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A Real Equality Agenda

Let’s redistribute power, not income.

Feb 10, 2014, Vol. 19, No. 21 • By JAY COST
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Liberal Democrats had outsized majorities during this period of the New Deal, but Southerners controlled key choke points within the legislature, notably the House Rules Committee. It was only a broad coalition that included liberals, organized labor, and, crucially, Northern industrialists that brought the Fair Labor Standards Act to a vote on the floor. Unsurprisingly, the wage floor was set so low that only the South was really affected. And even then, it only passed after it was loaded up with exemptions for all sorts of politically privileged groups.

This decidedly inegalitarian back story of the minimum wage has mostly been lost to history. One would be hardpressed to find a book about the New Deal in Barnes & Noble that discusses this at any length. This is not a coincidence; advocates of bold, activist government want to forget all the inequalities it creates. So it is with Obama. His signature achievement, the Affordable Care Act, is one of the most grossly unfair pieces of legislation to become law in modern times. Underwritten by a logroll among elite interests as varied as the drug manufacturers and the feminist left, it is an enormous redistribution of wealth from the young to the old, the healthy to the sick, without due regard to socioeconomic status. 

The second problem with Obama’s inequality agenda is more subtle, yet more pernicious. A narrow focus on economic inequality overlooks the fact that, over time, everybody’s standard of living tends to improve. Andrew Carnegie, for all his wealth and power, never had access to penicillin, which today the poorest of the poor can get for free. And that’s not all. Today’s poor have access to nutrition, amenities, medical care, and knowledge that were scarce or nonexistent not that long ago. That is the “magic” of Adam Smith’s invisible hand. Looking at things through the historian’s lens, it is clear that almost everyone wins with economic development.

On the other hand, the game of political power is necessarily zero sum. Economic exchanges have the capacity to create wealth, which can accumulate in ways that make everybody better off eventually. Not so with power. Political transactions do not create new wealth, and political power is a commodity whose supply never changes. One side’s gain must always be another’s loss.

The Jacksonian Democrats were acutely aware of this. While Jackson’s rant against the Second Bank was, at its best, a tirade against inequality, the president’s focus was more political than economic. Ditto the populists of the late 19th century. They were not looking to redistribute wealth via farm subsidies; rather, they wanted to redistribute the political power that had accumulated in the East.

By expanding government to deal with economic imbalances, Obama threatens to exacerbate the nation’s already deeply unequal power relations. The Framers of the Constitution were careful to design a governmental structure that balanced institutions against powers, but subsequent generations sloppily altered the original design. Today, Washington, D.C., operates according to a perverted form of Madisonian pluralism: Public policy is deemed legitimate not because it measurably advances the common interest, but because all the active, organized interest groups in town have had a chance to influence it at the margins. This broken system—which Madison himself would find repellent—inevitably favors the organized over the unorganized, the defenders of the status quo over those seeking a change, and private interests over the public good.

The problem is now so bad that the federal government is arguably incapable of taking on any substantial project without treating groups differently, based solely upon their political connections. Obama entered Washington promising to change this process, but his four big achievements—the stimulus, the auto bailout, Obamacare, and the Dodd-Frank financial reform bill—only reinforced it. Why should we doubt that his efforts to deal with income inequality will only make the nation’s political inequality worse? We do not have to read the story to know the plot: Under the guise of distributing wealth more evenly, Obama will favor key interest groups (vital to Democratic political success), and by centralizing more authority within Washington, D.C., he will enshrine those privileges in the law. This may or may not equalize the money in the wallets of the citizens (it probably won’t), but it will assuredly take political power from the people at large and hand it over to friends of Barack Obama.

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