Monday, September 28, 2015

On Why we Support a Large Welfare State: Separating the Factual from the Moral Arguments

Why do we support a large welfare state? Why do we want to broadly redistribute wealth in our society? This morning, Brad DeLong sent us to Matthew Yglesias at Vox who notes:
So the Pope, amongst other things, has a bunch of left-wing anti-capitalist views. Lots of people on the right have decided that they want to argue with the Pope about this and the general line that they take is that the Pope is wrong and capitalism is good because you can see that well-functioning market economies actually do a great deal to raise living standards broadly.
Capitalism raises living standards broadly.  That's a factual argument, and across the political spectrum we accept it.  Yglesias says "that's true, but it does not raise living standards as broadly as capitalism plus a large welfare state."

Republicans say we should shrink the welfare state (we should have minimal regulation, low taxation, and less redistribution) because this will raise living standards broadly. And that is factually incorrect.  A small-government-low-taxation-low regulation state does not raise living standards broadly--it results in great disparities in income and wealth.  In addition, of course, it results in a degraded environment, less safe working environments, inadequate health care for large portions of the population, and a degraded social safety net. Truth is, although capitalism raises living standards broadly, it does so a lot less broadly than capitalism plus a large welfare state. Yglesias claims that "thoughtful opponents of the welfare state" agree with this.

[T]houghtful opponents of the welfare state have generally avoided making the (factual, ed.) argument that capitalism is good because it promotes human well-being. Since capitalism does promote human well-being, "capitalism promotes human well-being" sounds like a good argument in its favor. But it turns out that capitalism plus a large welfare state promotes human well-being even more. So you either need to embrace the welfare state (the correct answer) or come up with another justification of capitalism.
I'm not sure who these "thoughtful opponents of the welfare state" are. It seems to me that Republican politicians running for office are routinely asking low level service employees, secretaries, janitors, construction workers, factory workers, and the unemployed to vote Republican because, they claim, unregulated capitalism, with low taxation, will raise living standards broadly; and, they claim, capitalism plus a large welfare state will kill jobs, create debt, and result in broadly lower living standards.

Thoughtful right wing economists, like Harvard's Greg Mankiew, says Yglesias, don't actually believe that argument. They have avoided making the factual argument that capitalism (with only a minimal welfare state) promotes human well being. The real argument, says Yglesias, is over whether we should adopt redistributive policies at all:
"the really big thing we argue over is whether people with high market incomes should be taxed in order to provide 'free stuff' to the poor and the middle class."
And as Pope Francis points out, that is a moral argument. The fact that well implemented redistributive policies, part of a large welfare state, raises living standards more broadly than capitalism with a minimal welfare state and low taxation is factually beyond question, says Yglesias:
"the evidence is pretty overwhelming that you can design a growth-friendly tax code that still raises a ton of money and then improve living standards by giving people some free stuff."
"Thoughtful opponents of the welfare state" like Mankiew, suggests Yglesias, don't dispute this. Instead, they argue we should not redistribute wealth for moral reasons.

In practice, of course, politicians do their best to muddle and obscure the factual and moral questions. The factual question gets mixed up with Republican pseudo-moral rationales for dismantling the welfare state:
One (moral argument, ed.) that frequently arises is what Greg Mankiw has referred to as the "just deserts" perspective in which "people should receive compensation congruent with their contributions" and we should aim for a society in which public policy ought to ensure that "every individual would earn the value of his or her own marginal product."
So if, for example, you are blind and inability to see makes it hard for you to earn a living in an unregulated market that's too bad for you. Your vision impairment means your ability to contribute to market production is limited, and therefore it is morally appropriate that your living standards be limited as well. By the same token, if a combination of genetics and childhood living conditions have left you with an IQ that is 2 standard deviations below average (this is about five percent of people) then, again, it's just the case that you deserve to have a much lower standard of living than society could provide for you if it were willing to do more redistribution.
Mankiw's moralized capitalism seems bone-chilling to me but I don't really think I can prove him wrong. It is, however, pretty trivial to see that Mankiwism isn't a Christian worldview. Jesus didn't preach "blessed are those with high marginal products, for they shall inherit incomes proportionate to their contributions." The practical benefits of capitalism are something that maybe a Christian should care about, but the practical benefits of capitalism-plus-welfare-state are bigger. To justify the tax cutter policy agenda, you need some thicker ethical theory and it ends up being a distinctly non-Christian one.
And to that we can say, Amen.

So why do we have a large welfare state with redistributive policies? Because we are with Yglesias and Mankiew that pro-growth redistributive policies are possible and can be effective; because we are with Pope Francis that it seems like the morally right thing to do; because it is the only way to raise living standards broadly; because we should help the disadvantaged among us; because we want to protect and preserve our environment; because we want to raise the quality of life most broadly. In short, the ongoing Republican argument that we should substantially retrench the welfare state "because this will broadly promote human well being" is factually incorrect and morally bankrupt.

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