the most redistribution since the Johnson Administration

In today’s Times, Eduardo Porter argues,

Future historians could well conclude that Mr. Obama led the biggest redistribution of wealth in decades.

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 become the biggest increase in government redistribution since the Johnson administration. …

The Obama fiscal stimulus also did much to assist the most vulnerable Americans. It expanded the food stamp program and the earned-income tax credit. It extended unemployment insurance and sent $800 checks to poor and middle-class families. Over all, the Congressional Budget Office found that total government taxes and transfers reduced the nation’s income inequality by more than a quarter in 2009, the most in at least 30 years.

I think this story has been unaccountably overlooked by upper-middle-class liberals who are remote from welfare programs and over-influenced by symbolic issues, such as the “public option” (which was dropped from the health care bill). They use symbolic issues to measure the administration’s economic progressivism, when the graph above is a much better index. I was on a bus full of liberal academics when the Supreme Court upheld the Affordable Care Act last summer, and I was the only one who cheered–not because the decision would help Barack Obama, but because, as Porter notes, the top 1% of taxpayers will each pay $52,000 under the ACA to fund up to $2,000 for each family in the bottom 50%.

The graph is full of paradoxes and challenges. Note, for example, that even though Bill Clinton presided over growth and low unemployment, inequality (both before and after government taxes and transfers) grew rapidly during his eight years, echoing the trends first seen under Reagan. On the other hand, both pre-tax and post-tax inequality fell in the last years of GW Bush–perhaps just as a result of the money that rich people lost in the markets.

Of course, factors well beyond the control of a president affect inequality, but Porter cites evidence that the intentional policies of the Obama administration have helped cut inequality substantially.

I cite this graph because I think it displays important and overlooked trends. I do not mean to imply that redistribution is a good in itself, or that a reduction in the GINI inequality coefficient is necessarily a sign of progress. (Consider the fall between 2007 and 2009: bad years for everyone.) Government spending is only beneficial if the people who get the money benefit broadly, in terms of agency, freedom, and well-being as well as cash. But the argument about the Obama administration should begin with the premise that it has redistributed wealth–just as Romney charges, and left-liberals often deny.

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About Peter

Associate Dean for Research and the Lincoln Filene Professor of Citizenship and Public Affairs at Tufts University's Tisch College of Civic Life. Concerned about civic education, civic engagement, and democratic reform in the United States and elsewhere.