Tuesday, December 10, 2013

Barack Obama's Curious Redistribution Ideas

President Obama recently spoke critically of the gap between the rich and the poor.  He has endorsed an increase in the federal minimum wage, from $7.25 up to $10.10.  He has argued for stronger enforcement of the labor laws.  He seeks universal pre-school.

Predictably, Republicans stood in opposition.  More government spending isn't the answer, they contend.  Economic growth is the tide that will lift all boats, they say.

Republicans, whether they are right or wrong, have nothing to worry about.  Barack Obama, whatever he may say, isn't really serious about changing the distribution of income or wealth.  He favors reducing the cost of living adjustment for the Social Security, military and federal retirement benefits that tens of millions of Americans depend on.  Cutting back on retirement benefits worsens the distribution of income and wealth.

There were some federal tax increases that took effect this year.  But the income tax increase on high level earners was accompanied by an increase in Social Security taxes (which are regressive).  So what was the net effect?  Most likely, very little or no redistribution.

The Affordable Care Act would have a redistributive effect because of its health insurance subsidies for low income participants.  If only people could enroll  . . . .

Barack Obama has serious credibility issues.  He drew a line in the dust over the use of poison gas, and Assad stepped over it.  Obama squirmed, complained, and then let the Russians broker a deal.  He didn't have the management skills to implement his signature legislative achievement, the Affordable Care Act.  He negotiated some sort of deal on nukes with Iran, although that deal seems to have implementation issues as well.  As negotiators talk, Iran continues to enrich.  If you're looking for action from the White House on redistribution of income or wealth, don't hold your breath.  Keep saving and investing, because you're on your own.

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