How Rand Paul's Policies Would Increase Inequality

So-called libertarian Rand Paul is running for president. As with Cruz, it's hard to see him being more than a sideshow. Nonetheless, he's a sideshow with a non-trivial amount of support, especially among young conservatives. For that reason, it's worth rehashing his wacky political views.

Redistribute from the Poor to the Rich

Like most conservatives, libertarians especially, Paul is of the mind that our country's current set of economic institutions distribute too much to the poor and not enough to the rich. Nevermind that the poor in the US are among the poorest in the developed world (in both absolute and relative terms). Nevermind that the rich in the US are the richest in the developed world (in both absolute and relative terms). Nevermind that the US has one of the highest levels of inequality in the developed world. Things are still not quite inegalitarian enough for Paul's tastes.

Also like most conservatives, Paul supports the usual set of structural reforms to fix our problem by redistributing income up. Paul's budget proposal for 2014 provides a good blueprint of how he'd like to go about doing this:

  • "Flat Tax." By increasing taxes on the bottom and middle while decreasing them on the top, Paul's "flat tax" plan redistributes the national income upwards. Of course, making tax burdens "flatter" as part of a project to increase the overall tax level can be justified provided surplus revenue is buried into transfers. But Paul has no intention of making the overall tax level higher. He intends to make it lower.
     
  • Eliminating Capital Taxes. Paul also wants to clear out the entire slate of taxes that fall almost entirely on the super-rich, including taxes on capital gains, dividends, interest, estates, and enormous gifts. Such a reform would be a massive giveaway to the rich.
  • Block Granting Benefit Programs. To balance the budget while reducing the overall tax level, outlays have to be cut somewhere. Given what the federal government does, that means either cuts in social insurance or cuts in the military. Last month, Rand Paul proposed increasing military spending. So, that leaves only social insurance cuts. To cut social insurance, the conventional Republican strategy, which Paul adopts, is to block grant a bunch of the benefit programs to the states while slowly suffocating their funding. This is what they did to TANF and the program is basically a zombie on a march towards eventual death. Block granting programs like SNAP, WIC, and Medicaid reduces benefits for the poor while also making the benefits less responsive (sometimes even entirely unresponsive) to cyclical downturns, which is when the benefits are most needed.

In total, Paul wants to give away huge sums of money to the rich via the elimination of capital income taxes and switching into his "flat tax." The "flat tax" also, all else equal, reduces the disposable incomes of the bottom and the middle. This tax reform would lower the overall tax level, necessitating social insurance and transfer cuts that will fall heavily on the poor, as well as on the elderly and sick. It doesn't take a genius to see how this plays out distributively and it's not pretty.

Like all the other advocates of upwards redistribution, Paul assures us this reform would generate crazy growth that would actually leave the bottom and middle better off even while it spikes inequality. The problem is that this growth game is not supported by cross-country studies on the determinants of growth. Not only do countries with high tax levels and high transfer levels (like the Nordic countries) grow as well as we do, but huge cross-country datasets tend to show inequality-reducing transfers leads to more growth.

The Federal Government Enslaves Doctors

Of course, Paul doesn't actually care whether his redistribution from the poor to the rich has dynamic second-order effects that greatly benefit those it takes from. Like his father, at the end of the day, Paul subscribes to this college-student-inflected libertarianism where he thinks things like taxes and social insurance are the forceful aggression of the government (but that somehow other government economic institutions like property laws aren't).

If you don't believe me, please watch this bizarre spectacle where he argues that a public right to healthcare entails enslaving doctors (YouTube Link). Here is a partial transcript:

With regard to the idea of whether or not you have a right to healthcare, you have to realize what that implies. It's not an abstraction. I am a physician. That means you have a right to come into my house and conscript me. That means you believe in slavery.

He goes further than that, expanding it even to water and food. Statements to the effect that people should have a right to those things are, in his view, statements in support of slavery.

Civil Rights

Because Paul is ultimately and deep down a believer in the Rothbardian non-aggression brand of libertarianism most popular among college freshman, it should come as no surprise that he doesn't believe in the Civil Rights Act as applied to public accommodations. The "No Blacks" sign at the hotel is OK by him, not something of public concern. A company that systematically refuses to hire women in top positions, also OK.

To be fair, he has more recently dishonestly said he is for the Civil Rights Act. But this is political expediency, and doesn't even come accompanied with the more sophisticated libertarian pretend stuff where they now go "Oh well you know, non-discrimination laws just this once I guess was cool [because I would be laughed out of decent society and pushed into total irrelevance if I said otherwise]." Instead, he just sort of all of a sudden became alright with civil rights protections.

But make no mistake in all of this. As his comments on public rights to water and healthcare reveal, his deep down view is that anti-discrimination laws are tantamount to enslavement. Conscription of public accommodations providers! An aggressive intrusion into their absolute pre-political property rights!

Conclusion

This is just a tip of the iceberg of the circus that is Rand Paul's politics, but it should give you a sense of his angle. Rand Paul's libertarian fantasy is, like all libertarian fantasies, a reality-denying nightmare for nearly all but the rich, especially the white and male rich.

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