Redistributing Wealth Is the Wrong Way to Fix a Rigged Game

Teacher incentives: One of several factors that prevents public education from performing as well as it might is a system of incentives for teachers, defended by powerful teachers' unions, that makes it (a) very difficult to fire the worst teachers and (b) very difficult to incentivize better teaching with pay, because so much of compensation is based upon seniority (along with masters degrees in education that don't seem to do much to improve teacher quality). Merit based pay need not be tied to test scores. In fact, I'd much prefer a system that empowered principals to reward the best teachers in their schools from a larger total pool of salary money.

The payroll tax: As Tim Carney puts it, "It's a tax on employment. It's a tax on someone's first dollar. And it's specious to say that it funds Social Security and Medicare -- both entitlements are funded on the margin by general revenues. So give up the charade and abolish a regressive federal tax."

Occupational licensing: One nonprofit that gets less attention than it deserves is the Institute for Justice, a public-interest law firm that fights on behalf of the rights of small food-truck entrepreneurs to compete against established restaurants, monks to sell simple wooden caskets without jumping through hoops favored by the funeral industry, eyebrow threaders to service clients without attending expensive beauty schools that don't even teach the technique, and interior designers to practice their art without obtaining permission from a professional cartel. Throughout the economy, entrenched interests and politicians with college degrees are passing laws that have the effect of disadvantaging would be entrepreneurs who lack the start-up capital of wealthier analogs, or else have more trouble navigating the bureaucracy, whether because they are immigrants with a language barrier or unable to afford attorneys or consultants.

The tax code: The complexity of the current system effectively rewards tax attorneys, accountants, and the people rich enough to pay the best of them, at a huge deadweight cost to the economy.

The patent system: There is reason to believe that it is doing as much to stifle innovation as to encourage it. Additionally, as Tim Lee writes, "a 'property' system that makes it impossible to figure out who owns what is economically inefficient, and should be reformed for that reason alone. But a property system that exposes anyone who enters a particular industry to unavoidable and potentially crippling legal liability should also offend our sense of justice. People should have a reasonable shot at following the law, and at a minimum the penalties for failing to do the impossible shouldn't be too harsh. A legal regime that's practically impossible to comply with, and which imposes potentially crippling liability on infringers, is incompatible with the rule of law."

Drug policy and the criminal-justice system: Take a poor kid from a rough neighborhood and a rich kid from a wealthy suburb. Each is pulled over with an eighth of marijuana in their car. What's likely to happen to them next, on average, illustrates one of the most profound inequalities in how rich and poor people are treated in the criminal-justice system, and that the effects touch everything from incarceration rates to job prospects to the likelihood of having an absent father. It seems to me that, along with all its other unintended consequences, drug prohibition and the black market it spawns imposes far higher costs on the worst off Americans -- and higher costs still on even poorer people who live in countries with cartels empowered by black markets. 

(There is, as well, something deeply pernicious about a private prison industry and public-employee unions composed of prison guards who lobby for policies that would incarcerate more people.)

Foreign policy: Working-class Americans, who disproportionately serve in the military, would benefit from fewer wars of choice, like the conflict in Iraq, that kill thousands of them, maim tens of thousands, and damage many others with terrible consequences ranging from PTSD to suicide. But there are powerful lobbies that will benefit financially from more wars of choice, and that benefit in any case from often wasteful spending on various weapons systems of choice. At the very least, defense contractors that perpetrate fraud ought to be pursued mercilessly.

* * *

That isn't an exhaustive account of policy areas where there is room to significantly improve fairness and outcomes for non-elites. But it is enough to show that tremendous good could be done for regular Americans even if you take redistribution beyond the safety net off the table. Why do I prefer to focus on those sorts of efforts, as opposed to open-ended progressive redistribution? 

Several reasons.

For one, Americans should have strong, though not absolute, claims on what they earn -- not absolute, because everyone has an obligation to fund certain common enterprises (common defense and a safety net among them). But I'd much rather use public policy to redistribute ill-gotten wealth away from rich rent-seekers who make their money gaming the system at everyone's expense than by taking earned wealth from people who accrued it by creating value for others.

Progressives seem to have no aversion to redistributing, without any principled limit, even the most legitimately earned wealth. If that characterization is correct, why? If not, what is the principled limit?

I also think activist government and redistribution are extremely vulnerable to rent-seeking elites -- more vulnerable, in fact, than a system that focused on establishing fair general rules. Libertarian populists accuse President Obama of crony capitalism when they tout their remedies. To me, the response that Chait offers is extremely unconvincing, but not for the reason he might think. 

Here's the part of his piece I'm talking about:

The most important premise of Republican populism is the belief, accepted as self-evidently true after four and a half years of relentless repetition, that Obama's governing style is corrupt, or at least close to corrupt. Obama's agenda, writes Carney, amounts to "taxpayer transfers to the big companies with the best lobbyists, with some crumbs hopefully falling to the working class."

Douthat calls it "cronyist liberalism."

But this is almost completely wrong. There's a speck of truth here: Obama has fallen short of the soaring idealistic vision of governance campaigned on in 2008 -- negotiations conducted on-camera, lobbyists treated in his administration like lepers -- but he's still easily surpassed the normal presidential standard of good governance. The Bush administration devolved into a massive K Street patronage operation; Reagan's administration featured five distinct genres of corruption scandal (sixteen Reagan HUD staffers were convicted of bid-rigging, high-level staffers Michael Deaver and Lyn Nofziger were convicted of illegal influence peddling, Reagan's EPA was a sewer, etc.).

Chait would have us believe that the Obama Administration hasn't had a whiff of cronyism, especially compared to the rampant cronyism of Republican presidents. Wilkinson says this gives Obama too much credit, and I agree, but why contest Chait's point? Assume Obama is as good as Chait says. Guess what? He leaves office in 2017, when another person will enter the White House. Whether then or soon after, a Republican will enter the White House. He or she can inherit a system where redistribution is discouraged and the focus is on establishing fair "rules of the game," or one where the president has tremendous discretion to redistribute wealth. 

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Conor Friedersdorf is a staff writer at The Atlantic, where he focuses on politics and national affairs. He lives in Venice, California, and is the founding editor of The Best of Journalism, a newsletter devoted to exceptional nonfiction.

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