Another casualty of Trump’s victory: the Democrats’ reputation as the party that favors working Americans

What happened to the Democrats’ reputation as the pro-worker party? In other words, what happened to the Democrats as the party that promises economic redistribution to the common man from the rich?

These are questions Democrats are asking after Vice President Harris’ decisive but not landslide loss to President-elect Trump.

Her economic policies were obviously scraps. Her $25,000 payment to first-time homebuyers would be scrapped by sellers, her ban on “price gouging” targeted notoriously competitive grocery chains, and her call to restore the refundable child tax credit from the pandemic it aimed at a policy whose demise did not trigger any kind. visible protest.

These barely perceptible policy proposals had no perceptible political effect. Exit poll evidence suggests Ms Harris performed slightly better than average with high incomes – more than $100,000.

Nor is it obvious that Sen. Sanders’ post-election suggestions — to help working-class Americans by raising the minimum wage and lowering health care costs — would have fared any better. Few minimum wage earners are heads of household, and voters are suspicious of proposals to reduce out-of-pocket health care costs.

There are two big problems for those who push the policy of economic redistribution. First, America already has a very redistributive tax system. Second, America already has very redistributive economic policies.

Consider the tax numbers. Despite complaints that billionaires are somehow not being taxed, the federal income tax is substantially progressive.

In fiscal year 2022, for example, 48 percent of all federal income tax revenue came from the top 1 percent of earners, who paid an average tax rate of 26 percent. The top 10 percent of earners paid 72 percent of income, while the bottom 50 percent accounted for just 3 percent of income.

It is true, of course, that the Social Security payroll tax, which drops above a certain income level, is not that progressive. It’s also true that while some states have high income tax rates, others have no state income tax at all, and almost all states rely heavily on less progressive sales taxes.

Still, that leaves America with a more redistributive system overall than European nations—much praised by leftists—who rely heavily on taxing consumers through value-added taxes.

The government could earn more revenue by raising the top rate from 37 per cent set in 2017 to the 39.6 per cent proposed by Ms Harris. That’s a number cleverly set by former President Clinton’s administration, probably because 39.6 percent doesn’t sound as close to half as 40 percent.

At some point, when you raise tax rates, especially when states like California and New York pile 10% rates on top of them, the animal spirits of high earners will be diverted from productive activity to tax avoidance, and incomes will begin to decrease. Economic redistribution stops working when the government has less income to redistribute.

The second problem for politicians seeking to redistribute money to low-income earners is that the American government already does a lot of it, more than Democratic or Republican politicians seem comfortable admitting.

Documenting the numbers are Senator Gramm, former Texas A&M economist Robert Ekelund and retired Bureau of Labor Statistics professional John Early in their 2022 book “The Myth of American Inequality: How Government Biases Policy Debate.”

The authors show how government statistics, painstakingly compiled but defined in ways that made sense decades ago, now significantly underestimate the incomes of low-income people.

As they point out, the Census Bureau’s income statistics don’t take into account government transfer payments — food stamps, Medicare, Medicaid, the Earned Income Tax Credit and child tax credits.

These are substantial enough that when you factor in transfers and taxes, the lowest three quintiles—fifths—of the income scale end up with similar pay between, rounded, $50,000 and $66,000.

This is not a sumptuous standard of living, but it is not a level of starvation either. The days I remember from my childhood in Detroit when factory workers would collect their paychecks and hand over bills and change to their wives and live in fear of layoffs are gone.

These days, low-income Americans live on credit and debit cards and qualify, as millions did after the 2007-2008 recession, for EBT food stamps and disability payments.

Just about everyone would like a 13th month of income. Still, the lack of visible protest over the Covid-era expiration of the refundable child tax credit or the courts blocking President Biden’s student loan forgiveness suggests that most Americans realize they can handle it.

Similarly, the unpopularity of Obamacare during the Obama presidency and the unpopularity of repealing Obamacare when Republicans took office suggest that Americans are more suspicious of changes in health care arrangements than seething with dissatisfaction with them.

This is not a population with a dejected proletariat demanding fundamental change and large-scale economic redistribution. It’s more like a population living with, and sometimes lamenting, government tax and benefit systems redistributing large shares of a largely growing economy.

Republicans have learned that voters will tolerate only marginal reductions in redistribution, and with their new low-income core constituency, they have no incentive to seek more.

Democrats are having trouble dealing with the fact that lower-income voters worried about their upstart stance on cultural issues have no more appetite than their newly affluent core constituency for much greater economic redistribution — even if they could conceive of one that doesn’t send the whole system. collapsing.

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