Income Inequality: Part 1

Many people claim to be “socially liberal but fiscally conservative” as though it’s evidence of what good people they are. Look at me! I care about the individual rights of immigrants, women, blacks, and gays! I’m all for same-sex marriage! I’m pro-choice!

But then they also might vote conservatively for fiscal reasons. I find this to be inconsistent. Through a series of posts about international income inequality, I will make the case that being “fiscally conservative” is as much a moral stance as “socially liberal.” Economic policies are in the domain of ethics, and I will eventually conclude that being fiscally conservative is ethically worse than being fiscally liberal.

Let me say a bit about how to define ‘fiscally liberal’ and ‘fiscally conservative’, and then I will move onto my method of inquiry. A fiscal conservative is definitely committed to the following principles:

  1. We ought to balance the budget. The government should not be spending more than it takes in.
  2. Any new spending ought to be supported with current revenue, and not through borrowing.
  3. The method for balancing the budget ought to be to reduce spending rather than raising taxes.

Fiscal conservatives are often, though not necessarily, in favor of the following principles:

  1. We ought to have a laissez-faire economy with limited regulation by the government.
  2. We should have a small central government with more control given to individual states.
  3. We ought to have lower taxes for everyone; a fiscal conservative will rarely vote to raise taxes for any reason.
  4. We ought to reform the welfare system, i.e., dramatically cut spending on welfare programs.

Then, the fiscal liberal would think more or less the opposite. She believes we may balance the budget by raising taxes on the super wealthy (while agreeing that we ought to balance the budget), we should have a strong federal government that ought to regulate corporations, and the government ought to actively support those less fortunate.

What’s the ethical problem? There are several ways to think about this (more than several, but I’ll only discuss three). First, we might wonder what does more harm than good or more good than harm. That is, we should think about the consequences of our actions in terms of benefit and harm. Fiscal conservatives argue that raising taxes on the rich does more harm than good; fiscal liberals argue that cutting spending on those less fortunate does more harm than good. This is a moral argument.

Second, we might use a “Golden Rule” reasoning. What if I were in that position? How would I want to be treated? If I were fully rational, and I didn’t know whether I was rich or poor, smart or dumb, strong or weak, what sort of system would I want? Would I want less spending and lower taxes, or would I want more spending with higher taxes? Following John Rawls, we might come to the conclusion that the ideally rational person would be okay with some inequalities so long as those inequalities are to everyone’s advantage. And the rational person would certainly want to make sure he was taken care of if he was poor, dumb, and weak. Following the American Dream doctrine, however, the ideally rational person might come to the conclusion that we can all make it to the top someday, and so we shouldn’t stab our future selves in the foot with a high tax burden. And these would be moral conclusions about what we ought to do; they are considerations of justice.

Third, we might be concerned about rights. There are two broad categories of rights, negative rights and positive rights. A negative right is the right not to be harmed. The right to life, liberty, and property are all negative rights—they are rights not to have your life, freedom, or property taken away. A positive right is the right to be helped. The rights to food, shelter, clothing, education, healthcare, etc are all positive rights. I take it that everyone believes in negative rights (except the consequentialists), but only some people think there are positive rights. A fiscal conservative might think only negative rights matter—the right not to have your money taken from you by the government. And so, (excessive) taxation is not morally permissible. But others also believe in positive rights. The fiscal liberal might think that there is a negative right not to have your money taken away, but we have to weigh that right against the positive right to food, shelter, and clothing. And so, the argument between fiscal conservatives and liberals is about human rights. It is a moral argument.

Over the next few weeks, I will argue that inequality directly correlates with harm; the more unequal a society is, the more harm comes to its citizens. And the harm is not merely economic. It’s not simply that the people in the middle and bottom have less. Rather, the more unequal societies suffer severe psychological, physical, and political harm. And, I will show there is no such connection between poverty and these harms—the connection is uniquely between inequality and harm. Thus, we have a moral reason to tax the rich and give to the poor. The fiscal liberal is right.

My method is to compare the degree of inequality (the Gini Coefficient) to a variety of social goods across 31 countries, including the U.S. As a start, here’s how these 31 countries stack up with respect to inequality after taxes, i.e., the adjusted income:

Inequality After Taxes

 

 

 

 

 

 

 

As you can see, the U.S. is the second most unequal country in the OECD. I will explore the negative consequences this inequality has for each and every one of us. In particular, I will look at measurements of wellbeing such as infant mortality, prison populations, mental illness, substance abuse, education, gender equality, cardiovascular disease, corruption, and many more. My goal is to show that while greater inequality may have some slight economic benefits, the harm done to individual human beings greatly outweighs those benefits. Therefore, we morally ought to reduce inequality in our society. This cannot happen without government regulations, taxation, and spending on those less fortunate. So, we morally ought to be fiscal liberals.

Over the next few weeks, I’ll tackle these negative consequences of inequality one by one. I’ll begin next week with corruption, where I’ve found some very surprising results! Check back for more details.

Once I’ve made the case that inequality does more harm than good, I will then turn to the “Golden Rule” argument and the argument about negative and positive rights. The argument about rights will be an argument against Libertarianism—so look out for that later on if you’re interested!

 

 

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s