Redistribution vs. More With Less

Mark Funkhouser’ editorial “A Better Way to Attack Inequality Than Redistributing Wealth” (http://tinyurl.com/glpprmd) is egregiously misinformed. Funkhouser dismisses "increasing the top federal individual income tax rate from the current 39.6 percent to 50 percent" and "distributing that money to the poorest fifth of Americans," saying it “would amount to an average of $2,650 per household,” He objects: “Many Americans don’t think that taking money from one person to essentially give it to another is a legitimate function of government.” He dismisses as small “the welfare checks that would be generated by raising taxes on the rich.” He asserts, “Redistribution is divisive, separating out the poor as a special class of people when we should be pursuing policies that increase unity and a sense of commonality among all Americans.” He proposes that it would be worth a lot more for government to do a better job at what it already does, “state and local government officials should focus on the powerful impact on social equity of simply improving the operations of their governments.”

In response:
First, let’s clear up that language about amounting to the small $2,650. For Funkhouser, $2,650 is likely small, indeed. Payscale.com suggests that a magazine publisher will earn more than $100,000 and it could be much more. Assuming $100,000 for Funkhouser, the added benefit would be 2.7%; nothing to dismiss, but not a critical sum. However, the maximum Supplemental Security Income (SSI) benefit for a two member elderly or disabled household is $13,200 per year. So, adding $2,650 would be 20% more. For a one person household, it is 30% of the maximum $8,796 benefit. For the entire lowest fifth of income distribution total income is less than $25,000, and $2,650 would be more than 10%. It is unlikely that any American earning $100,000 would dismiss a gain or loss of the comparable $10-30,000 as trivial.

Second, what about this “legitimate function of government”? Funkhouser suggests it is schools, police and public transit. He seems to have forgotten the federal government altogether. Perhaps that is because he is writing for state and local officials. But, surely he realizes that the hypothetical tax policy to which he objects would be a federal tax policy. More importantly, he seems to object only to overt redistribution. He says nothing about the redistributive effect of policies following Reagan “reforms” that have assigned essentially the entire share of economic growth to the already wealthy (http://tinyurl.com/j6pqdue). Some polices he has not objected to include: Reagan’s and George W. Bush’s tax reductions; NAFTA; the repeal of Glass-Steagall; and the bank rescue after the 2008-09 banking crisis. All of these redistributed income or wealth, but not to the poor.

Not only is redistribution a legitimate function of government, it is integral to much of what government does: The point of the Federal Deposit Insurance Corporation is to charge (take from) deposit holders to offset (give to) risk bearing depositors. The point of public schools is to take money from the tax base (which is, imperfectly, the parents) and give benefit to students (their children). When police stop burglars, they are redistributing wealth from burglars to the (assumed) legitimate claimants. The redistributive function is divisive only when there is political rhetoric to make it divisive.

Third, the assertion that a more perfectly functioning government would be more beneficial is both obvious and flawed. It is obvious in that governments, like all human endeavors, are imperfect and can be improved. However, the present effort to do more with less has roots from before the Great Depression. Surely, we have already gotten most of the benefit that can be squeezed out of that over the last 85+ years. If we haven’t gotten much benefit, then either there is little to get or we are not skilled at getting it. In any case, this is a smokescreen for not doing anything.

Funkhouser suggests that Ferguson, Mo. Is an inefficient government. He fails to point out that the reason that it is inefficient is that, like the vast majority of American governments, it serves a small population. Of the 89,000 general and special district local governments in the United States, fewer than 1,500 serve a population of more than 25,000 (http://tinyurl.com/kazojqy). Only 257 serve a population of more than 100,000. All the smaller governments are inefficient because they are top heavy. To make them more efficient, they could be forced into consolidation with neighboring jurisdictions until they are at least 100,000 and probably larger.  No force on earth is going to do this.

And, even if done, it isn’t clear how being more efficient is going to make some things better. Larger (if not too large) police and fire jurisdictions are likely better for most residents because they have more opportunity to be professionally trained (but this may mean they cost more); however, school districts may be worse (but, more efficient).

What is better, anyway? In Funkhouser’s editorial, Baltimore is a stalking horse for bad government but it wasn’t so long ago that Governing honored Martin O’Malley partly for his accomplishments as Baltimore’s mayor (http://tinyurl.com/7qa427m). Often, “better” means providing the user of this term something he or she wants. For the Oregon insurrectionists, it means providing them unfettered free use of public land; while for admirers of nature and people who are concerned about long-term survivability on earth, it means the opposite.  For the failing banks of 2008, it meant both a direct infusion of public funds and the ability to borrow at close to zero with little or no obligation to pass along much of that benefit to overly indebted home owners. For the home owners, it meant relief that appears to have never come. “Better” is a slippery word when the user omits saying for whom. If we look more closely, many arguments for better government are really arguments over who gets the benefit of government. That is redistribution.