Picking Winners and Losers

In a thought-provoking piece at RealClearPolicy Richard V. Reeves and Katherine Guyot propose four policies intended to “help the middle class” along with ways to pay for them. Their four proposals are:

  1. A worker tax credit funded by a carbon tax.
  2. A tax credit for first-time home buyers unded by eliminating the mortgage interest deduction.
  3. Provide paid family leave with a payroll tax.
  4. Child savings accounts for college paid for by taxing large inheritances.

While I think they are to be commended for even entertaining the possibility of paying for proposed programs, I wonder what the net effect of their proposals would be? Would they actually help the middle class or would they just transfer money from one portion of the middle class to another?

What struck me about their proposals was that each picked winners and losers. The rich would be winners and the poor losers. Spenders would benefit while savers would lose out. Those with children would benefit at the expense of the childless. College administrator, professors, and lawyers would benefit at the expense of people who wanted to go to college or their parents.

Those are the same policies that have failed over the period of the last 30 years. Here’s a radical proposal. Do more for the middle class by doing less. The most important thing we can do to help the middle class is to create more jobs that pay salaries that enable people to lead middle class lives. That can be done by reducing the subsidies we’re paying to jobs that pay a lot more. Reduce health care costs. Stop subsidizing big banks. Return to the executive compensation rules that prevailed in 1992. Stop subsidizing the stock market. Stop importing skilled workers to replace the workers who are already here.

Above all, use an evidence-based approach to policy-making. Give every transfer program an expiration date to make it easier to abandon programs that aren’t working and replace them with programs that might actually work.

3 comments… add one
  • PD Shaw

    1. It looks like a carbon tax that has been painted-up to look like a working class benefit. I wonder how that would play out politically, given that a good portion of the working class is dependent on cars for their job? Would the carbon tax get eliminated or reduced?

    2. I’m not a fan of the mortgage interest deduction, but it’s shrinking, so I’m not inclined to replace it with a new subsidy, particularly since I disagree with the notion that increasing home ownership is an unalloyed good. I would try to lower the cap on the deduction further.

    3. I don’t have a problem with paid family leave, though when I was co-owner of a small business, the loss of one employee over a long period of time was not something that could simply be paid-for. There simply wasn’t that much slack in the system, nor ability to hire a replacement just for a few months. Co-workers tend to bear the burden of these things, so perhaps the money could be used as a bonus for morale, but I assume most employers would just pocket the money?

    4. Having been doing college tours, including my alma mater, there is a lot of non-education spending wrapped into the college experience these days. Still, I think a lot of public universities are within the realm of being affordable, with the biggest problem facing those that take out a lot of loans but don’t complete their degree. Seems like a subsidy that would increase the number of “some college”.

  • Guarneri

    “Having been doing college tours, including my alma mater, there is a lot of non-education spending wrapped into the college experience these days. “

    It’s quite an experience, eh? Quite different than when I considered just three places: Purdue, Rose-Hulman, and IU. Good luck. Here’s a feel for where we went with our daughter: IU, Vanderbilt, U of NC, Virginia, Wake, Richmond, SMU, and Villanova. I cite them because it’s not like they were the Ivy’s or schools in CA you might consider super expensive. And yet, to your observation, these schools had dorm and other facilities that were Taj Mahals. And non-academic programs and employees everywhere.

    It’s driven by subsidy, ego and lack of administrative acumen. You can imagine I’m not a fan of #4 in their list.

  • Hmm. I visited U of Chicago, Northwestern, Michigan State, Michigan, Princeton, Columbia, Yale, Harvard, MIT, and Boston College. I applied to Northwestern, Michigan State, Princeton, and Yale and was accepted by all but Princeton.

    If I’m not mistaken my nieces and nephews each applied only to a single school, in general a nearby school.

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