American Socialism for the Already Rich

Editor's note: This article originally appeared in the Spring 2007 issue of Democracy: A Journal of Ideas

A father goes grocery shopping for his family and returns with the basics -- milk, bread, peanut butter, cereal, applesauce, frozen pizzas. He also comes home with a large steak, which he alone plans to eat, and a bottle of good wine, which his pregnant wife cannot share. Money is a little tight, so he buys fewer vegetables and substitutes Kool-Aid for fresh juice. He uses a credit card, knowing they won't be able to pay off the full balance next month. No one in the house starves that week, and the father eats and drinks unusually well.

If this happened once, most of us would say the guy was being a little selfish. But if he acted this way year after year, we would be deeply troubled and tell him to get his priorities straight. And yet too many U.S. social programs operate exactly this way: While they serve many people, they often give the most help to those who need it the least. Classic social insurance programs like Social Security and Medicare do, indeed, distribute benefits widely and offer extra help to the poor and the very sick. And means-tested programs like Medicaid and Temporary Assistance for Needy Families (TANF, also known as "welfare") are aimed exclusively at the disadvantaged. Nevertheless, the ability of these programs to fight poverty and inequality is substantially negated by other social programs -- mainly tax expenditures like the home mortgage interest deduction and social regulations like the Family and Medical Leave Act (FMLA) -- that benefit primarily the middle and upper-middle classes. While these latter policies may have their individual merits, in their current form they often widen the gap between haves and have-nots.

Economists criticize many of these policies for their inefficiency, noting, for example, that the mortgage deduction in the U.S. tax code encourages people to overinvest in large luxury homes. But an equally powerful objection is rooted in fairness. A number of social policies make a mockery of the goal, enshrined in the Constitution, that government exists to "promote the general welfare." Our longstanding commitment to equal opportunity rings hollow when certain programs help people with good jobs and incomes to get health insurance, housing, parental leave and retirement pensions, but offer little help to the poor and near-poor. We may disagree over how hard government should try to reduce poverty and inequality. Surely, however, when millions of Americans live in poverty and inequality has reached record levels, we can agree that public policies should not make these problems worse.

Call it phony universalism, Robin Hood in reverse, or socialism for the rich -- whatever the name, the U.S. government is effectively targeting tax subsidies and legal protections at the more advantaged members of American society. The level of support is enormous, amounting to hundreds of billions of dollars each year. For every dollar spent on traditional anti-poverty programs, the United States spends almost as much through the tax code helping individuals who are lucky enough to have health and pension benefits at work or rich enough to buy a nice home (these are often the same people). This is how the United States can spend a ton of money on its welfare system and yet make fewer inroads against poverty and inequality than other affluent nations. Imagine a campaign against child obesity that encouraged kids to exercise daily and eat more Cheetos: U.S. social policy is beset by the same kinds of contradictions.

Some policy makers realize what's going on. When the Bush administration proposed new tax incentives for Health Savings Accounts, the Center on Budget and Policy Priorities quickly pointed out that most of these benefits would go to affluent taxpayers. The Democratic authors of the American Dream Initiative, a set of policies designed to expand and strengthen the middle class, were careful last year to propose refundable tax credits for college tuition so that more people with below-average incomes could benefit. But it's not enough to oppose bad ideas, or layer potentially good new programs on top of dysfunctional old ones. We also need to scrutinize existing programs and figure out how they got started, whom they really help, and what we can do to change them. Otherwise, we may find ourselves repeating these same mistakes as we respond to persistent poverty and growing inequality today. Moreover, if we can find ways to spend less on some of these existing programs, we can free up monies to serve more pressing social needs. The goal should not be to exclude the middle class from these programs but to ensure that more governmental benefits are distributed to those who truly need help.