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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.
THe Obama stimulus differed in degree but not really in kind from the 2008 Bush stimulus bill. Several of the programs Porter points to were also in the 2008 stimulus. Had McCain been elected, he certainly would have passed an economic stimulus larger than the 2008 Bush bill, and it certainly would have included unemployment extensions and middle class tax rebates, along with quite a number of the other elements in the Obama stimulus.
When you look at his record up against the size of the 2008 crisis, Obama has been a conservative president who emphasized continuity. The radicalism of the Republicans has hidden that. Bernanke was the most activist figure in DC.
That’s a great point about the stimulus, but what about health care?
Well, one thing to keep in mind is that the major ‘redistributive’ part of health care reform will not go into effect until 2014, so far it has redistributed nothing. Which is not a debaters point as HCR is basically not achieved yet…the two remaining hurdles to implementation are getting Obama reelected and likely Republican pressure to roll back redistributive elements of it during the upcoming ‘fiscal cliff’ debates, beginning immediately after the election. The built in delay also shows how little the entire HCR debate had to do with responding to the economic catastrophe in 2008-09.
But beyond that, I do agree that if HCR is implemented as is it will represent a genuine redistributive accomplishment. That is especially so since it is partially funded by the only tax increase on the rich Obama has so far passed, namely the Medicare tax surcharge for high earners. But I know you understand what an incrementalist reform it really was — a framework hammered out over a decade between moderate liberals in think tanks, liberal Republican governors, and the insurance and pharma industries. Nothing that wasn’t in that framework really got a hearing, from single payer to drug reimportation. Although I don’t hold with the left types who say it’s a fraud, there are real policy consequences to that incrementalism. Including a continued drain on middle class incomes and public budgets from grossly inflated health costs, continued access problems for the many who will remain dependent on Medicaid (sure to be cut in the coming years), limits in the subsidized coverage available, etc.
Anyway, the article you linked doesn’t even seem to have hard redistribution numbers for the Obama administration compared to others. I’m not sure those numbers are available yet post taxes and transfers. But I’m pretty sure that when they are, they’ll show that middle class incomes dropped and poverty and inequality rose significantly under Obama. Which isn’t surprising, given that we were hit by a Great Depression level economic shock. It’s legit to blame him for policies that weren’t adequate to the problem.
Great blog by the way…particularly liked your piece on ideology a couple of months ago, which seemed dead on.
Hi Marcus,
Thanks for reading! All your points are good. One of my takeaways from your comments is that the Eduardo Porter article isn’t very helpful and doesn’t make a valid point. But I continue to celebrate the ACA, assuming it survives ….
Peter