Pre-distribution or redistribution? The Piketty moment, the Democrats, and the oncoming elections
[This post began with an exchange in comments at Naked Capitalism; it's a response to a "Distributionist" proposal by contributor Hugh in response to a post by Randall Wray, "Forget Taxes for Redistribution – What to do About Inequality". Popularizing, we could define our terms using short-hand slogans from the New Deal era: "Soak the rich" would stand in for "Redistribution," since redistribution's intent is to reallocate wealth using the tax code; and "New Deal" itself would stand in for "Pre-distribution," since redistribution's intent is to reallocate wealth via government programs and services. ("Predistribute" because, as MMT teaches, government spending can come before the collection of taxes, and does not depend on them.) Note also that "Redistribute" is just a little bit deceptive; granting that we could raise tax rates on the rich effectively, that does not automagically net out positive for those who are not rich. Suppose we raised a trillion new dollars with progressive taxation, and then blew it on a manned space mission that the oligarchs to build Galt's Gulch on Mars? (Trickle-down enthusiasts, the door is to your right.) Or a lottery where all the proceeds went (again) to a winning 1%? --lambert]
I've read your proposal to "Soak the rich" -- which I'm all for -- and these are my thoughts.
Ultimately, people support government programs because they deliver concrete material benefits; that's why programs like single payer in Canada or the NHS in the UK or Social Security and Medicare in this country are hard to dislodge, no matter who hard the neo-liberals work to degrade, privatize, and loot them.
And programs that deliver concrete material benefits are hard to dislodge because they develop constituencies and institutions that support them. Show me the enduring constituency for (say) a steeply progressive tax code! There isn't one. And why? No concrete material benefits for voters, that's why. Suppose the Piketty media boomlet turns into a constituency of sorts. Show me why that constituency is going to end up more powerful than a program like Social Security, that sends you a check in the mail (even today), or a program like Medicare, that gets you medical care (even today).
That's why the best course is the one that Wray advocates: Pre-distribution. I'm a big fan of "Show me the money." "Show. Me. The. Money." Pre-distribution shows me the money. Messing about with the tax code does not. I can read about a "tax fight" in the papers, but at the end of the day I have to ask a question: "And I get?" What do I get out of your Distributionist plan? Read it through, and you'll see the answer: Nothing. Zip. Zilch. Nada. A big fat zero. Actually, to be fair, I get the good feeling of having taken revenge on evil-doers (and evil they are!). But feelings don't pay the grocery bills, and a check in the mail does. Show me the money! (You can't, because Federal taxes don't fund spending anyhow). And I get? The only answer is nothing. I read the proposal, and there's nothing in it for me.
* * *
Now let's give some consideration to the whys and wherefores of the Piketty boomlet, and the whole "income inequality" gambit. (Wrong phrase: It's "income inequality"; it's class warfare. Not that you'll ever hear a Democrat say that.)
1) We know that both parties and the political class as a whole are fully committed to a neo-liberal worldview that rejects the public delivery of public services for public purpose in favor of private delivery of public services for private purpose, through rent-seeking intermediaries (hence ObamaCare and not single payer, charters, and on and on and on).
2) We know that "income inequality" and the Piketty book are being pushed by the Democratic nomenklatura and the career "progressives," subsets of the political class above.
4) We know that the Democratic 2008 campaign took a massive popular wave of desire for "hope and change" and dissipated it, completely and deliberately (through, for example, closing down OFA).
5) We know that the Democrats, and especially the career "progressives," are expert at devising roach motels for progressive energy.
So where does that leave us?
Let's assume that a Distributive tax program like yours is the main focus of good-hearted and sincere leftists (like yourself) in the 2014 and 2016 campaigns. (You didn't the Piketty boomlet was happening for any other reason, right?) So let's see how all this is likely to play out.
Leaving aside lots and lots of spam for money and petitions from Democratic operatives paid by the click:
1) Massive "tax fight" in Congress in the Fall of 2014 and the summer of 2015. (There will be lots and lots of stories of wretched excess by the filthy rich, and the Senate may even bestir itself to [gasp] hold hearings, something Democrats could never bring themselves to do when the filthy rich had committed well-documented crimes.)
2) The uproar over "tax reform" will therefore turn out to be another "progressive" roach motel. Real outrage and real desire for reform will be fed with the empty calories of TV images from another Beltway circus.
3) A "tax reform" bill may even, after tremendous labor, be passed into law.
4) In due course, say in a decade or so, the law will be seen to have sadly come to nothing, exactly for the reasons Wray gives. (Even as you accuses Wray of pearl clutching, I notice that your proposal does not address how these taxes are to be collected; Wray claims they cannot.) This will happen more or less unnoticed, since as I pointed out above, there's no constituency for such a law, since it does not deliver any concrete material benefits.
5) Therefore, what the neo-liberals really fear and hate -- public delivery of public services for public purpose -- won't even be "on the table" at all. No "infrastructure program to begin to repair our deteriorating public goods, with the jobs targeted at the working poor" (Wray). No "universal preschool" (Wray). Robin Hood, shouting "Soak the rich!" in a "tax fight" will have sucked all the oxygen out of the room, choking the "New Deal."
6) Democratic nomenklatura to their funders: "Mission accomplished!"
7) Democratic apparatchiks to each other: "BWA-HA-HA-HA-HA-HA-HA!!!! The ol' 'roach motel' play worked again!" They never learn! [high fives, PBR all round]
Obviously, we should tax the rich painfully, to prevent the formation of an aristocracy of inherited wealth, to prevent the rich from buying the government with their loose cash, and for the psychological and spiritual well-being of their children. We also need to see banksters in orange jumpsuits doing the perp walk. Even if the statute of limitations for their crimes in the housing bubble now applies, they have doubtless committed fresh crimes. But let's not bet the farm of delivering concrete material benefits on solving "income inequality" with the tax code. Na ga happen. The American people really need the left to do better, and the Democrats are doing all in their power to prevent that. Sadly, reactions like your proposal play into their hands.