Economic Inequality in the United States

By Lars Osberg | Go to book overview

13

GOVERNMENT AND
INEQUALITY

13.1 Introduction

Some of the roles played by government in influencing economic inequality have already been alluded to. The state plays a major role in financing the education whose attainment is a major element of earnings determination (see Chapters 6 through 9); it safeguards the property rights which distribute income from property (Chapters 5 and 11), and its redistributive policies have been blamed, unfairly, for slow growth (Chapter 12)—to name only a few of its impacts on economic inequality. In Chapter 9 we also noted that opinions may differ as to what kind of action to expect from government. In this chapter we do not attempt to outline a political theory of what actions governments will take on the issue of economic inequality. Rather, we consider only the impacts of the actions they have taken (13.2 and 13.3) and a few of the actions they could take (13.4).

The analysis of government's impact on economic inequality in the United States is greatly complicated by the speed with which it is currently changing. From the mid 1960s until 1980 changes in governmental distribution policy came relatively slowly, within a broadly accepted legislative consensus. The inauguration of the Reagan Administration has, however, produced dramatic changes in tax and expenditure incidence. At the time of writing (spring 1982) only a limited number of studies of the impacts of the 1981 legislative changes are available and it is unclear how much of the proposed 1982 budget will survive in its current form. Section 13.2 therefore concentrates on the tax and expenditure incidence of government prior to 1980, while section 13.3 presents some preliminary evidence on the impacts of the 1981 revisions. Section 13.4 considers two policies, manpower training and incomes policies, whose aim is greater equality of wages, as well as two which are more directly redistributive—the negative income tax and taxable family allowances. Section 13.5 is a summary and conclusion.

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