this impression to not be enough, Mankiw turns to the somewhat more surprising crutch of genetics. “Parents and children share genes,” which in Mankiw’s telling explains “intergenerational persistence in income even in a world of equal opportunities.” Though he disavows “genetic determinism,” Mankiw nevertheless thinks genetic transmission of things like IQ (a common conservative trope) make it “implausible to interpret generational persistence in income as simply a failure of society to provide equal opportunities.”

Even setting aside the obvious strawmanning here (nobody thinks persistent inequality is only caused by lack of opportunity), Mankiw’s analysis is unpersuasive. It can’t explain, for instance, why the United States has one of the lowest rates of intergenerational mobility in the developed world. Presumably, if genetics overwhelmed the effects of family inequality, more egalitarian distributions of wealth wouldn’t correlate with higher rates of mobility, but evidence from the developed world suggest they do.

But more fundamentally, follow Mankiw’s logic to its conclusion. He believes both that 1) the fact that the rich tend to stay rich, and the middle class tend not to become rich, are consequences of the natural distribution of talents and that 2) the most talented, morally speaking, deserve to keep what they earn.

In essence, Mankiw is arguing that a partly genetically determined upper class deserves most of society’s wealth and deserves to pass it on to their kids. It’s an argument that we’re living in a natural American hierarchy.

Needless to say, this is an unpopular message. Poll after poll after poll of Americans suggests overwhelming, almost consensus belief in the idea that American society should be about opportunities for mobility — the up-by-your bootstraps, Horatio Alger ideal that’s always characterized the American Dream. Both Mitt Romney and Paul Ryan made the idea of equal opportunity central to their economic arguments. Widely read conservative wonk Avik Roy argues that “For many of today’s conservative reformers, equality of opportunity — especially for the poor — is the highest moral and political priority.” Arguing that the middle class (unlike the poor!) already has equal opportunity, and that’s why they’re not getting richer, isn’t exactly a winning campaign strategy for a reeling political organization.

To his credit, Mankiw recognizes that the poor really do face “a variety of socio-economic maladies” that limit their equal opportunity, and hence can’t manifest their genetic talents in the market. However, the logical implication of that position is government policy of some sort, be it either liberal-supported remedies like Obamacare or conservative proposals like school vouchers. Whichever you prefer, that money has to come from somewhere, which means taxes. Given that one wouldn’t want to drive the middle classes down into the lower income levels through confiscatory tax policy, that probably means taxes on the wealthy or super-wealthy.

Since Mankiw and the GOP oppose higher taxes on the rich on moral grounds, however, this creates an insuperable conflict between equality of opportunity and the moral principle, which Mankiw calls “just deserts,” that the rich should keep what they produce. But there’s a tempting way out of this solution, one conservatives have been pursuing for quite some time: the poor really are getting what they deserve. They’re coddled by government programs, but also non-producers who simply don’t deserve help overcoming structural barriers like crumbling schools and inadequate health care.

Or, in one man’s famous words, “My job is is not to worry about those people. I’ll never convince them they should take personal responsibility and care for their lives.”

So until the Republicans resolve the conflict between belief in the moral sanctity of wealth accumulation and equality of opportunity Mankiw’s paper exposes, they’ll never develop a coherent economic message, let alone a winning one.

*Mankiw’s argument for this moral position is entirely deficient. He never explains in any depth why being lucky enough to be born with intelligence or the desire to work hard entitles one to keep your own wealth, a standard criticism in the political philosophy literature. He appeals to shared moral intuitions (including, at one point, those of small children) that people deserve what they get without explaining how and why basic feelings matter, but rejects the contrary intuition that the rich can afford to be taxed more as “unjust.” He also assumes that John Rawls’ famous “veil of ignorance” argument is only about redistribution, when in reality it’s also an argument for a complex series of rights protections that would obviate Mankiw’s absurd claim that Rawls’ position entails forced kidney donation.