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Friday, August 15, 2014

'The Supply-Side Case for Government Redistribution'

Alan Blinder on the inequality Laffer curve (that some of us were writing about in early 2011):

The Supply-Side Case for Government Redistribution, by Alan S. Blinder, Commentary, WSJ: ...Why is high and rising inequality a problem? ... In thinking about the effects of inequality on growth, we should look more at the supply side than the demand side. That's ironic. The clarion call of "supply-side economics" since the 1970s has been to cut taxes on the rich on the hope (not supported by much evidence) that benefits would "trickle down"... But nowadays the best supply-side policies may be those aimed at reducing income inequality. Consider:
Children who grow up poor get inferior K-12 education, and most likely don't go to college. They don't develop their talents as fully as middle- and upper-class kids do. Children who grow up undernourished do not reach their full physical or mental potential... Children who don't have enough access to health care grow up to be less healthy and productive adults. These ... ill-effects of poverty ... aren't limited to poor countries...
The strongest arguments against rampant inequality may nonetheless be political, not economic. ...Americans aren't really created equal. ... Sadly, with our political system so dominated by money, "equal political rights" is a cruel deception. ...
So even if you don't buy the ethical argument for redistribution, and even if you thought 1979 levels of income inequality were just fine, there are good reasons to reconsider the case in 2014. Inequality has risen so much in the past 35 years that it may now be retarding economic growth on the supply side while leaving us with the finest government money can buy.

    Posted by on Friday, August 15, 2014 at 08:38 AM in Economics, Income Distribution | Permalink  Comments (32)

          


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