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CONTACT: Pat Vaughan Tremmel at (847) 491-4892 or p-tremmel@nwu.edu
EVANSTON, Ill. --- Advocates of free markets want government out of the way. Politicians and pundits, especially during a heated presidential election season, regularly bemoan the alleged ineptitude, inefficiency and impotency of government.
But a new book, "What Government Can Do: Dealing with Poverty and Inequality," by two political scientists takes an optimistic look at a wide range of programs and policies, showing the strides our nation has made in a number of policy areas and arguing that government should do still more to provide equality of opportunity.
"Despite recent headlines heralding the latest Census Bureau figures on poverty, the gulf between the rich and the poor has widened significantly since 1973," said Benjamin Page, co-author of "What Government Can Do" (University of Chicago Press) and the Gordon Scott Fulcher Professor of Decision Making in political science at Northwestern University. Page also is a faculty associate at the Institute for Policy Research at Northwestern.
The Census Bureau report figures, according to news accounts, suggest that the remarkable economic boom has pushed poverty to its lowest rate since 1979. "It is true that the nation's robust growth finally began to trickle down to low income workers in the late 1990s," said Page. "But U.S. inequality and poverty are still at the highest levels in the advanced, industrialized world."
The book argues that doing more in a number of policy areas ‹ranging from taxes and wages to social security, Medicare and education ‹could have a huge effect in fighting inequality.
Unlike other academics whose books often focus primarily on one policy area, Page and his co-author, James R. Simmons, University of Wisconsin, Oshkosh, take a hard look at many interdependent policy areas that must be tackled to make a significant dent in inequality.
Since 1973 the gap in earnings between well-educated and not-so-well-educated workers steadily increased, and the real standard of living of a large proportion of the workforce may have declined, according to the authors. This alarming pattern can be traced to a number of powerful economic and political forces, including increasingly free international trade, capital mobility and immigration, the loss of manufacturing jobs in the United States, increased use of computers and information technology and weakened trade unions.
The authors advocate many sweeping changes, while emphasizing that the policies that they favor do not and will not have major negative impacts on economic efficiency or on individuals' freedom and liberty.
Among the book's highlights:
o Arguments for abandoning egalitarian programs because of the competitive pressures of economic globalization are greatly exaggerated, though some government programs are more vulnerable than others. A comparative look shows that welfare states in the social democracies of Northern Europe and other advanced countries have undergone marginal retrenchment but remain largely intact with no signs of unraveling.
o A number of programs involving investment in the human capital of disadvantaged individuals -- particularly in the areas of infant and child health and nutrition, pre-schooling and elementary and secondary education -- can reduce poverty and inequality while helping, rather than hurting, the economy as a whole.
o Several programs designed to provide abundant jobs at good wages, which the authors regard as crucial to any serious effort to reduce poverty and inequality, produce net economic benefits or only small costs with little or no vulnerability to global competitive pressures. In particular, the book points to moderately stimulative (and countercyclical) macroeconomic policy, targeted public service employment, low-income wage subsidies such as the Earned Income Tax Credit and international agreements that require minimal working and environmental standards in low-wage countries.
o Social insurance programs like Social Security, Medicare and Medicaid are more vulnerable to the pressures of global economic competition, but considerably less so than anti-government rhetoric often suggests. Indeed, universal, single-payer medical insurance could actually save money and help the economy while reducing inequalities.
o The corporate income tax -- because of its incentives for capital flight and the ease of shifting profits abroad -- is vulnerable to global competitive pressures. But other progressive taxes, including the personal income tax and property taxes, are much less so. Competitive pressures and efficiency considerations would not stand in the way of increased levels and increased progressivity of the personal income tax to fund egalitarian programs.
o If Americans could overcome anti-egalitarian biases in our political system -- especially unequal political participation and the power of money and organized interest groups -- it would be possible to do a great deal more about poverty and inequality, and to do so in an effective, efficient fashion without major negative side effects.
"Private markets and free enterprise capitalism, for all their virtues, do not themselves keep the levels of poverty and inequality within acceptable bounds," said Page. "Many factors that lead to high or low incomes are beyond individuals' control. To a great extent they reflect happy or unhappy chance, the results of nature, nurture and social arrangements: the fortune or misfortune of genes, upbringing, parents, peers, good breaks, catastrophic accidents, economic fluctuations, global trends. We can and should help the unlucky."
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