First Post: America’s Inequality Spiral and the Argument for a Welfare State

America’s Inequality Spiral and the Argument for a Welfare State

We make equality a founding principle, meaning equality of rights–everyone should be treated the same under the law and by major institutions. We also want equality of opportunity so everyone has an equal chance to achieve success, get ahead, realize their potential, etc.. But we generally deny that people are equal in intelligence, talents, character, drive, and skills. Madison in the 10th Federalist asserts people differ in their ability to accumulate wealth and property. So treating people equally and giving them a level playing field will produce unequal results. What then?

It would be contrary to experience and human nature not to expect that high achievers won’t try to tilt the playing field in their favor and in favor of their children, families, and friends.  If they succeed, there is no more equality of opportunity. So some kind of intervention is needed to prevent this. This is what redistribution by the government does–it corrects to some extent for the inequalities that come about in a free society and tries to make sure that there is at least some minimum level of opportunity available to all. It tries to make sure that all the pathways to success, like access to top colleges, are not monopolized by the sons and daughters of the privileged.

We need to make sure this extends also to political choices. The rich and powerful will try to control the political process and influence elected officials; it’s critical to make sure their advantage in resources doesn’t translate into too much of an advantage in influence.

Does pushing back against the privileged class run the risk of discouraging risk-taking or investment by limiting the rewards that come with success? This is really an empirical question; the answer seems to be that you can do a lot of redistribution without blunting ambition, though of course there is SOME level where it becomes counterproductive. But high marginal tax rates in the 50s and 60s didn’t seem to hurt the economy, and lower rates and skyrocketing CEO salaries havn’t seemed to help it.