FacebookTwitterGoogle+RedditEmail

Upward Redistribution

by DEAN BAKER

There has been much public discussion of who exactly pays taxes and who gets government benefits ever since Mitt Romney’s now-famous fundraising speech was made public. Almost all of this discussion has focused narrowly on what the government actually takes from people in tax revenue and what it pays out in Social Security, unemployment insurance, and other benefits. This is unfortunate, because tax and transfer policy is the less important way in which the government helps or harms people.

The set of rules the government puts in place that structure the economy redistributes far more income than its tax and transfer policy. Starting with an obvious example, the government has destroyed millions of manufacturing jobs through a trade policy that puts U.S. manufacturing workers in direct competition with low-paid workers in the developing world. This policy has also had the effect of driving down wages in other sectors as the displaced manufacturing workers are forced to compete for jobs in retail or elsewhere in the service sector.

Note that this is not free trade. There are millions of very bright people in India, China, and elsewhere in the developing world who could easily train to U.S. standards for doctors, lawyers and other highly-paid professions. They would be happy to work in the United States for half the prevailing wage in these areas, leading to large gains to consumers and the economy, but we chose not to structure our trade agreements to facilitate trade in this area.

We have also strengthened patent and copyright laws to make the monopolies granted stronger and longer. Currently we spend $300 billion a year on prescription drugs. If drugs were sold in a competitive market, we would save around $270 billion annually. This transfer from consumers to drug companies is about five times as large as the size of the Bush tax cuts to the richest 2 percent.

Labor-management policy is another important area through which the government redistributes income. In the last three decades this policy has been much more friendly to management and hostile to workers. For example, in the Chicago teacher strike, Mayor Rahm Emanuel had gone to court and threatened strike leaders with fines and imprisonment if they did not end their strike.

There are many other areas in which the rules set by the government redistribute income. In the last three decades, the direction of redistribution has been mostly upwards. If we want to have a serious discussion of makers and takers, we have to look at these rules, not just the tax code.

Dean Baker is the co-director of the Center for Economic and Policy Research (CEPR). He is the author of Plunder and Blunder: The Rise and Fall of the Bubble Economy and False Profits: Recoverying From the Bubble Economy.

This column originally appeared in Debate Club.

Dean Baker is a macroeconomist and co-director of the Center for Economic and Policy Research in Washington, DC. He previously worked as a senior economist at the Economic Policy Institute and an assistant professor at Bucknell University.

More articles by:

CounterPunch Magazine

minimag-edit

bernie-the-sandernistas-cover-344x550

zen economics

Weekend Edition
January 20, 2017
Friday - Sunday
Charles R. Larson
Review: Robert Coover’s “Huck out West”
January 19, 2017
Melvin Goodman
America’s Russian Problem
Dave Lindorff
Right a Terrible Wrong: Why Obama Should Reverse Himself and Pardon Leonard Peltier
Laura Carlsen
Bringing Mexico to Its Knees Will Not “Make America Great Again”
John W. Whitehead
Nothing is Real: When Reality TV Programming Masquerades as Politics
Yoav Litvin
Time to Diss Obey: the Failure of Identity Politics and Protest
Mike Whitney
The Trump Speech That No One Heard 
Conn Hallinan
Is Europe Heading for a “Lexit”?
Stephen Cooper
Truth or Twitter? Why Donald Trump Is No John Steinbeck
Binoy Kampmark
Scoundrels of Patriotism: The Freeing of Chelsea Manning
Ramzy Baroud
The Balancing Act is Over: What Elor Azaria Taught Us about Israel
Josh Hoxie
Why Health Care Repeal is a Stealth Tax Break for Millionaires
Kim C. Domenico
It’s High Time for a Politics of Desire
Shamus Cooke
Inauguration Day and Beyond
Clark T. Scott
More and More Lousy
David Swanson
Samantha Power Can See Russia from Her Padded Cell
Kevin Carson
Right to Work and the Apartheid State
Malaika H. Kambon
Resisting the Lynching of Haitian Liberty!
January 18, 2017
Gary Leupp
The Extraordinary Array of Those Questioning Trump’s Legitimacy (and Their Various Reasons)
Charles Pierson
Drone Proliferation Ramps Up
Ajamu Baraka
Celebrating Dr. King with the Departure of Barack Obama
David Underhill
Trumpology With a Twist
Chris Floyd
Infinite Jest: Liberals Laughing All the Way to Hell
Stansfield Smith
Obama’s Hidden Role in Worsening Climate Change
Ron Leighton
Trump is Not Hitler: How the Misuse of History Distorts the Present as Well as the Past
Ralph Nader
An Open Letter to President-Elect Donald Trump
Binoy Kampmark
NATO and Obsolescence: Donald Trump and the History of an Alliance
Zarefah Baroud
‘The Power to Create a New World’: Trump and the Environmental Challenge Ahead
Julian Vigo
Obama Must Pardon the Black Panthers in Prison or in Exile
Alfredo Lopez
The Whattsapp Scandal
Clancy Sigal
Russian Hacking and the Smell Test
Terry Simons
The Truth About Ethics and Condoms
January 17, 2017
John Pilger
The Issue is Not Trump, It is Us
John K. White
Is Equality Overrated, Too?
Michael J. Sainato
The DNC Hands the Democratic Party Over to David Brock and Billionaire Donors
John Davis
Landscapes of Shame: America’s National Parks
Andrew Smolski
Third Coast Pillory: Politicians and Rhetorical Tricks
Chris Busby
The Scientific Hero of Chernobyl: Alexey V. Yablokov, the Man Who Dared to Speak the Truth
David Macaray
Four Reasons Trump Will Quit
Chet Richards
The Vicissitudes of the Rural South
Clancy Sigal
“You Don’t Care About Jobs”: Why the Democrats Lost
Robert Dodge
Martin Luther King and U.S. Politics: Time for a U.S. Truth and Reconciliation Commission
Jack Sadat Lee
I Dream of Justice for All the Animal Kingdom
James McEnteer
Mourning Again in America
January 16, 2017
Paul Street
How Pure is Your Hate?
FacebookTwitterGoogle+RedditEmail