Growth, equality issues will shape campaign

Published February 24, 2016

by Andy Taylor, NC State Political Science professor, published in Carolina Journal, February 23, 2016.

It is clear, even before the parties’ nominees have been selected, that a central feature of this year’s presidential election will be an intense debate over growth and equality.

The Republican nominee will advocate policies directed toward stimulating our anemic economy, one that barely has expanded since the Great Recession. The Democrat will reiterate President Obama’s assertion, made during a 2011 speech in Osawatomie, Kan., that dramatic and widening economic disparities constitute “the defining issue of our time.”

We know all this because, although the primary campaigns have seen some quite nasty intramural fighting, the economic plans forwarded by Republicans are strikingly similar; those by Democrats share the same themes. There are, of course, some meaningful within-party differences, but the goals are always the same.

For the GOP, taxes must be reduced and simplified, spending cut. Job and wealth creation will occur only with economic growth, a force unleashed not by government but a robust business community with resources available to reinvest in capacity.

On the Democratic side, self-proclaimed “socialist” Bernie Sanders has a spending wish list estimated at $18 trillion over the coming decade. It includes a single-payer health system, tuition-free public higher education, and paid family and medical leave.

Although, according to Joe Biden, a “newcomer” when it comes to the issue of inequality, Hillary Clinton has focused on taxing capital gains and slapping a surcharge on the rich. Both she and Sanders want to raise the minimum wage to at least $12 an hour and oppose the liberalizing Trans-Pacific Partnership trade deal pushed for by Obama. The principal Democratic goal is to increase the incomes of those near the bottom.

This debate is reminiscent of one that has taken part in philosophical circles over the past half century and that I discuss in my classes. In his famous 1971 book, A Theory of Justice, John Rawls essentially argued inequality should reflect the amount of relative personal deprivation individuals were willing to tolerate to avoid entering a lottery to determine their wealth and social standing.

By way of response, Robert Nozick, who became a leading libertarian intellectual on the back of such work, stated inequality was unimportant so long as commercial exchange was voluntary and economic outcomes reflected the distribution of effort and talent across individuals.

I tell my students I believe Rawls has an “incentive” problem because predetermination, an inevitable effect of forced equalization, leads to free-riding and a decline in collective productivity. Nozick has an “original position” problem. To what extent do inherited social advantages, rather than business acumen or a person’s effort and talent, shape economic results?

I think Americans today find themselves somewhere between Rawls and Nozick and possibly close to this year’s Nobel Prize winner in economics, Angus Deaton. Deaton’s work on global health and wealth reveals inequality to be valuable in that it fosters aspiration and innovation among those lower down the pecking order. Extreme inequality, however, can place so many burdens on those toward the bottom that emulation is worthless, diminishing social mobility and economic competition.

In fact, several of the presidential candidates on both sides recognize this middle ground. Republicans do worry about inequality — as demonstrated by John Kasich’s call to expand the earned-income tax credit, Marco Rubio’s proposed new child care credit, and Ben Carson’s and Donald Trump’s plans to exempt people in roughly the bottom third from pay ing any individual income tax at all.

Some Democrats understand that growth is important — Clinton speaks of a “growth and fairness economy” in which government investment in things like infrastructure and education stimulates economic activity.

Republicans believe there can be greater equality only with growth; Democrats counter that growth follows equality.

We desperately need growth. Republicans tend to get that better than Democrats. Without it, efforts to equalize outcomes become punitive and divisive. Firms become uninterested in generating genuine wealth and instead chase profits through rent-seeking or lobbying government officials.

To get growth, policymakers need to assess regulations, invest strategically in infrastructure, and cut taxes, especially on corporations. But we simultaneously must find a way for those near the bottom to believe once again that they can rise to the top.

Andy Taylor is a professor of political science at the School of International and Public Affairs at N.C. State University. He does not speak for the university.