So we’re talking redistribution now? Alright. Let’s start with some basic facts.
When most people hear the word “redistribution,” they think of one kind of redistribution: From the rich to the poor.
But the government redistributes resources in all sorts of ways. It redistributes from the healthy to the sick, and the young to the old. Those forms of redistribution are also pretty well known.
The government also redistributes in stranger ways. The mortgage-interest deduction, for instance, redistributes from home renters to homeowners. The tax exclusion for employer provided health care redistributes from people who buy health insurance on their own to people who get it from the workplace. The deductability for interest redistributes from firms that rely on equity financing to firms that rely on debt financing. Defense spending redistributes from taxpayers to military contractors.
In a sense, almost every choice the government makes about how to spend or how to tax involves a decision to redistribute in some way or another.
That said, perhaps the most important current fact about redistribution is that, in recent years, we’ve been doing less from the rich to the poor. As the Congressional Budget Office puts it, “the redistributive effect of transfers and federal taxes was smaller in 2007 than in 1979.” That’s largely because we’re spending so much money redistributing from the young to the old and the healthy to the sick, and also because we’ve made the tax system somewhat less progressive.
If you like that trend, then you’re going to love Mitt Romney’s budget framework. He’s sworn that he won’t permit any cuts to Medicare or Social Security — so, the main methods of redistribution from the young to the old — for at least the next decade. He also wants to increase spending on defense. So all those forms of redistribution will rise during a Romney presidency.
At the same time, he wants to cut federal deficits and spending dramatically, and so that’s going to mean very large cuts to programs that redistribute from the rich to the poor, like food stamps and Medicaid. He’s also promised to repeal the Affordable Care Act, which also redistributes from the rich to the poor, and to permit a number of stimulus-based tax cuts to expire, which will mean the tax code becomes that much less progressive.
As for President Obama, he wants to increase taxes on the rich by about $1.5 trillion over the next decade, implement Obamacare, and, in the short-term at least, pass the American Jobs Act, which includes a slew of very progressive tax cuts and transfer payments. So it’s fairly clear that rich-to-poor redistribution will rise if he’s reelected.
Romney hasn’t named sufficient spending cuts for us to say whether he would actually cut total government spending, and so we can’t say whose presidency would lead to more total government spending, and thus more total redistribution. What we can say is that an Obama presidency looks likely to do more redistribution from the rich to the poor and from the healthy to the sick, while a Romney presidency looks likely to do more redistribution from the young to the old and from taxpayers to defense.