Sunday, February 1, 2015

The new politics of rent-seeking

Reihan Salam has an excellent article about the upper middle class that is sure to be a classic:
Another thing that separates the upper middle class from the truly wealthy is that even though they’re comfortable, they’re less able to take the threat of tax increases or benefit cuts in stride. Take away the mortgage interest deduction from a Koch brother and he’ll barely notice. Take it away from a two-earner couple living in an expensive suburb and you’ll have a fight on your hands.
The article identifies the upper middle class as the single biggest demographic cohort with a socio-economic position sufficient to benefit from political and economic rent-seeking. This is a powerful new way to understand how coalitions in our democratic policymaking apparatus sustain terribly sub-optimal policy over lots of issues. It's not that the upper middle class benefits materially the most from policies designed to protect and enrich interest groups. It's more about the qualitative difference that exists between benefiting from a subsidy and not. The distributive effects of rent-seeking aren't nearly as potent in driving political action as their absolute effects.

A political movement geared around opposition to rent-seeking has tremendous potential to unify disparate strands of liberalism and conservativism in the US, but unfortunately its feasibility is limited because it will require lots of upper middle class people to vote away subsidies that they benefit from.

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