Could the Non-Rich Buy Off the Rich, to Get Them to Stop Blocking Progressive Policies?

-- Posted by Neil H. Buchanan

My new Verdict column revisits a classic question in egalitarian liberalism: Should policy be aimed only at helping people at or near the bottom of the income spectrum, or is it also important to reduce high incomes and wealth?  Put differently, is the problem poverty and economic vulnerability, or is it "income disparity" more broadly?  My column comments in particular on a recent NYT op-ed by USC Law Professor Edward Kleinbard, who offered the most plausible progressive/liberal case that I have yet seen to the effect that the best policy agenda is simply to ignore the rich, focusing instead on making sure that we create a government that is large enough to do what needs to be done to help the poor and middle class, funded by some combination of taxes on everyone.  Although I am not ultimately convinced, the op-ed is definitely worth reading and thinking about.

In private correspondence, Professor Kleinbard mentioned to me that he did not choose the headline over his piece, "Don't Soak the Rich," which surely must have been annoying.  He also points out that his argument was necessarily truncated by space limitations, and that this led to a less nuanced argument about how to measure the progressivity of a system of spending and taxing.  Interested readers might want to look at Professor Kleinbard's well-reviewed new book, We Are Better Than This (Oxford University Press), which apparently develops these and other arguments at length.  I certainly hope to find time to read the book soon.

In any event, I was simply using that op-ed as a touchstone, both because it was so recent and because it was obviously a very good faith effort by a liberal to suggest that maybe taxing the rich is the wrong policy goal (or, at least, should not be the top priority in the current political environment).  In any event, how can a liberal like me not admire an argument that goes like this: "The most important thing isn't taxing the rich, it's making sure that we have a big government"?  Conservatives' heads must have been spinning.

My response is essentially that we have to do both (tax progressively and spend progressively), and in particular that it will be easier to get the progressive, adequately sized government sector that we need only if we also use progressive taxes to reduce the power of the super-wealthy to influence national policy.  After all, the Koch brothers and their comrades are all in against progressive spending, and they are clearly not interested in compromise when it comes to policy.  Big Government, no matter how it is financed, is anathema to them.

Let us assume, however, that I am wrong, and that the conservative movement would be willing to prioritize its wish list.  Maybe the thing that matters most to the big money men is protecting their wealth from the tax man, and everything else (culture wars, Obama hatred, and all that) can be jettisoned in the name of regressive tax policies.

There is certainly reason to suspect that this might be true.  During the transition between the Bush I and the Clinton (I?) administrations in 1992-93, conservative activists were in a panic.  They were sure that Bill Clinton was the love child of Che Guevara and Leon Trotsky, determined to make rich people poor, and poor people slaves.  A news report at the time described the damage control that the conservatives were engaged in, quoting an operative from one of the right-wing think tanks as saying that his clients were expecting to pay higher taxes, but they would fight tooth and nail against increased taxes on wealth (such as the estate tax).  Wealth taxes, in other words, were where they drew the line.  (And history tells us that wealth taxes did not go up, while income taxes were raised progressively -- although Clinton later apologized to an audience of wealthy donors for having done so.)

Imagine, then, the following deal: Super-wealthy Americans agree to allow a Kleinbard-style progressive, activist government to run the country, so long as liberals agree to some kind of permanent reduction (or elimination) of taxes on the rich.  Although the Koch brothers themselves show every sign of being true believers in the whole anti-government enterprise, it is easy to imagine that those who are not Rand-besotted zealots would consider accepting such a deal.  "As long as you let me keep my money, I'm happy."

As plausible as that sounds, I do not think that such bifurcation could possibly work, even for wealthy people whose only ideology is that they want to be allowed to become ever richer.  For the fact is that the progressive vision that Professor Kleinbard (and I, and many others) share would still deeply impinge on the ability of the wealthy to "protect" and expand their wealth.  For example, the provision of portable health care, and the guarantee of income supports, would make workers less desperate to work for low wages.  That means that current right-wing opposition to the minimum wage would have to extend to anything that effectively increased wages, too.

The big problem here is that wealthy people understand, better than most people, that they make "their money" in the first place by putting in place congenial legal rules.  A progressive government that changes, even indirectly, the worker-employer power balance threatens the pre-tax income of the wealthy, such that a guarantee that taxes will not be progressive is not enough to guarantee a happy outcome.  It might be tempting to say, "Well, maybe the rich will not fight so hard on pre-tax income if taxes are lower," but the one thing we know about the super-wealthy is that enough is never enough.  That is a core assumption of capitalism, after all.

And it is not just the worker-employer balance that is at stake.  Senator Elizabeth Warren's progressive vision is most inspiring in its focus on preventing financial institutions from extracting money from people through legalized fraud and loan-sharking tactics.  A government that has a "progressive spending program," but that ignores the plight of people who are put into debt spirals by predatory financial institutions, is not a progressive government.  If people can still become impoverished simply by being pulled into a vortex of interest payments and fees of all kinds, then the government is not doing its job.  (Today, the government is not doing its job.  Senator Warren's efforts to get it to do its job have turned her into Wall Street's biggest villain.)

What about policies that are not, in the first instance, economic policies?  Environmental issues loom large in any progressive vision of an active, problem-solving government.  A government that tells coal-mine owners and oil companies that it will not tax their profits, but that it will wean the people off of their products, is hardly going to be viewed with equanimity by those owners.  I suppose that one could agree to allow the polluters to maximize their profits, and then have the government spend money cleaning up the messes (and treating the sick and dying), but if the word "inefficient" ever had any meaning, it would apply to that unholy deal.

In the end, the problem is that the political power exerted by the money men is not only -- or even mostly -- brought to bear on tax policies.  There is no price that could be paid to get them to stop blocking progressive policies, because those policies can affect their bottom lines in any number of direct and indirect ways.  As daunting as it is, the only plausible strategy is the same one that progressives have been pushing from the beginning: Limit the power of the wealthy by adopting rules that prevent wealth from being used to change those rules.