Scott Winship is a senior fellow at the Manhattan Institute who specialises in income inequality and economic mobility. He, along with other conservative wonks,
has been working with Rep. Paul Ryan (R-WI) on a new anti-poverty agendathat will likely be unveiled in the Spring. We spoke yesterday evening and a transcript of our conversation, edited for length and clarity, follows.
For readers less familiar with your work, what are your views on income inequality and what the mainstream media often gets wrong?
I think the conventional wisdom is wrong in a number of ways so I’ve tried to correct all those deficiencies. One is that I don’t think that the evidence that rising inequality has produced societal problems is very compelling. I’ve just tried to point out that the evidence many economists are citing is a lot more complicated. They are only citing some papers and not others. The strength of the evidence wouldn’t pass the smell test if their graduate students were bringing it to them.
In terms of passing the smell sentence, what type of research are you referring to? Are there any examples you find particularly troubling?
The most egregious example of this is the Great Gatsby Curve that Alan Krueger made famous. Krueger is absolutely one of the most brilliant economists of the last 20-30 years so he knows the difference between correlation and causation. It shouldn’t fall on me to point it out.
Interestingly, you can find similarly strong correlations between mobility and things that the right tends to be more focused on like family structure, for instance. If anyone on the right trotted out that argument, the left would immediately attack it and I think for good reasons because it’s just not a strong argument. Someone needs to point that out when the left does it as well.
The other area that I’ve tried to correct the conventional wisdom on is what the actual trends in inequality are. There’s a tendency for people to argue that the middle class and the poor have done worse over time than they really have and that relates to all these complicated methodological issues around market income versus taxes and transfers. But then there’s some basic facts that are not recognised. A lot of people don’t realise that inequality between the middle and the bottom hasn’t increased since the 1980s. And that’s importance because if you’re starting out poor and striving to reach the middle class, then it some ways it matters more whether you’re falling behind the middle class than it does whether the top is pulling away from everybody.
Are you concerned with the disparity between the top 1% and everyone else?
If I had to bet, I would say that inequality between the top and everyone has increased quite a bit over time. Whether I think that’s a problem, I’m not at all sure. The evidence does not make me nervous that it’s a problem. It’s pretty ambiguous and I think to some extent that if income inequality has increased by as much as it has, it’s partly a correction for a number of decades in which inequality wasn’t growing. If you look at inequality between 1950 and today, it’s been not nearly so severe as between 1980 and today. It’s two different periods and this latest one that we’re in looks pretty bad but partly that’s because the earlier period was a little bit unsustainable.
Can you talk a bit about your work on economic mobility and how it factors into this debate?
I had a cover story in the National Review in 2011 where I basically argued that the left overstates the problems of the middle class and the poor. Contrary to what the left says, the evidence doesn’t clearly indicate that mobility has declined over time. You routinely hear this story about the American dream dying or mobility declining and the evidence just doesn’t support that at all. It’s very mixed.
But on the other hand, in that National Review piece, I tried to tell conservatives that even though mobility is not getting worse, it’s not at a level that we ought to be particularly proud of. If you start in the bottom fifth, there’s a 40% chance you’re going to end up in the bottom fifth when you’re an adult and there’s only about a 13% chance that you’re going to end up in the top two fifths. I don’t think those are odds that any of us who are currently in the top two fifths would accept for our own kids.
What policy ideas have you been considering with Paul Ryan?
I don’t want to talk too much about specific things that I’ve discussed with Chairman Ryan and his team. I’ve always really been impressed with Chairman Ryan’s entitlement reform proposals which I think are incredibly bold. On the left, the sort of boldness that’s really required is to tell the middle class that you’re going to have to raise their taxes, because if you’re a liberal, that’s what’s going to have to happen. You can’t do what the left wants to do and continue to think that tax increases on the rich are going to get you there. No one on the left is really willing to say that.
On the right, where boldness is required, is telling people that we can’t continue to spend the amount that we’ve committed to the future and that there are going to have to be sacrifices. The Chairman has been admirably bold in really being upfront about that message. I really admired his entitlement reform proposals.
Ultimately, I think it’s important both politically but more importantly, substantively, for the right to offer something positive to the poor and middle class and to have some element of a mobility opportunity agenda that does offer them something from the federal government. That’s tricky because conservatives admirably worry about perverse incentives. It’s really easy to reduce poverty if you just give cash to people but obviously, that causes people to work less. It causes them to behave irresponsibly in other ways. Quite rightly, conservatives have been trying to figure out how you deal with this problem of perverse incentives.
The other thing that I think conservatives emphasise admirably is that we spend a lot of money on social programs that are intended to promote mobility and a lot of them there’s just no evidence at all that they make much of a difference.
Are there any specific policies such as expanding the EITC that you support?
There are a couple of interesting approaches. One of which would be the earned income tax credit. It has been very successful, both in reducing poverty — it’s the biggest anti-poverty program right now — but also it’s been successful at promoting work. It’s worth thinking about a married parent tax credit that would similarly provide a bonus and an incentive for parents to marry and maybe the bonus could be for parents to wait until they were married to have children. Out of wedlock childbearing is one of the more distressing problems that we’re facing.
Another interesting approach would be to promote a voucherized human capital investment program. The idea would be that if you’re disadvantaged you qualify for a voucher that you could use for whatever services you think would most benefit your kid. That will vary by family obviously. Maybe it’s tutoring. Maybe it’s summer school. Maybe it’s an after school program. Maybe it’s violin programs. Essentially, you give folks vouchers. You create a regulated market of organisations that can receive vouchers and people who could receive the vouchers. But then you rigorously evaluate both overall approaches and individual providers and those who are ineffective at some point no longer qualify for the vouchers. What would be potentially interesting about that is you could attack this cultural element of poverty as well where people particularly in neighborhoods of concentrated poverty have kind of ended up with bad norms that inhibit mobility.
It would be voluntary so it would encourage personal responsibility as well. If parents decided not to use these vouchers then they wouldn’t help their kid at all so you’re sort of building in an incentive for them to think about their kid’s future and investing in it.
Finally, one of the benefits of it would be you would find that more programs than not fail to be effective. In some sense that would be bad because you would be throwing dollars at problems without improving things. On the other hand, it would also be a way to build concerns and recognition around the fact that a lot of what we currently do is ineffective and there’s no reason to spend money on ineffective things when we could discover things that do work and use the money there.
What are your thoughts on a guaranteed basic income?
It’s an interesting idea. I do think it’s dangerous to give everybody a minimum income without any strings attached. On top of that, I think it’s interesting to think about giving workers a guaranteed income, which is kind of what the earned income tax credit does. I think it would be a good idea for are workers who are married parents rather than unmarried parents to receive something of a bonus or an incentive in the same way — maybe there’s a different guaranteed minimum income for them. In some ways, it is a compelling approach. A guaranteed minimum income for workers is certainly appealing.