Something strange is happening in the U.S. economy: Inequality has risen, but there hasn’t been a rising demand to do anything about it.
A new Brookings Institution paper by Yale political scientist Vivekinan Ashok, Princeton economist Ilyana Kuziemko and Yale economist Ebonya Washington looks at why this has been the case.
They find that support for increased redistribution -- shifting wealth and income from the top to the bottom through policies like increased taxes and an expanded social safety net -- has remained flat because of two demographic groups: people over the age of 65 and African-Americans.
Support for redistribution among these two populations has dropped in recent decades, the study finds, leading to the overall support for policies that reduce inequality to remain stagnant.
One big reason older people’s support for redistribution has been falling is that they like what they have (Medicare) and fear that increasing benefits for other people would mean losing some of the benefits they already enjoy. The study finds that older Americans' fear that widening the safety net would decrease their existing benefits accounts for 40 percent of their drop in support for redistribution.
It turns out that "keep your government hands off my Medicare" actually helps explain how older Americans think about inequality.
That appears to be an American quirk. In contrast to other developed countries, the authors note that "the elderly in the U.S. are the only immutable group entitled to government health insurance." In other countries where inequality has increased but there is already universal health care, the elderly haven’t decreased their support for redistribution.
Once it’s properly assembled, the safety net seems to be self-reinforcing: Universal health care, itself a form of redistribution, seems to make redistribution more popular. When the safety net is haphazard and incomplete, some interest groups are afraid that any improvement or expansion will harm them.
Among African-Americans, the study finds that about half of the falling support for redistribution is due to decreased support for race-based aid. "Blacks," the authors write, "while more likely than whites to support racially-targeted government aid, are converging toward the opinion of whites" on issues like the relationship between luck, hard work and economic reward.
And that, the authors note, raises a huge question: "Why is support for race-targeted aid decreasing during a period in which the black-white wage gap has stagnated?"
Because of this paper, we know more about who is decreasing their support for reducing inequality and have an inkling of why. But knowing that, Justin Wolfers of Peterson Institute for International Economics notes, only drives home "just how puzzling the whole trend is."
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