DHE on Inequality

At yesterday’s debate with Austan Goolsbee, Doug Holtz-Eakin said the following on behalf of the McCain campaign:

[CORRECTION: This was during an appearance with Jason Furman on Bloomberg.]

So there arne’t any tax cuts for the wealthy in this and it’s not about concentrating income at the top. The reality is that we have seen not just in the United States but, as the OECD has now documented, across the blobe a widening wage distribution. It began in the ’80s with the top growing and getting more income and the bottom getting less. The bottom end stabilized in the 1990s. We’ve seen the top end continue to go up into the 21st century. The source of that is education.

Several points in response:

1. It’s odd to cite a time series in which the only the top does well during the 1980s and during the 2000s but there’s broadly shared prosperity during the 1990s as part of the case for electing a conservative president. Prima facie that data seems to back up the contention that electing progressives brings broad-based prosperity whereas electing conservatives concentrates wealth in the hands of the few.

2. Relatedly, the idea that inequality trends have no relationship to who holds the presidency is strongly at odds with the data:

3. While the OECD survey did indeed find a growing rich-poor gap in pretty much all countries, only a minority of countries — a minority that included the United States of America — are witnessing growth in the gap between the rich and the middle class.

4. Even if it is true that growing pre-tax inequality has nothing whatsoever to do with public policy, that would seem to strengthen the case that we should pay attention to the distributional consequences of changes in tax policy, not that we should become indifferent to them.

5. While there does seem to be an education-related component to the growth in inequality (specifically, the number of college graduates has not kept up with the growing labor market demand for college educated workers) there are also other factors, including the declining real value of the minimum wage and declining rates of unionization. In both cases, and all others I’m aware of, McCain takes the pro-inequality side.

6. McCain, breaking with longstanding conservative precedent, has decided that refundable tax credits such as the EITC constitute a form of “welfare” and “socialism” thus eliminating the possibility that he could embrace the traditional conservative alternative to minimum wage and unionization as a way to combat inequality.

7. You might think that someone who had identified increasing the proportion of college graduates in the population as the key to reducing inequality would have a higher education policy. You would be mistaken.

8. More generally on education, McCain’s proposed across-the-board spending freeze and opposition to federal assistance to cash strapped state government would have a devastating effect not only on schools, but kids’s nutrition, health care, and access to early childhood and prenatal services making these problems much worse.

I think that’s all I’ve got at the moment. It seems to me that conceptual space exists for a form of rightwingery that takes inequality seriously and would put forth policy solutions to the problem that differ from those preferred by the progressive establishment. I might even like some of those policy solutions. But to get there, you would need policymakers willing to take the issue seriously, not just kind of wave it away as if outcomes in the world have nothing to do with policy choices. If Doug Holtz-Eakin doesn’t think that policy decisions can impact this sort of issue, then why is he interested in getting involved in politics at all?