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Brynn Tannehill Headshot

Death of a Libertarian

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I am forced to make a confession. I once considered myself more libertarian in outlook than anything else. The main idea behind it is seductive; less government intervention means real equality, more opportunity, and less economic friction. Who hasn't seen horror stories of government run amuck? From teachers sitting around being paid to do nothing, to $7,600 coffee makers, to vast OSHA requirements that allow people to make a living suing businesses, to the idea that high marginal tax rates discourage high achievement, there is an elegant simplicity to the idea that less government is better. It espouses Randian individualism, hard work, and the idea that if you work hard and make the right decisions you will achieve your potential. What could be more American?

There's only two problems with libertarian philosophy:

1. It only works if you're white, male, straight, and mainline Christian
2. The actual numbers don't support any of their fiscal dogma

First is the libertarian belief that the 1964 Civil Rights Act is bad law, and a violation of religious liberty. In 2010, and again in 2012 libertarian icon Rand Paul tried to explain away why he thinks it is a bad law. Essentially, Paul's arguments boil down to it infringes on your first amendment right to be a jerk, and no one is being discriminated against these days anyway. Opposition to Non-Discrimination Ordinances (NDOs) covering LGBT people use the same logic, namely that it is unconstitutional because infringes on the religious freedom to discriminate in the public sector, and that no one is actually discriminating against LGBT people.

Yeah, read that last line again.

In 1984, international corporate law firm King and Spalding argued that the First Amendment's guarantee of freedom of expression and association allowed them to deny any and all women and minorities partnerships if they so chose. They lost the case 9-0. After 30 years, and a unanimous decision, I think we can call this established law.

As for the second, are you kidding me? Black people aren't discriminated against? Transgender people aren't discriminated against? Here are 228 pages of bedtime reading to help you catch up on the reality of life as a transgender American.

This is how libertarian social philosophy fails. Libertarians claim that the marketplace is self correcting, and the goal of letting the marketplace work things out is to create equality of opportunity. It doesn't work out that way though. The workplace and the American Dream are a broken bargain for transgender people. When libertarians oppose NDOs of any stripe, they ignore the evidence that the marketplace is not in fact self correcting when it comes to discrimination. It also denies that ensuring equality of opportunity is an essential function of government.

When government has no role in ensuring opportunity, the result is tyranny of the majority.

That leaves the central tenet of libertarian philosophy: low taxes, especially on top wage earners. The idea behind it is that people will work harder, be more productive, allow greater social mobility through hard work, and expand the middle class if people keep more of their money. This is especially true for top wage earners, where they believe whole heartedly in trickle-down theory. The only problem is the numbers just don't support this.

There are three key concepts here: top marginal rates, size of the middle class, and intergenerational social mobility. Mathematically, when you compare metrics that measure each of these things, a disturbing pattern emerges.

A brief explanation of terms is needed though. The GINI Coefficient is a measure of income distribution that goes from perfect equality 0 (everyone has the same amount of wealth) to perfect inequality 1 (one person has all the wealth). Countries with lower numbers tend to have a larger middle class, and are exemplified by Nordic countries. Countries with higher numbers tend to look like oligarchies and developing nations (China, Mexico, and Brazil).

Intergenerational mobility is a measure of how hard it is to move up the food chain economically. Freakonomics describes it as:

A score of zero means that we have equality of opportunity -- the kids of rich people earn as much as the kids of the poor. A high number means that the rich parents have rich kids and poor parents have poor kids. The U.S. has a score of 0.4 which means that, on average, you pass on 40% of your economic advantage to your kids: if I earn $100,000 more than you, then on average, my kids will earn $40,000 more than your kids. You'll notice that the U.S. also scores (comparatively) high on this measure. Americans are often surprised to learn that in the land of opportunity, your life outcomes are largely determined by your parents.

When you compare intergenerational mobility with GINI coefficient, you get the "Great Gatsby Curve."

2013-11-12-GreatGatsbyCurve.png

This chart clearly shows the correlation between high income inequality (i.e. weak middle class), and an inability to change one's socioeconomic status within society. But, what does that have to do with the libertarian ideal of low taxes? It turns out a lot.

2013-11-12-GINIv300k.png

There's a strong link between countries that keep tax rates on the 1% low, and high economic inequality (and thus a weak middle class). Quantitatively, trickle-down theory fails. But what about a relationship between tax rate on the 1% and social mobility?

2013-11-12-Elasticityvtaxrate.png

Yep. Still a significant (p = 0.0452) correlation between low tax rates on the top 1%, and lack of socioeconomic mobility.

The ostensible goal of libertarian theory is a good one: equality of opportunity for everyone. However, when we look at what happens when libertarian ideals are implemented, the results are just the opposite; discrimination prevents people from achieving their potential, a smaller middle class, greater economic inequality, and lack of socio-economic mobility.

Other countries have implemented their ideals, and the result is places most wouldn't want to live in.