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:
- A worker tax credit funded by a carbon tax.
- A tax credit for first-time home buyers unded by eliminating the mortgage interest deduction.
- Provide paid family leave with a payroll tax.
- 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.