How do the right and left differ?In today's lecture, I have discussed a number of reasons that right-leaning and left-leaning economists differ in their policy views, even though they share an intellectual framework for analysis. Here is a summary.
- The right sees large deadweight losses associated with taxation and, therefore, is worried about the growth of government as a share in the economy. The left sees smaller elasticities of supply and demand and, therefore, is less worried about the distortionary effect of taxes.
- The right sees externalities as an occasional market failure that calls for government intervention, but sees this as relatively rare exception to the general rule that markets lead to efficient allocations. The left sees externalities as more pervasive.
- The right sees competition as a pervasive feature of the economy and market power as typically limited both in magnitude and duration. The left sees large corporations with substantial degrees of monopoly power that need to be checked by active antitrust policy.
- The right sees people as largely rational, doing the best the can given the constraints they face. The left sees people making systematic errors and believe that it is the government role’s to protect people from their own mistakes.
- The right sees government as a terribly inefficient mechanism for allocating resources, subject to special-interest politics at best and rampant corruption at worst. The left sees government as the main institution that can counterbalance the effects of the all-too-powerful marketplace.
- There is one last issue that divides the right and the left—perhaps the most important one. That concerns the issue of income distribution. Is the market-based distribution of income fair or unfair, and if unfair, what should the government do about it? That is such a big topic that I will devote the entire next lecture to it.
Equality in Health SpendingRobert Samuelson reports:
It is widely assumed that health care, like most aspects of American life, shamefully shortchanges the poor. This is less true than it seems. Economist Gary Burtless of the Brookings Institution recently discovered this astonishing data: on average, annual health spending per person -- from all private and government sources -- is equal for the poorest and the richest Americans. In 2003, it was $4,477 for the poorest fifth and $4,451 for the richest. Probably in no other area, notes Burtless, is spending so equal -- not in housing, clothes, transportation or anything. Why? One reason: government already insures more than a quarter of the population, including many poor.
Show Me the MoneyTop Recipients of Fannie Mae and Freddie Mac Campaign Contributions, 1989-2008
1. Dodd, Christopher J, D-CT
2. Kerry, John, D-MA
3. Obama, Barack, D-IL
4. Clinton, Hillary, D-NY
N.B.: Senator Dodd is Chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs.
Biden's Charity AversionThe most surprising fact I learned yesterday:
Democratic vice presidential nominee Sen. Joe Biden released 10 years of tax returns Friday...The Bidens' joint gross income hovered between $215,000 and $320,000 a year during this period...The amount they gave to charity during this period never exceeded one-half of 1% of their annual income. The Bidens never gave more than $995 to charity in any of the tax years, and usually gave much less.(Source)Compare Biden's behavior to that of a typical American:
The IRS reports that those who itemize deductions on their income tax returns have claimed, since 1975, that between 1.6 percent and 2.16 percent of their income went to charitable concerns. (Source)This contrast is an example of a broader phenomenon:
conservatives who practice religion, live in traditional nuclear families and reject the notion that the government should engage in income redistribution are the most generous Americans, by any measure. Conversely, secular liberals who believe fervently in government entitlement programs give far less to charity. They want everyone's tax dollars to support charitable causes and are reluctant to write checks to those causes. (Source)If Biden's below-average charitable giving is typical of those with his political views, why am I surprised by it? Because this man has run for President more than once. He must have known there was a good chance that his tax returns would at some point be made public and undergo close scrutiny. He had a far greater-than-average personal motivation for charitable giving and, nonetheless, chose not to chip in.