Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
Please Support CounterPunch’s Annual Fund Drive
We don’t run corporate ads. We don’t shake our readers down for money every month or every quarter like some other sites out there. We only ask you once a year, but when we ask we mean it. So, please, help as much as you can. We provide our site for free to all, but the bandwidth we pay to do so doesn’t come cheap. All contributions are tax-deductible.
FacebookTwitterGoogle+RedditEmail

Upward Redistribution

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.

More articles by:

Dean Baker is the senior economist at the Center for Economic and Policy Research in Washington, DC. 

October 17, 2018
David N. Smith
George Orwell’s Message in a Bottle
Patrick Cockburn
When Saudi Arabia’s Credibility is Damaged, So is America’s
John Steppling
Before the Law
Frank Stricker
Wages Rising? 
James McEnteer
Larry Summers Trips Out
Muhammad Othman
What You Can Do About the Saudi Atrocities in Yemen
Binoy Kampmark
Agents of Chaos: Trump, the Federal Reserve and Andrew Jackson
Karen J. Greenberg
Justice Derailed: From Gitmo to Kavanaugh
John Feffer
Why is the Radical Right Still Winning?
Dan Corjescu
Green Tsunami in Bavaria?
Rohullah Naderi
Why Afghan Girls Are Out of School?
George Ochenski
You Have to Give Respect to Get Any, Mr. Trump
Cesar Chelala
Is China Winning the War for Africa?
Mel Gurtov
Getting Away with Murder
W. T. Whitney
Colombian Lawyer Diego Martinez Needs Solidarity Now
Dean Baker
Nothing to Brag About: Scott Walker’s Economic Record in Wisconsin:
October 16, 2018
Gregory Elich
Diplomatic Deadlock: Can U.S.-North Korea Diplomacy Survive Maximum Pressure?
Rob Seimetz
Talking About Death While In Decadence
Kent Paterson
Fifty Years of Mexican October
Robert Fantina
Trump, Iran and Sanctions
Greg Macdougall
Indigenous Suicide in Canada
Kenneth Surin
On Reading the Diaries of Tony Benn, Britain’s Greatest Labour Politician
Andrew Bacevich
Unsolicited Advice for an Undeclared Presidential Candidate: a Letter to Elizabeth Warren
Thomas Knapp
Facebook Meddles in the 2018 Midterm Elections
Muhammad Othman
Khashoggi and Demetracopoulos
Gerry Brown
Lies, Damn Lies & Statistics: How the US Weaponizes Them to Accuse  China of Debt Trap Diplomacy
Christian Ingo Lenz Dunker – Peter Lehman
The Brazilian Presidential Elections and “The Rules of The Game”
Robert Fisk
What a Forgotten Shipwreck in the Irish Sea Can Tell Us About Brexit
Martin Billheimer
Here Cochise Everywhere
David Swanson
Humanitarian Bombs
Dean Baker
The Federal Reserve is Not a Church
October 15, 2018
Rob Urie
Climate Crisis is Upon Us
Conn Hallinan
Syria’s Chessboard
Patrick Cockburn
The Saudi Atrocities in Yemen are a Worse Story Than the Disappearance of Jamal Khashoggi
Sheldon Richman
Trump’s Middle East Delusions Persist
Justin T. McPhee
Uberrima Fides? Witness K, East Timor and the Economy of Espionage
Tom Gill
Spain’s Left Turn?
Jeff Cohen
Few Democrats Offer Alternatives to War-Weary Voters
Dean Baker
Corporate Debt Scares
Gary Leupp
The Khashoggi Affair and and the Anti-Iran Axis
Russell Mokhiber
Sarah Chayes Calls on West Virginians to Write In No More Manchins
Clark T. Scott
Acclimated Behaviorisms
Kary Love
Evolution of Religion
Colin Todhunter
From GM Potatoes to Glyphosate: Regulatory Delinquency and Toxic Agriculture
Binoy Kampmark
Evacuating Nauru: Médecins Sans Frontières and Australia’s Refugee Dilemma
FacebookTwitterGoogle+RedditEmail