Income Inequality and the Republican Party: Do We Really Want More of the Same?

Slate magazine has been publishing a well-done series on income inequality in America. It came to my attention by Ezra Klein's Wonkbook and Rachel Maddow's daily show. While the TV format and the short blog post tends to oversimplify quite a bit, some of the graphics are nevertheless still quite illustrative. Probably the best one (below) shows the correlation between growing income inequality and Republican administrations:

Source: Ezra Klein's Wonkbook; Slate Magazine's Visual Guide to Inequality

This graph shows that under Democratic administrations, income gains were largest at the bottom end of the income scale and grew progressively smaller as one moved up the income scale. Income gains were still positive, even at the top of the income scale, indicating that reducing inequality can (and has) coexisted with growing prosperity. Under Republican administrations, however, the opposite trend held. The largest income gains were found at the top of the income scale, and grew progressively smaller as one moved down the income scale.

This is pretty straightforward. Obviously, the rich make out pretty well under Republican administrations, while everyone does pretty well under Democratic administrations. The rub, however, is in the causal mechanisms. No one can say for sure why this happens. The easy target is tax policy, but as the Slate series goes over in quite a bit of detail, a lot of academic research by political scientists (Larry Bartels, Jacob Hacker, Paul Pierson) and even liberal economist Paul Krugman hasn't been able to find solid evidence pointing to tax policy as the cause for this phenomenon. And the "usual suspects" - racial inequality, gender gaps, immigration - are also ruled out by convincing evidence by research in the Slate series.

So what could it be? Nobody knows for sure, but Krugman points to "a strong circumstantial case for believing that institutions and norms … are the big sources of rising inequality in the United States." In short, we should be looking at the correlation between economic and political/social trends.

When Republicans are in power, people think and behave differently in the market than when Democrats are in power? An interesting idea, one that certainly bears further investigation. Sounds like a job for our behavioral economists!

In the mean time, the correlation (if not causation) is pretty clear. Do we really want to vote that in next November?