It’s not quite topical or typical of what we normally post at Law is Cool, but an article appearing in the New York Times yesterday was so interesting to me that I thought it worth mentioning. Given that we are on the cusp of the most exciting American elections in my lifetime, I’m going to allow myself to delve into U.S. politics for a moment (before I get back to writing OCI application cover letters).

I have often wondered about the relative effectiveness of conservative versus liberal economic policies. During my relatively short lifetime, my suspicion has been that although the Republicans typically bill themselves as the “fiscally responsible” party, the United States has seen better economic growth under Democratic leadership. Were my suspicions accurate?

The Republican Plan

The classical Republican strategy involves granting tax cuts to the wealthy and to big corporations. The theory is that these tax cuts put money directly into the coffers of businesses, which can be used for expansion. The expansion creates jobs and the increased business spending stimulates the economy. All this prosperity somehow trickles down to the poorest members of society. Voila, happiness abounds.

With a tip of my hat to South Park, the strategy can be summarized as follows:

• Phase 1: cut taxes for the rich.
• Phase 2: ???
• Phase 3: profit.

The Democratic Plan

In contrast, the Democratic strategy typically involves implementing social programs coupled with tax cuts that are either aimed at the poor, or distributed more evenly among families regardless of the tax bracket they fall into.

The theory here is that social programs and safety nets reduce income disparity and also mean that people don’t have to maintain significant savings to prepare for unforseen crises like loss of a job or a serious illness.  At the same time, the tax cuts put money into the pockets of consumers who can be comfortable going and spending their new-found wealth as they please.  Consumer spending at all income levels pumps money up the chain to businesses, and the economy grows like a tree being watered.

The basic difference between the Democrats and the Republicans comes down to the question of who drives the economy. The Democrats believe that it is the average American consumer, while the Republicans think it is the rich and the corporations that really fuel America’s economic engine.

Both theories sound pretty promising, but who’s right?

So Who’s Right?

These subjects are covered extensively in Princeton Professor Larry M. Bartels’ new book: Unequal Democracy: The Political Economy of the New Gilded Age.

Of course, the debate is an ongoing one, but the study put together by Bartels sheds some light on the quality of the two strategies.

Simply put, the United States economy has grown faster, on average, under Democratic presidents than under Republicans.

The stark contrast between the whiz-bang Clinton years and the dreary Bush years is familiar because it is so recent. But while it is extreme, it is not atypical. Data for the whole period from 1948 to 2007, during which Republicans occupied the White House for 34 years and Democrats for 26, show average annual growth of real gross national product of 1.64 percent per capita under Republican presidents versus 2.78 percent under Democrats.

That 1.14-point difference, if maintained for eight years, would yield 9.33 percent more income per person, which is a lot more than almost anyone can expect from a tax cut.

(Source: New York Times)

Income Disparity

Beyond simple economic growth, the numbers suggest that the Democrats have also been more successful in alleviating income disparity, thereby meeting one of the implicit goals of their strategy.

The statistics illustrate something that I found interesting but not at all surprising. On a measure of family income growth across various tax brackets, Republican strategies help low-income families much less than high-income families. The trend for the Democrats is reversed, but there is less deviation; they tend to help people at all income levels pretty much equally, with a slight preference for the poor.

[W]hen Democrats were in the White House, lower-income families experienced slightly faster income growth than higher-income families — which means that incomes were equalizing. In stark contrast, it also shows much faster income growth for the better-off when Republicans were in the White House — thus widening the gap in income.

(Source: New York Times)

Why This Matters

From a justice perspective, why should we care so much about income disparity?

Well, for one thing, poverty and income disparity are among the most robust predictors of crime.

For example, Richard Block’s 2006 study appearing in the journal Criminology found that violent crimes are most prevalent in neighborhoods where very poor and middle-class people live in close proximity.

Similarly, a Canadian study which looked at the relationship between homicide rates and income inequality found that:

The results of these analyses support the proposition that the degree to which resources are unequally distributed is a stronger determinant of levels of lethal violence in modern nation states than is the average level of material welfare. [At p. 231]

…

It is not inconceivable that violent escalation of social competition at the bottom of the social hierarchy is indirectly exacerbated by an awareness of extreme wealth at the top that contributes to a pervasive cultural perception and acceptance that one is living in what Frank and Cook (1995) have called a “winner-take-all society”. [At p. 233]

(Source: Daly, Wilson, & Vasdev, “Income inequality and homicide rates in Canada and the United States,” Canadian Journal of Criminology, April 2001: 219-236.)

Conclusion

The weight of evidence supports the finding of a clear relationship between poverty, income disparity, and crime.

Fiscal policy can make a difference.

In his Doctoral Dissertation entitled Assessing the Relative Effects of Macro-Level Predictors of Crime: A Meta-Analysis, Travis Pratt explains that:

“the meta-analysis also indicated that public levels of social support consistently maintain respectable inverse relationships with crime.”

(Source: Pratt, at pg. 187)

To the extent that alleviation of poverty and income disparity are possible through fiscal policy — and both Pratt and Bartle suggest that they are — politicians ought to take notice.