Friday, September 06, 2019

Universal Support for Universal Public Goods: Fighting Back Against the Democrats' Naysayers

by Neil H. Buchanan

Means-tested program participation.  Could any words bring more joy to the heart of a neoliberal policy wonk?  Sure, he will tell you, it is important to provide for the needy, but we must be prudent and make sure that every such program is targeted EFFICIENTLY.  Ergo: means-tested program participation.  Oh, the thrill!

Why this dollop of extra sarcasm to start the day?  The debate within the Democratic Party, which is sometimes described as Center-versus-Left or Establishment-versus-Insurgents, is in many ways ultimately a debate about neoliberalism's inherently incremental approach to everything.  More to the point, it highlights just how much the supposedly Reasonable Moderates buy into the logic of flinty conservative presumptions about how government should work.

To take but one example, Joe Biden was on "The Late Show with Stephen Colbert" two nights ago, and Colbert asked him if he favors Medicare for All.  Biden's response was almost like a nervous tic: "No, $30 trillion."  What did that mean?  Biden's big talking point about health care is simply to repeat the estimate that Bernie Sanders's program would cost $30 trillion over ten years.

That our current non-system will cost more than $50 trillion over that timeframe is apparently not worth mentioning, but in any case Biden immediately added that we need to incrementally fix the Affordable Care Act -- which itself was a neoliberal's incrementalist dream, with means-tested program participation all over the system -- maybe adding a public option (although I doubt that he would fight for that when the time came).

So the self-described realistic people are the ones who cannot even get the big picture right, choosing instead to reinforce the notion that "we'd have to raise taxes by $30 trillion" while ignoring how much more we would save.  That is what counts as leadership, I guess.  To be clear, I have no problem with someone saying that a political fight over Medicare for All is currently unwinnable, but it is dishonest and self-defeating to act as if Republicans are actually right when they are in fact merely exploiting voters' confusion to maintain the awful status quo.

What of means-tested program participation more generally? At the Democrats' first debate in July, another so-called reasonable candidate, Pete Buttigieg, responded to a question about plans to make college tuition free: "I just don’t believe it makes sense for working-class families to subsidize tuition for billionaires. The children of the wealthiest of Americans can pay at least a little bit of tuition."

Little people should not subsidize rich people.  How is that not the height of reasonableness?  Glad you asked.
In my new Verdict column today, I defend the universal approach to free college that Sanders and others have proposed against the Buttigieg-style preference for means-tested program participation.  After I put that column to bed (and then went to bed myself), I realized that I had failed to point out the most obvious response to the argument that free college is unrealistic: free K-12 education.

For over a century, the U.S. and other countries have committed not just to free public education but to universal free public education -- paid for with taxes (that we actually dare to call taxes) -- yet we are afraid to provide free college education to the subset of people who are academically qualified.  At the very least, we should stop and wonder why we treat college as a luxury good that everyone must pay for out of pocket.

In any event, I focused in my column on the incrementalists's arguments against universal programs. My broadest point was that neoliberal reformers like Buttigieg are now fetishizing the idea that no public program should ever help a rich person.

Given that I am a progressive who strongly believes in redistributive policies and who decries growing inequality, one might think that I would be delighted by that approach.  As I argue in the column, however, means-testing everything ultimately turns all government programs into "welfare" in the public's mind, which makes the programs vulnerable to demagogues and budget cutters.  I point out that many neoliberals' willingness to means-test a universal program like Social Security would be a disaster, precisely because Social Security's support among the pubic at large is based on the belief that it is an earned benefit and not a means-tested program.

Redistribution can and should be carried out by the tax system -- the same tax system that people like Biden indirectly help to vilify by endlessly repeating "thirty trillion dollars" as a mantra.  If one wants, as I do, to reduce the power of billionaires, the tax system is the way to do it.  Whether or not Bill Gates receives the maximum $2,861 per month of Social Security benefits at full retirement age is simply not where the rubber meets that road.

And that applies to free college as well.  Even leaving aside Buttigieg's somewhat odd phrasing -- that "children of the wealthiest of Americans can pay at least a little bit of tuition," when what he clearly means is that they should pay in full -- his point is that we must not run a program without means-testing it to prevent any money from benefiting rich people.  I applaud the sentiment (as I so often do when dealing with neoliberals), but I despair at the self-defeating nature of the approach.

As I explain in the column, no one truly pays full price for a college education, and that is ultimately not a problem.  We can and should use the tax system to allow the public to share in the benefits that their programs have helped to create.  Indeed, we should use the tax system not merely as a pay-as-you-go system to recapture funds from billionaires' college-going children but to address inequality more generally.

Yet there is Buttigieg, happily scolding his more liberal colleagues for being unrealistic.  As I put it in the column, he and others are committed to "what we might call 'progressivism on steroids'—the weird variation of the ability-to-pay principle that holds that no rich person can benefit from public services at all."  Under that approach, "it is not just Social Security or college education that would need to be effectively turned into welfare programs. Nearly everything would be."

The privatization of roads and other public goods fits nicely into this approach, after all, because only then can we truly get people to pay what means-testing requires.  There is a counterintuitive result in standard economics that shows that "perfect price discrimination" -- that is, getting everyone to pay exactly as much as she or he is willing to pay, no matter what anyone else is paying -- makes even a monopolistic market Pareto-efficient.  That Pareto-efficiency itself is incoherent is a minor matter.

One problem is that means-tested program participation systems are expensive.  Social Security has astonishingly low administrative costs for a reason.  The neoliberal desire to deny benefits up front to people who could pay sends us on a quest that wastes loads of resources on making sure that only the deserving poor and middle class ever receive a benefit.

But if Buttigieg, in his embrace of progressivism on steroids, is worried about the taxes paid by middle class people being used to help rich people's kids -- and again, I completely share the visceral reaction against something that feels like a reverse-Robin Hood approach -- then he can rest easy.  The reason, moreover, pleasingly turns a Republican talking point on its head.

In 2012, Mitt Romney immeasurably aided in his inevitable electoral humiliation by making inadvertently revealing remarks about his contempt for the 47 percent of the American people who had not paid any federal income taxes in a recent year.  Never mind that those people paid other taxes, and never mind that the year in question was during the Great Recession (when everyone's incomes were depressed, making it more likely that people would fall under the minimum levels to owe federal income taxes).  Romney scoffed at the very idea that such people would ever see reason.  Why?
"There are 47 percent of the people ... who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled to health care, to food, to housing, to you-name-it. That that's an entitlement. And the government should give it to them. ... These are people who pay no income tax. ... And so my job is is not to worry about those people. I’ll never convince them that they should take personal responsibility and care for their lives."
Romney's elitism was startling in its clarity, but hardly surprising.  (What is surprising is that Romney subsequently decided to run for Senate but seems to have no reason to be there.  But I digress.). But here is the point for people like Pete Buttigieg: The federal income and wealth tax systems are designed to do exactly what Romney described, which is to make sure that most taxes are paid by the most well-off people in the country.
Again, even people who do not pay income taxes to the feds pay sales taxes and sometimes income taxes to their states.  They pay property taxes directly or indirectly.  The pay -- from their first dollar of income -- Social Security and Medicare taxes that entitle them to receive benefits from those universal programs.  What they do not do is pay much if any federal income tax.

And that is true because of two design features in the system.  First, we created a "zero bracket" that exempts the lowest income Americans from paying federal income taxes, on the theory that they are too poor to be asked to do so.  Republicans not only embrace this idea but expanded it in their 2017 mess of a tax bill, doubling the standard deduction and removing more people from the federal tax rolls.

Second, the income tax system somewhat progressively taxes income, and because income is so unequally distributed, tax shares track that inequality.  The top one percent of taxpayers will pay 24 percent of federal income taxes in 2019, but they will receive 21 percent of the income.  That is not exactly Sweden-level progressivity, to say the least.

In the end, then, we have a system that does exactly what Buttigieg would want it to do: use money collected from the wealthiest Americans to pay for programs that benefit all Americans.  Both Sanders and Elizabeth Warren make this even more direct by proposing different versions of wealth taxes that would be dedicated to paying for free college, but even without that, even our current sadly degraded tax system is still progressive enough to prevent middle-class people from subsidizing rich people.

We should do better, of course, but following the Buttigiegs and the Bidens of the world down the means-testing rabbit hole is a wasteful way to achieve what we can already achieve by having universal programs that garner wide public support and paying for them by recommitting ourselves to an ability-to-pay tax approach that addresses our inequality problem.  It is time for the Democrats' naysayers to get off the 'roids.

1 comment:

Michael A Livingston said...

The experience of the Nordic (Scandinavian) countries suggests that, at least in some cases, universal benefits may be more popular than the targeted variety.