Repeal and Replace, R.I.P.

March 26, 2017

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Oh, if only the House Speaker hadn’t tried to push through health insurance legislation so quickly, without enough consultation and deliberation. If only the Freedom Caucus had shown a little more flexibility. If only President Trump had sold the bill more effectively, actually understanding and explaining it instead of just declaring it wonderful. Then maybe the outcome would have been different.

Or maybe not. This week’s health care debacle was not just a tactical failure; it was a colossal policy failure. After seven years of riding a wave of popular discontent with Obamacare, Republican leaders presented their alternative, and it promptly bombed. Once the Congressional Budget Office projected how many Americans would be worse off under the plan, popular support for it fell to 17%. What they have probably succeeded in doing is making Obamacare more popular, now that people see how hard it is to improve on it.

The fundamental problem was that “repeal and replace” wasn’t really a very good idea. Although Obamacare did force some people to buy policies for more than they wanted to pay, it helped a larger number buy the insurance they needed. As the number of beneficiaries grew, so did resistance to a simple repeal. Republicans had to claim that they had something better with which to replace the law, and Donald Trump made that claim a centerpiece of his campaign. Trouble is, they never did come up with adequate replacements for the provisions of Obamacare they wanted to get rid of. They were never going to replace the hundreds of millions of dollars of revenue they would lose by eliminating the Obamacare taxes; nor were they going to replace over a trillion dollars of insurance subsidies and Medicaid benefits they wanted to cut. The tax credits they offered were better than nothing, but not as good as the  benefits available to most beneficiaries of the existing law. Lower-income, older and rural folks were going to be hurt the worst, making the bill worse for Trump supporters than Clinton supporters.

As a result, the legislation had little appeal. It wasn’t the total repeal that the far right wanted, but it took away too much to please Republican moderates, such as governors whose states benefited from the Medicaid expansion. Democratic support for the bill was practically nonexistent.

For Trump, the defeat on health care represented a massive failure to live up to expectations. After repeatedly promising to make health insurance more affordable for more people, he threw his support behind a bill that did no such thing. He did not demonstrate that he knew or cared exactly what was in the bill, as long as he could undo the Obama administration’s principal domestic achievement. He was even willing to trade away the essential benefits insurance policies must now cover, such as maternity care, in order to pick up a few more votes. In the end, his legendary deal-making skills were no match for a divided Republican Party. Now he tries to make the best of it by rooting for Obamacare to fail, so that the country can blame the Democrats and adopt a Republican alternative, no matter how flawed. Trump even claims that this was his preferred strategy all along. But he got elected by running on “repeal and replace,” not “sit back and let fail.” That’s not the leadership people hoped for. Even worse, the administration may try to sabotage Obamacare by finding ways to discourage people from signing up or insurance companies from participating. That wouldn’t be leadership either, and it would violate the President’s oath to faithfully execute the laws.

The more responsible strategy would now be “retain and repair.” Bring together some reasonable leaders of both parties to identify the weaknesses in the Affordable Care Act and address them specifically. Find some ways to control premiums and deductibles, but don’t fix things that aren’t broken, like the Medicaid expansion.

Somewhat belatedly, Trump has discovered that health care is hard. Maybe we are making it too hard by trying to add in too much profit for insurance companies, on top of the high cost of medical treatment itself. Eventually the US may have to follow other developed countries by insuring everyone through a single-payer, government-run, non-profit system. Premiums could be lower; benefits could be standardized; and people could buy supplemental insurance if they chose, as many do with Medicare. If that’s the direction we ultimately go, then “repeal and replace” may come back to life, but not in a form that conservatives will recognize.

 

 


Let’s Be Honest about Health Insurance

March 16, 2017

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The Republican plan to repeal and replace Obamacare is turning out to be a tough sell. The Congressional Budget Office has estimated that by 2026, 24 million fewer Americans would be covered under the replacement law than under the existing law. Like advertisers making dubious claims about a weak product, advocates for the legislation are doing their best to mislead the public about what it actually does.

One tactic they use is to cherry-pick the CBO numbers, touting the ones they like and ignoring the ones they don’t like. They have no problem accepting the figures on tax reductions and lower deficits, but they hate to accept any evidence of reduced coverage.

This week, Steven Ratner described and refuted ten untruths we have heard from the plan’s defenders. At the top of his list was HHS Secretary Tom Price’s assertion on Meet the Press that “nobody will be worse off financially in the process we are going through.” That would be amazing if it were true, but it is far from the truth.

One reason for Republicans to be less than candid is that they are trying to pretend that the bill fulfills two conflicting promises: the longstanding conservative promise to reduce the federal role in health care, and Donald Trump’s campaign promise to replace Obamacare with something better in terms of coverage and affordability. Fulfilling both would be quite an accomplishment. As it is, the proposed bill addresses the first promise–although not enough to satisfy extreme conservatives–but falls far short on the second. Reduced federal taxing and spending, yes; improved coverage and affordability, no way.

The logic of repeal and replace

We can debate the CBO’s specific numbers, up to a point, but the basic logic of their analysis is inescapable. Repealing Obamacare eliminates the taxes that were raised in order to fund it, and that dramatically reduces federal revenue. In order to avoid increasing the federal deficit, the government must cut health care expenses by at least as much as it loses in revenue. In fact, the bill saves the government money by cutting $337 billion more in expenses (over ten years) than it loses in revenue. That appeals to conservatives because it reduces deficits, and it can also justify further tax cuts later. Conservatives also like the fact that the tax cuts go mainly to people with higher incomes, while the spending cuts affect people with lower incomes. But does anyone really believe that the government can cut health care spending by $1.2 trillion and not hurt anyone?

The two main ways of cutting Obamacare’s spending are to reduce the number of people on Medicaid and to reduce assistance to people buying private insurance. The proposed replacement bill does both. It phases out the expansion of Medicaid to people with incomes a little too high to qualify for traditional Medicaid (incomes between 100% and 138% of the poverty threshold). It also replaces the existing subsidies for private health insurance premiums with tax credits that are worth only half as much, on the average. Because the new plan distributes the benefits differently, some people come out better. But more people come out worse, especially older, low-income people living in rural areas.

Republicans argue that they don’t entirely exclude anyone from coverage, since people can find some kind of plan even if they no longer qualify for Medicaid or no longer can afford their existing insurance. The bill allows insurers to offer plans that cover less of actual costs than Obamacare plans do. The new plans could have lower premiums but also higher deductibles. That is ironic, since the high deductibles of some of the existing plans offered on the insurance exchanges are already a common criticism of Obamacare. The new bill would probably make that problem worse.

The advocates of “repeal and replace” claim that everybody will have “access” to the health insurance market, without addressing the question of whether they can afford to buy what they need in that market. That’s like saying that everybody has access to a grocery store without asking whether they can afford to fill their cart with good food. They can also claim that people will have more “choice”, if that includes the choice to go without insurance, or the choice to buy an inferior plan that lets patients down when they need it.

Seduced and abandoned

Although they refuse to admit it, President Trump and Congressional Republicans seem willing to hurt many of their own supporters, especially with the cuts to Medicaid. The 32 states (including D.C.) that have implemented the expansion of Medicaid include 12 that Trump won: Alaska, Arizona, Arkansas, Indiana, Iowa, Kentucky, Louisiana, Michigan, Montana, North Dakota, Ohio and Pennsylvania. A decline in federal support will impact many people directly, as well as put additional strains on state budgets and health care systems. Many providers in those states have been breathing a sigh of relief because fewer uninsured people have been showing up with acute medical problems. They are not anxious to go back to those bad old days.

Although voting in the 2016 election was very racially polarized, health insurance is not a black or white issue. The people who stand to lose the most from the proposed legislation are people with relatively low incomes but not actually in poverty, since the poorest will continue to qualify for Medicaid. Those affected include a large segment of the working class, whether white, black or Latino. Older and more rural voters, who tended to be Trump supporters, also have more to lose. The thought may cross their mind that they’ve been had.


CBO Confirms Insurance Losses under AHCA

March 14, 2017

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The Congressional Budget Office has “scored” the proposed American Health Care Act for its impact on insurance coverage, insurance premiums, and the federal budget. The results are not surprising to those most familiar with its provisions, although the reductions in insurance coverage may be even a little worse than expected. The analysis puts the Republican leadership in a difficult position. President Trump has called for a plan that increases coverage and lowers costs, while conservative House Republicans want a bill that offers even less assistance to the uninsured than this one does. The proposed plan doesn’t satisfy the demands from either side among Republicans, let alone generate any support among Democrats.

Here is a summary of the CBO’s conclusions about the proposed AHCA. See my previous post for a description of the bill itself.

Effects on insurance coverage

The CBO projects that the number of uninsured Americans would gradually rise relative to the number of uninsured if the current law were to continue. By 2026, 52 million would be uninsured instead of 28 million, a difference of 24 million. That would wipe out the gains attributable to the Affordable Care Act and take the country back to roughly where it was before it was passed. Only the most extreme conservatives would call that making America great again. It is certainly not what Trump led people to expect.

The biggest part of the 24 million difference is due to a 14 million projected decline in Medicaid enrollment, “as states that expanded eligibility for Medicaid discontinued doing so, as states projected to expand Medicaid in the future chose not to do so, and as the cap on per-enrollee spending took effect.” Those changes would result from the double impact of the bill on Medicaid. It phases out the expansion of Medicaid eligibility to include people with incomes up to 138% of the poverty level, and it caps federal payments to the states in such a way as to produce a projected shortfall relative to rising health care costs.

In the short run, enrollment in the “nongroup market” (people covered neither by their employer nor by Medicaid) would also decline dramatically. Some people would drop out because they were no longer required to buy insurance and didn’t feel they needed it. Others would leave the market when they lost their Obamacare subsidies and found that the tax credits in the new law didn’t cover enough of their premiums.

In later years, after 2020, the CBO projects that fewer employers would offer health plans to their workers, since their mandate to do so is also repealed. Many workers would then seek coverage in the nongroup market, which would then have something of a comeback.

The upshot of these changes is that by 2026, Medicaid coverage drops by an estimated 14 million, employment-based coverage by 7 million, and nongroup coverage by 2 million.

The loss of coverage would be especially great for low-income Americans, because of the cutbacks in Medicaid. In addition, the tax credits in the new law are not adjusted for income, as the Obamacare subsidies are. Federal benefits would fall short of premium costs for more families. Since the tax credits ignore geographic variations in costs, people in high-cost (especially rural) areas would also find insurance less affordable. And finally, many older people (but not old enough for Medicare) would also lose coverage. Although tax credits range from $2,000 to $4,000 by age, that difference wouldn’t be enough to cover the higher premiums that insurers could now charge.

Effects on premiums

The CBO analysis projects that premiums would rise for older people and fall for younger people. While the ACA allowed only a 3-to-1 ratio between the two, the AHCA allows a 5-to-1 ratio.

The effect of the law on average premiums is more complex. In the short run (before 2020), average premiums should rise because of the repeal of the individual mandate. Young, healthy people are most likely to drop out of the market. That would force insurers to increase premiums on the older, less healthy people who remain, since insurers are still required to cover people who are already sick. The CBO projects a rise of 15-20% for average premiums in the nongroup market.

After 2020, average premiums should come back down again for several reasons:

  • The age-mix of people insured in the nongroup market should change, as premiums rise for older people and fall for younger people. More older people would then leave the market, and younger people would come in.
  • The law sets up a Patient and State Stability Fund with money that states can use to compensate insurers for covering high-cost patients.
  • Insurers can offer cheaper plans because what the plans cover is not as tightly regulated. They still have to cover ten essential benefits, but they no longer have to cover 60% of the costs of care. They could offer a small maternity benefit, for example, that leaves mothers with most of the actual bill.

One unfortunate side effect of that last provision is that people will find it harder to shop for insurance. Insurers will no longer have to offer standard plans covering 60%, 70%, 80% or 90% of costs, and they will no longer have to offer them through federal or state exchanges. Insurers can offer all sorts of things, in all sorts of ways, including plans with very skimpy benefits. Let the buyer beware! (Although offering insurance across lines is not part of this bill, the Republican plan to add that in later legislation could make this worse, by allowing insurers to offer plans that do not meet the normal standards of the states in which they are sold.)

The CBO’s conclusion: “By 2026, average premiums for single policyholders in the nongroup market under the legislation would be roughly 10 percent lower than under current law.” Two reasons for that reduction aren’t very great though: pushing older people out of the market and offering policies with fewer benefits.

The CBO expects the insurance market to be relatively stable. It does not expect a “death spiral,” that is, an unsustainable spiral of premiums. That would happen if the pool of people buying insurance became, on the average, sicker, leading insurers to raise premiums, which in turn encouraged more of the healthy people to drop their coverage–a vicious cycle. The CBO says that passage of the AHCA should not produce such a cycle, but leaving the current law alone shouldn’t either.

Effects on the federal budget

The CBO projects that “enacting the legislation would reduce federal deficits by $337 billion over the 2017-2026 period. The government would lose $883 billion in revenue, but that would be more than offset by over $1.2 trillion in spending cuts.

The biggest revenue losses would result from repealing the many taxes used to fund Obamacare, especially the surtaxes on high-income taxpayers and the tax penalties for failing to carry insurance. The law also sacrifices tax revenue by offering tax credits to help offset the cost of premiums.

The biggest spending cuts are in Medicaid, followed by elimination of Obamacare’s subsidies for buying insurance in the nongroup market. The CBO notes that the government saves money because the average tax credit people get under the new law is only about 50 percent of the average subsidy people get under the current law.

The law also includes $9 billion in savings from eliminating the Prevention and Public Health Fund, which “awards grants…to public and private entities to carry out prevention, wellness, and public health activities.” The CBO didn’t try to estimate any offsetting costs to the country. But if an ounce of prevention is worth a pound of cure, then $9 billion in prevention might be worth $144 billion, making this an exercise in fake economy!

Although the new law could reduce the federal deficit, I would be surprised if Republicans actually use it that way. My hunch is that if the legislation passes, they will use the savings to justify further tax cuts. The large spending cuts in the law are surely no accident, but are consistent with the larger Republican agenda of reducing taxes on the wealthy while reducing benefits for the needy.

Effects on reproductive health services

The AHCA would withhold funds from nonprofit reproductive health service providers that provide abortions. This is aimed at Planned Parenthood, although only a small portion of its income–and none of its federal income–goes to fund abortions. The CBO projects several consequences: more unplanned pregnancies, thousands of additional births, higher maternity costs for Medicaid, and loss of access to health care for poor women in areas without other providers serving low-income populations. Projecting abortion rates was not part of the CBOs mandate, but other research indicates that they would more likely rise than fall along with the rise in unplanned pregnancies.

Speaking of births, this legislation is the first legislative offspring of the strange marriage between Donald Trump and the Republican Party. In order to get elected, Trump needed to make some appealing promises to people who normally vote Democratic. Those included replacing Obamacare with something greater. But he also needed the support of the Republican base, which is more conservative than the country as a whole. The Republican leadership thought they could pull it all together and produce legislation that conservatives would vote for, the President would sign, and the public would accept. The fact that whatever coalition elected Trump is coming unglued so early in his administration is not good news for Republicans.

 


Taking the “Affordable” Out of ACA

March 9, 2017

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The Republican leaders of Congress have presented a plan to “repeal and replace” the Affordable Care Act, popularly known as Obamacare. Perhaps the title of the new act–the American Health Care Act (AHCA)–is telling. It replaces the word “affordable” with the more ambiguous word “American”. Maybe that will appeal to people who don’t mind if the new plan makes health care less affordable, as long as it doesn’t make it (horrors!) more Canadian, say, or Scandinavian.

President Trump has repeatedly promised that his replacement for Obamacare would be an improvement. It would offer “insurance for everybody” that would be “less expensive and much better.” We may reasonably ask if the coverage will be at least as good, and if the cost will be at least as affordable. Specifically, we may ask how the replacement would impact the people that the original act was most intended to help. They were primarily people with low incomes who were neither poor enough for Medicaid nor old enough for Medicare, but had trouble buying health insurance on their own.

Keeping the benefits

Although the most conservative Republicans would be happy with a simple repeal of the ACA, many of its provisions have become too popular to eliminate without serious political repercussions. Insurers must cover pre-existing conditions and offer policies to healthy and sick people at the same price. Policies must cover ten essential benefits, such as maternity care, rehabilitation services, and preventive health services without copayments. Policies cannot put an annual or lifetime cap on benefits. Dependents can remain on their parents’ policies until age 26. All of these benefits would remain in the AHCA.

Limiting the funding

Providing these benefits to a larger proportion of the population is costly. The Affordable Care Act increased the federal government’s contribution to health insurance financing by imposing new taxes, providing new subsidies to purchase private health insurance, and expanding Medicaid. It also increased the flow of premium payments to private insurers by requiring large employers to offer group plans to their employees, and requiring individuals without group coverage to buy their own plans or pay a tax penalty. The new taxes and mandates have been less popular aspects of Obamacare, but they are an integral part of its funding solution. The insurance companies had to offer more, but they got more customers to bear the cost.

In general, the Republican alternative tries to keep a lot of the benefits while eliminating a lot of the mechanisms for paying for them. It threatens the flow of premiums to private insurers by abolishing both the employer and individual mandates to buy insurance. That makes it easier for healthy people to go without insurance, knowing that they can always sign up later, even if they’ve developed a pre-existing condition in the meantime. (The bill does include an incentive to remain covered once a person is insured; if you let your coverage lapse, your insurer can raise your rates by 30%.) As I discussed in an earlier post, insurers cannot keep premiums under control if they only insure sick people. Already premiums have been rising because healthy people have been slow to purchase insurance, despite the tax penalty. With the penalty abolished altogether, this problem can only get worse. Although the Congressional Budget Office has not yet evaluated the bill, it has already estimated that eliminating the insurance mandate would raise premiums 20 to 25 percent.

Funding for the Affordable Care Act relied heavily on a tax surcharge on individuals making over $200,000 a year. The American Health Care Act eliminates it. Other taxes to be ended include the penalty taxes on businesses and individuals who fail to obtain insurance, the surtax on insurance executives with incomes over $500,000, and taxes on drug companies and makers of medical devices. The so-called “Cadillac tax” on especially costly insurance plans provided by employers is suspended at least through 2024.  The AHCA also reduces tax revenues by offering the new tax credits and deductions described below, many of which go to people with higher incomes than those the ACA was designed to help.

Cutting the subsidies

With the federal government having less tax revenue to work with, it isn’t surprising that it cannot do as much to subsidize health insurance for low-income Americans. The Obamacare subsidies were based on need, taking into account age, income and the cost of care in the recipient’s locale. (Premiums are typically higher in rural areas with fewer hospitals and insurers.) Low-income people could get help with deductibles and copayments as well as with insurance premiums. The AHCA replaces these subsidies with age-based tax credits in the range of $2,000-4,000 per person, with a family cap of $14,000. These are “refundable” credits, meaning that you get the credit you qualify for even if your federal tax bill is less than the credit. (Otherwise it wouldn’t be much help in buying insurance.) The credits phase out for people with higher incomes (over $75,000 for individuals and $150,000 for couples), but otherwise they are not adjusted for income.

Analysts have found that you are most likely to be hurt by these changes if you are a older person with a low income living in a rural area. For low-income people, the credits are generally too small to compensate for the loss of Obamacare subsidies. For older people, although the tax credits are adjusted for age, they aren’t adjusted enough to offset the high cost of policies for older people. In fact, the replacement law would make the cost disparity worse by allowing insurers to charge older people up to five times as much as younger people. (The previous disparity allowed was three times as much.) Many people will be squeezed between higher premiums and lower benefits, leaving them with thousands of dollars more in costs.

Those who gain from the changes are primarily people who earn too much to qualify for ACA subsidies, but would get an AHCA tax credit whether they need it or not to afford insurance. The highest earners don’t get the tax credits, but they do get the elimination of the ACA’s surtax on high incomes.

High-income people get an additional gift in the expansion of Health Savings Accounts (HSAs). These are tax-sheltered savings plans for people who can afford to take more responsibility for their health-care expenses. To qualify, you have to buy a health insurance policy with a high deductible. Then you save for your future out-of-pocket expenses through contributions to your HSA. The contributions are tax-deductible, and the withdrawals are also tax-free as long as they go to health care. This works best for high-income folks, since they are the ones who can afford to contribute the most, and they also get the biggest deduction by being in a higher tax bracket. A family in the 35% bracket who can save $5,000 gets a $1,750 tax break, while a family in the 15% bracket who can only save $1,000 gets a $150 tax break. The Republican plan helpfully raises the contribution limits from $3,400 to $6,550 for individuals and from $6,750 to $13,100 for couples, creating an even bigger tax break for those who can pay to play.

Cutting back Medicaid

About half of the 22 million people who have obtained health insurance as a result of the ACA have done so through the expansion of Medicaid. Even more would have done so, but only 30 states chose to participate in the expansion after the Supreme Court ruled that participation could not be mandatory. The expansion opened Medicaid to Americans earning up to 138% of the federal poverty level, which meant up to $16,643 for individuals and $33,948 for a family of four.

The proposed AHCA would halt that expansion in 2020. Those already enrolled could be grandfathered in, if states allowed that, but only if they remained continuously eligible. Anyone whose income rose above the threshold, even for one year, could no longer qualify, unless their income later fell all the way down below the original poverty level. The aim would be to reverse the expansion over the next few years.

In addition, the new law would change the way Medicaid works. Instead of simply covering whatever medical services a recipient receives, it would pay a fixed allotment per recipient to the state. The state would decide how to spend it on health services for the poor. But the state would be on the hook if health care costs rose faster than the allotment, or if a natural disaster or other local health problem put unexpected strains on the system. States would have more “flexibility,” but at the likely cost of reduced funding. Some Republican senators are worried that this change may ultimately shift billions of dollars in costs from the federal government to their states.

The bill would also eliminate Medicaid reimbursements to Planned Parenthood, so poor women would have to look elsewhere for services.

An American bill?

I suppose I would be naïve to suggest that a so-called “American” bill should reflect what a majority of Americans want. A Monmouth poll released this week found only 39% of Americans favoring either repealing and replacing the ACD, or repealing and not replacing it. 58% favored either keeping it as it is, or keeping it and working to improve it.

In general, the “repeal and replace” plan offered by the Republican leadership offers fewer benefits for low-income people, while providing more tax breaks for higher-income people. It may be another step in the perennial Republican effort to lower taxes, but it appears to be a step backward in making health care more affordable. Estimates of how many people would lose their insurance coverage under the plan vary widely, from a few million to as many as 15 million, about two-thirds of the number who gained coverage under Obamacare.

A close examination of policy proposals like this may help dispel the illusion that the Republican Party under Donald Trump has been miraculously transformed into a champion of the working class. And since he has endorsed the plan, it also casts doubt on the idea that his populism places him at odds with his party, at least as far as domestic policy is concerned. Right now, Trump and the Republicans seem to want many of the same things, whether they’re what the people want or not.


The Distribution of National Income (part 3)

February 23, 2017

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I admit that my last two posts have been pretty heavy on the facts and figures. But now we can use the conclusions to shed some light on the political polarization of the country.

Two main conclusions of Piketty, Saez, and Zucman’s analysis stand out. First, the distribution of pre-tax income is now more uneven than at any time since the 1920s. The top tenth of the population is getting almost half the national income, while the entire bottom half of the population is getting only one-eighth of it. Second, taxation and government spending are only mildly progressive and redistributive. Redistribution reduces the top tenth’s share from 47% to 39%, while increasing the bottom half’s share from 12.5% to 19.4%.

The politics of redistribution

To start assessing the political implications of these conclusions, let’s do a mental experiment. Imagine that each of the broad income groups described in the report took a position on government taxes and spending based solely on their narrow economic self-interest. We would expect people in the top tenth of the distribution to oppose the government’s redistributive role, since they pay more of its costs and qualify for fewer of its benefits. The lower-half of the population should be more supportive, since they receive more in benefits than they pay in taxes.

However, the political stance of the remaining two-fifths–those with incomes in the upper half but not in the top tenth–is likely to be more ambivalent. Their pre- and post-tax shares of national income are about the same (40.5% vs. 41.6%). What they receive in benefits offsets what they pay in taxes. Bear in mind that post-tax income in this analysis includes all forms of government benefits–monetary transfers, in-kind transfers, and general spending for the public good. If they focus on the benefits, they may support government spending; but if they focus on the costs, they may support tax cuts. (Or they can support a lot of both, and put up with deficits and more national debt.)

Since the major political parties disagree so much on taxes and spending, we would expect higher-income people to prefer the Republican Party and lower-income people to prefer the Democratic Party. This is true up to a point. Income is a fair predictor of party affiliation and voting, and the effect of income on voting has actually increased as the gap between rich and poor has widened. Gelman, Kenworthy and Su reported, “For the nation as a whole…there is a broad similarity between the trends in income inequality and the rich-poor gap in partisan voting. Each declined after the 1940s and then rose beginning in the 1970s or 1980s” (Social Science Quarterly, December 2010).

Gallup surveys have found that Democrats are much more likely than Republicans to believe that the present distribution of wealth is unfair, and that higher-income groups should pay more taxes.

The role of beliefs

Narrow self-interest is not the only basis on which people vote, however, even on questions of economics. Beliefs about how the economy works or should work are important, as well as beliefs about the impact of public policy on the general prosperity. Politics in a democracy is partly a struggle for the hearts and minds of the people, especially the hearts and minds of the middle class. They may align themselves with either the rich or the poor, depending on whose interests they think best represent the general good.

The upper-tenth have a disproportionate share of the money, but only a minority of the votes. To have their way politically–and they’ve been doing a pretty good job of that lately–they need good arguments against high taxes on the rich and high spending for the less fortunate.

One of those arguments is the appeal to meritocracy. Higher-income people can defend the very unequal pre-tax income distribution as a reflection of people’s real contribution to society. The successful deserve what they get; the unsuccessful deserve less; and the trouble with redistribution is that it punishes achievement and rewards failure. A related argument is that the rich are the job creators who use their incomes and wealth to invest in economic growth for the benefit of all.

Support for these views is widespread. Gallup has reported that when Americans are given a choice between taking steps “to distribute wealth more evenly” or “to improve overall economic conditions and the jobs situation,” people of all political affiliations and income levels prefer the latter by a wide margin.

That helps explain the working-class conservatism reported, for example, by J. D. Vance in Hillbilly Elegy. Although many low-income whites have more to gain from government spending than they have to lose from taxation, they cling to an ideology of self-reliance and hostility to government “handouts”. Reliance on government carries with it a stigma that I see as partly a racial stigma. Slavery, segregation and discrimination impeded black achievement and fostered government dependence, contributing to a stereotype of black laziness. Whites could maintain their sense of superiority by dissociating themselves from such dependency. That meant dissociating themselves from Big Government and liberal politics, especially after the Democratic Party embraced the civil rights movement in the 1960s.

Progressives need to change the national conversation about economic inequality, so that it is no longer about industrious job creators at the top, undeserving slackers at the bottom, and families in the middle who should be grateful to the rich for whatever wages they are offered. They need to challenge the dubious assumption that private wealth is always invested for the public good, while government spending is nothing but a drag on the economy. Considering our low rate of economic growth, our lagging productivity, and our wage stagnation, it isn’t obvious that concentrating more and more financial capital at the top has been such a winning strategy. Meanwhile, we cannot seem to find the money to make vital investments in our human capital, so that young people can get educations without accumulating a mountain of debt. People should not have to apologize for getting help to develop their human potential, especially when that enhances their capacity to contribute to society.

Voters shouldn’t have to choose between policies that create jobs and those that alleviate inequality. In a properly functioning democracy, they ought to go hand in hand, as they did during the postwar economic boom.

Progressive beliefs have the potential to spread to all class levels, just as conservative beliefs have. Already there are many higher-income individuals, such as Warren Buffet and George Soros, who advocate for more egalitarian policies.

Trump: populist or plutocrat?

Where does President Trump fit into the politics of redistribution? As a billionaire, he stands near the top of the economic pyramid. Like many other rich men, he sees his success as a sign of his superior merit, no matter what Trump University students or other detractors say in their lawsuits. Indeed, he declares himself to be uniquely suited to save the US economy.

Trump has filled his cabinet mainly with other rich folks who are not noted for their egalitarian views. Mother Jones reported that his cabinet selections have an average net worth of $357 million. The richest 1% of American households have an average net worth of only (did I say “only”?) $18.7 million.

Why is Trump so popular? I think primarily because he presents himself as the ultimate job creator, who will boost economic growth by bringing back lost American jobs. He will use the unorthodox strategy of getting other countries to give us more favorable terms of trade, so that our manufacturing industries prosper, presumably at someone else’s expense. All Americans will benefit, especially downwardly mobile workers, when he puts America first and makes America great again.

We are supposed to be so impressed by these promises that we overlook his tendency to favor the privileged over the rest of society. Strip away his economic nationalism, and what’s left is the usual Republican tax breaks for the rich and benefit cuts for the poor. We don’t have the detailed plans yet, but all indications point to a tax reform bill that will give the biggest reductions to the top brackets, and an Obamacare replacement that will make health insurance less affordable for the poor. Although Trump appealed to enough Democrats and independents to eke out an electoral college victory, the core of his support is among  Republicans.

The Trump administration has a real potential to exacerbate income inequality and political polarization. Maybe he can grow the economic pie so much that people don’t care how unequally it is divided, but I wouldn’t bet on it.