The Fallacy of Robin Hood Economics: We Can Do Better Than Robbing the Rich to Pay the Poor
In every entry-level economics classroom you will almost always encounter the same scene. The front row will be dominated by opinionated and vocal liberals who feel it is their moral duty to set the class straight on the failings of American capitalism. The middle rows will be a nice blend of both conservative and liberal students who are trying their best to earn an A and perhaps learn a thing or two along the way. In the back there is the kid in the headphones with his legs stretched across another chair, obviously not caring one way or the other.
Those in the front rows, their hands perpetually raised, hoping for an opportunity to lash out at the oppressive capitalist system in which we live, have a laudable goal. Only those at the very top of the economic hierarchy are capable of overlooking the class divide in the United States. Nobody with a halfway functioning moral compass is happy that so many suffer through poverty while some enjoy the benefits of wealth.
Whether or not the middle class is shrinking, or wealth inequality is growing, is up for debate. Many liberals point to the fact that the income disparity in the United States is growing, with the top 10% of earners making 50% of the national income – up 15% in the last 30 years. Many conservative economists argue that when we adjust for things like regional costs of living differences “the rise in American inequality has been exaggerated both in magnitude and timing.” Moreover, if we use after-tax rather than pre-tax income Cato Institute economist Alan Reynolds finds that there has been no change in income inequality over the past several decades.
Regardless of the truthfulness of the claim, we can all agree that in theory any increase in the size of income inequality is a bad thing. The rich should not be getting richer if the poor are getting poorer.
The front-row liberals have a clear answer to solve this clear injustice – we have to drive down the incomes of the wealthy. We must level the playing field by redistributing the wealth and taxing the well-to-do also known as the lucky.
Sadly, our government is being run by people who sat in the front row and now have much more powerful tools at their disposal than simply an economics class rant. Take for instance, James Galbraith, a former director of the Joint Economic Committee. In regards to President Obama’s hope to increase taxes on higher income workers he said , “putting income in the hands of people who need it, and not in the hands of people who don’t, is the right economic policy.” Sounds eerily like Karl Marx idea: “from each according to his means, to each according to his needs.” Actually no, it sounds exactly like that.
Barack Obama feels similarly. He has remained consistent in his plan to eliminate the Bush-era tax cuts for the upper classes. As President Obama said on the campaign trail, “It’s not that I want to punish your success; I just… think when you spread the wealth around , it’s good for everybody.” He’s made similar comments about raising taxes on capital gains, arguing that it should be done, regardless if it lowers tax income “for purposes of fairness .”
The goal of such policies appears clear – we are going to create inequality by pushing the top down. That’s one way to do it I guess, but it seems to make more sense to do just the opposite. Couldn’t we also lower the income gap by promoting policies that pulling the top up?
The reason that this isn’t done is because it is more abstract. It is easy to visibly “punish” the top earners. Simply tax them. It is much more difficult, absent direct subsidy, to have such a direct or clear impact on “helping” the lower classes. Pulling up the lower classes requires things such as K-12 education reform, improving community colleges, and encouraging independence by trimming the social safety net. Such policies take time to see results and their effects are spread out. That doesn’t mean that this shouldn’t be the approach we take, it simply means that we must be more patient when searching for results.
Moreover, these ideas are being promoted by those who occupied the middle rows of your economics class – the ones who have studied the problem and have the right answer – but aren’t necessarily shouting their answers to the world. As they say, the squeaky wheel gets the grease. That adage is no more true than in Washington.
So in this election season, as Democrats spout concepts of fairness, ask yourself whether it is more fair to focus on bringing down the upper class, or focus on attempting to bring up the bottom classes. Hurting one group, especially the ones that happen to be the primary job creators, in return for questionable benefits on the middle and lower classes seems like a poor policy choice. Perhaps a smaller income gap would make them feel better, but that is much different than actually being better off. Instead, let’s pursue policies that are capable of building up one social class without attempting to tear down another. Only then will we truly be able to conquer any wage gap in society. Only then will those loudmouths in the front row sit down and shut up.
by Brandon Greife, Political Director of the College Republican National Committee