Libertarian Land: Limit Income Redistribution To Help Only the Poor

Modern societies redistribute income in countless ways. Some policies address poverty, but others redistribute income to the middle class and from richer to poorer across the income distribution.These policies — which exist at both the federal and state levels — provide cash, in-kind goods and services, and vouchers. Numerous other policies intervene in specific markets out of distributional concerns. In Libertarian Land, redistribution is different, and smaller.Libertarian Land limits redistribution to policies that help the poor; no policy attempts to redistribute from richer to poorer broadly. The approach reflects the inherent tradeoffs between equity and efficiency in redistributionist policies.Anti-poverty programs have plausible justifications. Almost everyone would prefer a world where extreme poverty is rare, and most would choose, behind a veil of ignorance, to buy insurance against the possibility of being born into poverty. Thus poor and non-poor might benefit from government provision of a social safety net that protects the poor. Private charity is substantial in modern societies (via religious institutions, the Red Cross, Doctors without Borders, Habitat for Humanity, soup kitchens, and more), but purely private efforts might fall short of what society deems appropriate. Broader redistribution, however, is less compelling. Some Harvard law grads choose low-stress, low-effort jobs with moderate salaries; others choose the opposite. Neither group is more deserving. More generally, differences in income are partly luck, but also involve skill, effort, risk-taking, and preferences for leisure.Redistribution also discourages work and savings, and promotes the view that lower income is the result of bad luck. This reduces society’s work ethic and encourages transfer-seeking rather than innovation and productivity. Wide-scale redistribution is polarizing because it implies the well-off are bad people.Thus some citizens of Libertarian Land oppose all redistribution. Many, however, endorse anti-poverty spending, assuming it stays within reasonable bounds.To achieve a balance between the pros and cons of anti-poverty programs, Libertarian Land leaves all such policies to states rather than the federal government. The traditional thinking is that this generates a race-to-the-bottom in which each state “exports” its poor by offering a minimal safety net. Yet many states adopted anti-poverty programs before the federal government intervened in the 1930s. These programs were modest by modern standards, but that partly reflected the lower standard of living of the era. Numerous states currently offer more generous social safety nets than required by federal mandates.To the extent a race-to-the-bottom occurs, moreover, this offsets the tendency of anti-poverty policies to expand excessively, due to demand for transfers from the near poor and mission creep by those running the programs. In the United States, the overall redistribution system (especially Medicare, Medicaid, and Social Security) is on an unsustainable path, so a countervailing force is valuable. State anti-poverty programs in Libertarian Land focus on cash transfers rather than in-kind transfers like housing projects, government-provided medical care, or government schools. This is better for recipients, who have more flexibility to spend the transfers in ways that make sense for them. This approach also makes the amount being transferred transparent, avoids complicated interactions across policies, and minimizes bureaucracy. Cash transfers avoid polarizing issues such as whether Medicaid should pay for abortions.State anti-poverty policies never intervene in specific markets. This avoids inefficient, poorly targeted attempts to redistribute income, such as minimum wages, union protections, immigration quotas, bans on peak-load pricing of electricity, and price controls on medications. Despite the absence of federal redistribution, and the lower level of anti-poverty spending, unhappiness over the distribution of income is less prevalent in Libertarian Land than in modern societies.Differences in income reflect skill, risk-taking, preferences over work versus leisure, and other aspects of productivity. Few people resent the enormous incomes earned by amazing innovators like Steve Jobs, uniquely talented business executives like Warren Buffett or Oprah Winfrey, amazing athletes such as LeBron James, or star entertainers like Tom Hanks or Beyonce. What generates anger in modern societies are income differences caused by policies that create arbitrary winners and losers: licensing restrictions, land use regulation, immigration restrictions, corporate welfare, complicated tax codes, crony capitalism, and more. These do not exist in Libertarian LandThe Libertarian Land approach to redistribution does not please everyone; some support more redistribution, some less. For a policy that involves an inescapable tradeoff between equity and efficiency, that is the right balance.

Libertarian Land: Limit Income Redistribution To Help Only the Poor

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