The Washington PostDemocracy Dies in Darkness

Opinion Inequality is a distraction. The real issue is growth.

Demonstrators “occupy” Freedom Plaza in Washington in 2011. (Jacquelyn Martin/Associated Press)

 + The Question: How should the next president address wealth inequality?

Scott Winship is the Walter B. Wriston fellow at the Manhattan Institute and the author of the forthcoming study “Poverty After Welfare Reform.

Changes to the tax code certainly could reduce inequality, but the real question is whether we should try to reduce it. There is little evidence that we should.

Are American levels of inequality harmful? Some analysts claim that they hurt middle-class incomes or increase poverty. But child poverty is at an all-time low, and middle-class incomes are also at historic highs. Across developed countries, those with higher inequality have slightly higher middle-class incomes and less poverty.

Inequality is deeply entrenched. We’ll have to think big to fix it.

Others argue — based on mobility measures constructed to look worse when inequality rises — that higher inequality causes lower economic mobility or leads to political inequality. In fact, research claiming that the rich get their way in Congress over other voters has been debunked; in truth, across most issues, rich, middle-class and poor Americans have similar policy preferences. And in the United States, mobility has remained flat while inequality has risen over the past generation. Areas of the United States with more income concentration at the top have no worse mobility than areas with low inequality. The same is true across countries — the best research indicates that low-inequality Sweden is no more mobile than the United States.

To be sure, all this research provides little reason to think that marginally reducing inequality would worsen any of these outcomes. But it probably would not improve them either. Studies consistently find that the U.S. tax system is already among the most progressive in the world. Prioritizing inequality betrays indifference to policy outcomes and pure antipathy toward top earners.

In truth, nothing helps the poor and middle class like economic growth, and that is best pursued by policy reforms that ignore inequality. To promote growth, the next president should abolish corporate taxes and reform individual taxes to keep the overall burden of taxation the same across poor, middle-class and rich Americans. She should promote state and local reform of occupational licensing and land-use regulation. She should reform entitlements, including Obamacare, and reorient immigration policy in favor of admitting more higher-skilled and less lower-skilled immigrants. She should pursue a deregulatory agenda and nominate economists to the Federal Reserve Board of Governors who favor nominal GDP targeting, which prioritizes achieving desired growth rates over inflation targets and would tend to allow more wage growth.

Unfortunately, the distraction of inequality — or nationalism — makes it unlikely the next president will pursue any of these policies, and the poor and middle class will be worse off for it.

The counterargument:

Jared Bernstein: Inequality is deeply entrenched. We’ll have to think big to fix it.