Must inequality be a "perma-problem"?
Over at MR, Alex has produced an interesting analysis with a bottom line claim that of current Federal Spending 63 cents on the dollar is a transfer down from the rich to the poor. This by way of refuting the claim that while the rich pay for most of government, they also receive most of the benefits. The majority of the comments feature people squirming to still make a case that more redistribution is feasible and desirable, which leads me to the following thoughts.
Above some threshold, should inequality matter for public policy? Suppose everyone had good educational opportunities for their children, affordable health care, a car, affordable safe shelter, cable TV, and a retirement plan. Would it or should it matter if some people had a heck of a lot more? Or is inequality a political perma-problem, i.e. merely a convenient / immutable rationale for bigger government?
If we decide that we are not at that threshold (or that it does not exist), is simple re-distribution the best way to reduce inequality (considering that there might be other policy goals in play)? In other words, doesn't it make more sense to use policy to help provide the skills and tools needed to raise incomes organically rather than to simply transfer incomes ex-post? If we agree on this, is it always or mostly the case that higher taxes are the way to improve opportunity equality?
Think of schooling, probably the single biggest opportunity inequality in our country. Is more government spending the answer?
I am all about equality of opportunity. If we could achieve that, then any inequality of outcomes would not bother me at all.
What is really sad is that we could satisfy almost everyone here. The combination of our defense budget, farm programs, and congressional earmarks cut by 2/3 would allow of a heck of a lot of policy space for both smaller government and reduction of opportunity inequality.